Gujarat High Court

The New India Assurance Company Ltd vs Jamnaben Bharatbhai Rathod on 24 July, 2025

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                              C/FA/4098/2024                                    ORDER DATED: 24/07/2025

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                              IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
                                              R/FIRST APPEAL NO. 4098 of 2024
                                                            With
                                        CIVIL APPLICATION (FOR STAY) NO. 1 of 2024
                                             In R/FIRST APPEAL NO. 4098 of 2024
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                                         THE NEW INDIA ASSURANCE COMPANY LTD.
                                                          Versus
                                          JAMNABEN BHARATBHAI RATHOD & ORS.
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                       Appearance:
                       MR KV GADHIA(319) for the Appellant(s) No. 1
                       MR YOGIN A BHAMBHANI(6444) for the Defendant(s) No. 1,2,3
                       PARTY IN PERSON(5000) for the Defendant(s) No. 4
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                         CORAM:HONOURABLE MR. JUSTICE DEVAN M. DESAI

                                                            Date : 24/07/2025

                                                             ORAL ORDER

1. By way of this appeal, the appellant has prayed to quash

and set aside the order dated 5.12.2023 passed in

Workman Compensation (Fatal) Application No.2 of 2019

by the learned Workman Compensation Commissioner,

Anand.

2. Heard learned advocate Mr. K. V. Gadhia for the appellant

and learned advocate Mr. Yogin A. Bhambhani for the

respondents. Perused the record.

3. The short facts of the case are as under:

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* The deceased Bharatbhai Raisingbhai Rathod was an

employee, working as a labourer, with the original

opponent No.1. On 3.4.2019, during the employment, one

car bearing registration No.GJ-6-DG-9354 came and

dashed with the deceased. Resultantly, deceased expired.

The employer did not pay the compensation under the

Workmen Compensation Act and also did not deposit it

before the learned Commissioner, the claimants filed

Workmen Compensation before the learned Ex-Officio

Commissioner for Workmen Compensation Act, Labour

Court, Anand. Issues were framed by learned

Commissioner at Exh.16. Claimant No.1 widow of deceased

examined herself at Exh.21 and also produced

documentary evidence.

* The opponent No.1 and present respondent No.2

examined witness Dakshesh J. Trivedi at Exh.44. The

Insurance Company produced copy of the insurance policy.

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After considering the oral as well as documentary

evidence, the learned Commissioner, partly allowed the

claim application and further held present appellant -

Insurance Company liable to pay amount of compensation

with interest @ 9% alongwith opponent No.1 to the

claimants.

* Being aggrieved and dissatisfied with the impugned

judgment and award, the appellant - Insurance Company

preferred present appeal.

4. Learned advocate for the appellant submitted that the

appeal is filed only on a limited ground of challenging the

award of interest passed against the Insurance Company. It

is submitted that admittedly policy Exhibit 56 is a workman

compensation policy and copy of terms and conditions of

workman compensation policy is produced during the

course of hearing which is taken on record. It is contended

that the Insurance Company shall be liable for

compensation to the employee who has sustained injury by

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accident or has died during the course of employment. It is

further submitted that the policy does not extend to

include any interest and / or penalty imposed on the

insured on account of its failure to comply with the

requirements laid down in the Act. A reliance has been

placed upon a decision in the case of Harshadbhai

Amrutbhai Modhiya v. New India Assurance

Company Limited reported in 2006(5) SCC 192

(Paragraph Nos.14 and 15 thereof were pressed into

service). It is submitted that the law is settled that the

Insurance Company is not liable to pay any interest where

a policy in question is a workman compensation policy. It is

further pointed out by learned advocate for the Appellant

that Section 3 of the Workman's Compensation Act

provides for the employer's liability for compensation. The

duty is cast upon the employer for the payment of

compensation in case of an injury is caused to a workman

by an accident arising out of and in the course of

employment. It is further contended that the Appellant -

Insurance Company has deposited the amount of

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compensation before the learned Commissioner. It is

submitted that learned Commissioner has committed a

grave error of law by imposing interest upon the Insurance

Company. It is also contended that penalty has rightly been

imposed by the employer for non compliance of the

provisions as contained in Section 3 of the Act. As per the

aforesaid provision, the employer is liable for the interest

in addition to the amount of arrears in case employer

commits default in paying compensation within a period of

one month from the date it felt due to the employee /

dependents.

5. Per contra, learned advocate for the respondent - original

claimant has supported the impugned judgment and award

and submitted that benefits under the Act may not be

curtailed due to a dispute between the insured and insurer.

However, learned advocate for the respondent could not

contradict the settled position of law that under the

Workman Compensation Policy, the liability of interest and

penalty is on the employer in case the employer defaults in

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paying compensation within one month as contemplated

under Section 4(A)(3)(a) of the Act. The respondent No.2 -

herein has submitted written reply dated 1.4.2025. In

paragraph No.10 of the reply, it is stated by respondent

No.4 that an intimation about the accident was submitted

to the Insurance Company as well as to the labour

department within the time and there is no dispute with

regard to relationship of employee - employer between

respondent No.4 and deceased respectively. It is further

stated that since respondent No.4 is insured with the

appellant, it is the responsibility of the Insurance Company

to pay compensation and indemnify respondent No.4.

6. I have considered the submissions of learned advocates for

the respective parties and also perused the reply filed by

respondent No.4. Also perused the Record and

Proceedings.

7. The record reveals that there is no dispute with regard to

relationship of employer and employee between the

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deceased and respondent No.4 herein. There is no dispute

with regard to the fact that the respondent No.4 was

insured with the present appellant, however, the policy is

workman compensation policy and as per the terms and

conditions of the policy, the policy Exh.56 is not extending

to the liability of payment of interest and / or penalty which

is imposed upon the insured on account of failure to

comply with the mandatory provisions of the Act. Section 3

of the Act mandates the liability for compensation. The

employer under Section 3 of the Act is liable to pay

compensation to workman who has sustained injury by any

accident arising out of and in course of employment. The

employer, in the present case, is covered under the policy

and the employer has been rightly indemnified by the

Insurance Company. However, Section 4(A)(3(a) of the Act

deals with liability of payment of penalty and interest in

failure of non compliance of the mandatory provisions of

the Act. The said provision empowers the Commissioner to

impose interest in addition to the amount of arrears in case

the employer is in default in paying compensation due

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under the Act within a period of one month from the date it

fell due. There is no much quarrel on the question of

fastening a liability of interest and penalty upon the

Insurance Company. This issue is no more res integra in

the case of Harshadbhai Amrutbhai Modhia (Supra) in

paragraph Nos.14 & 15. Both the paragraphs of the said

decision are reproduced hereunder:

"14. By reason of the provisions of the Act, an employer is not statutorily liable to enter into a contract of insurance. Where, however, a contract of insurance is entered into by and between the employer and the insurer, the insurer shall be liable to indemnify the employer. The insurer, however, unlike under the provisions of the Motor Vehicles Act does not have a statutory liability. Section 17 of the Act does not provide for any restriction in the matter of contracting out by the employer vis-a-vis the insurer.

15. The terms of a contract of insurance would depend upon the volition of the parties. A contract of insurance is governed by the provisions of the Insurance Act. In terms of the provisions of the Insurance Act, an insured is bound to pay premium which is to be calculated in the manner provided for therein. With a view to minimize his liability, an employer can contract out so as to make the insurer not liable as regards indemnifying him in relation to certain matters which do not strictly arise out of the mandatory provisions of any statute. Contracting out, as regards payment of interest by an employer, therefore, is not prohibited in law."

8. In the present case, the claimants are entitled to

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compensation with interest and penalty. However, since

the contract of insurance does not extend to cover the risk

of payment of interest, the appellant cannot be saddled

with the liability to pay interest and in absence of a specific

contract, the coverage of the insurance cannot be

extended to the interest part.

9. In the background of the aforesaid facts and circumstances

and in view of the settled position of law, I am of the