Gujarat High Court

United India Insurance Company Ltd vs Dhanabhai Somabhai Dindor on 16 June, 2025

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                            C/FA/3273/2022                                 JUDGMENT DATED: 16/06/2025

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                              IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                                               R/FIRST APPEAL NO. 3273 of 2022

                      FOR APPROVAL AND SIGNATURE:

                      HONOURABLE MR. JUSTICE DEVAN M. DESAI
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                                   Approved for Reporting                   Yes                  No

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                                             UNITED INDIA INSURANCE COMPANY LTD
                                                             Versus
                                              DHANABHAI SOMABHAI DINDOR & ORS.
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                      Appearance:
                      MR GC MAZMUDAR(1193) for the Appellant(s) No. 1
                      MR HG MAZMUDAR(1194) for the Appellant(s) No. 1
                      RULE SERVED for the Defendant(s) No. 1,2,3
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                         CORAM:HONOURABLE MR. JUSTICE DEVAN M. DESAI
                                          Date : 16/06/2025
                                          ORAL JUDGMENT

1. This is an appeal filed by the appellant under Section

30 of the Workmen's Compensation Act, 1923 (For

short, hereinafter referred to as `the Act') challenging

the judgment and order dated 29.4.2022 passed by

the learned Commissioner, Employees'

Compensation Act, Labour Court, Panchmahal @

Godhra in W.C. (Fatal) Application No.21 of 2006.

2. Heard learned advocate Mr. H. G. Mazmudar for the

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appellant. Though served, nobody appeared for and

on behalf of the respondents. Perused the record.

3. With the consent of the learned advocates for the

respective parties, the appeal is taken up for final

hearing today.

4. The brief facts leading to filing of the present appeal

are as under:

* Original claimants were the employees with the

original opponent No.1 and claimants with her

daughters were excavating the land at the

construction site. On 18.12.2001 @ 11.00 am, the

sand fell down on the minor daughter. Resultantly,

daughter was snubbed in the sand and died. The age

of the daughter was 19 years. Hence, the heirs of the

deceased employee filed Workmen Compensation

(Fatal) Application before the learned Commissioner

of Labour Court, Jamnagar.

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* The notice of the claim application was served

to original opponents. Opponent No.1 did not appear

to contest the application, however, opponent No.2 -

Insurance Company appeared and filed Written

Statement at Exh.13 and also denied the allegations

made in the claim application.

* After considering the oral as well as

documentary evidence, the learned Commissioner of

Labour Court partly allowed the claim application and

directed the opponents to pay amount of

compensation to the tune of Rs.2,13,509/- with

interest @ 10% to the claimants. Penalty was also

imposed upon the employer to the tune of 20%.

* Being aggrieved and dissatisfied with the

proportion of interest upon the insurance company,

the appellant has filed present appeal on the

following substantial question of law:

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"Whether the appellant is statutorily and contractually liable to pay any interest over the amount of compensation under the provisions of Workmen Compensation Act."

5. Learned advocate for the appellant has submitted

that the challenge is made against the impugned

judgment and order dated 26.12.2022 only with

regard to fastening liability of interest on insurance

company. It is further submitted that so far as

interest is concerned since the policy is Workmen

Compensation Policy, the insurance company is not

liable to pay any amount of interest. He has placed

reliance upon the decision in the case Harshadbhai

Amrutbhai Modhia v. New India Assurance Co.

Ltd. reported in 2006(5) SCC 192 (Paragraph

Nos.14 and 15 thereof).

6. I have considered the submissions of learned

advocate for the appellant and also considered

undisputed fact that the insurance company has

deposited Rs.2,13,509/- before the learned

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Commissioner, the liability under the Workmen

Compensation has been fully discharged with by the

insurance company. So far as liability to pay interest

is concerned, under the Workmen Compensation

Policy, the issue is well settled in the case

Harshadbhai Amrutbhai Modhia v. New India

Assurance Co. Ltd. reported in 2006(5) SCC 192

(Paragraph Nos.14 and 15 thereof) and

Vedprakash Garg v. Premadevi reported in

thereof). Relevant portion of both the cases are

reproduced hereunder:

(1) Harshadbhai Amrutbhai Modhia (Supra):

"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

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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."

(2) Vedprakash Garg (Supra):

"13. The question posed for our consideration is required to be resolved in the light of the aforesaid statutory schemes of the two interacting Acts. It is not in dispute and cannot be disputed that the respondent- insurance companies concerned will be statutorily as well as contractually liable to make good the claim for compensation arising out of the employers' liability computed as per the provisions of the Companies Act. The short question is whether the phrase 'liability arising under the Compensation Act' as employed by the proviso to sub-sec. (1) of Section 147 of the Motor Vehicles Act and as found in proviso to clause (i) of sub- sec. (1) of Section II of the Insurance Policy, would cover only the principal amount of compensation as computed by the Workmen's Commissioner under the Compensation Act and made payable by the insured employer or whether it could also include interest and penalty as imposed on the insured employer under contingencies contemplated by Section 4A(3)(a) and (b) of the Compensation Act.

14. On a conjoint operation of the relevant schemes of the aforesaid twin Acts, in our view, there is no escape from the conclusion that the insurance companies will be liable to make good not only the principal amounts of compensation payable by insured employers but also interest thereon, if ordered by the Commissioner to be paid by the insured employers. Reason for this conclusion is obvious. As we have noted earlier the liability to pay compensation under the Workmen's Compensation Act gets foisted on the employer provided it is shown that the workman concerned suffered from personal injury, fatal or otherwise, by any motor accident. Arising out of and in the course of his employment. Such an accident is also covered by the statutory coverage contemplated by Section 147 of the

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Motor Vehicles Act read with the identical provisions under the very contracts of insurance reflected by the Policy which would make the insurance company liable to cover all such claims for compensation for which statutory liability is imposed on the employer under Section 3 read with Section 4A of the Compensation Act. All these provisions represent a well-knit scheme for computing the statutory liability of the employers in cases of such accidents to their workmen. As we have seen earlier while discussing the scheme of Section 4A of the Compensation Act the legislative intent is clearly discernible that once compensation falls due and within one month it is not paid by the employer then as per Section 4A(3)(a) interest at the permissible rate gets added to the said principal amount of compensation as the claimants would stand deprived of their legally due compensation for a period beyond one month which is statutorily granted to the employer concerned to make good his liability for the benefit of the claimants whose bread-winner might have either been seriously injured or might have lost his life. Thus so far as interest is concerned it is almost automatic once default, on the part of the employer in paying the compensation due, takes place beyond the permissible limit of one month. No element of penalty is involved therein. It is a statutory elongation of the liability of the employer to make good the principal amount of compensation within permissible time limit during which interest may not run not otherwise liability of paying interest on delayed compensation will ipso facto follows. Even though the Commissioner under these circumstances can impose a further liability on the employer under circumstances and within limits contemplated by Section 4A(3)(a) still the liability to pay interest on the principal amount under the said provision remains a part and parcel of the statutory liability which is legally liable to be discharged by the insured employer. Consequently such imposition of interest on the principal amount would certainly partake the character of the legal liability of the insured employer to pay the compensation amount with due interest as imposed upon him under the Compensation Act. Thus the principal amount as well as the interest made payable thereon would remain part and parcel of the legal liability of the insured to be discharged under the Compensation Act and not de hors it. It, therefore, cannot be said by the insurance company that when it is statutorily and even

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contractually liable to reimburse the employer qua his statutory liability to pay compensation to the claimants in case of such motor accidents to his workmen, the interest on the principal amount which almost automatically gets foisted upon him once the compensation amount is not paid within one month from the date it fell due, would not be a part of the insured liability of the employer. No question of justification by the insured employer for the delay in such circumstances would arise for consideration. It is of course true that one month's period as contemplated under Section 4A(3) may start running for the purpose of attracting interest under sub-clause (a) thereof in case where provisional payment has to be made by the insured employer as per Section 4A(2) of the Compensation Act from the date such provisional payment becomes due. But when the employer does not accept his liability as a whole under circumstances enumerated by us earlier then Section 4A(2) would not get attracted and one month's period would start running from the date on which due compensation payable by the employer is adjudicated upon by the Commissioner and in either case the Commissioner would be justified in directing payment of interest in such contingencies not only from the date of the award but also from the date of the accident concerned. Such an order passed by the Commissioner would remain perfectly justified on the scheme of Section 4A(3)(a) of the Compensation Act. But similar consequence will not follow in case where additional amount is added to the principal amount of compensation by way of penalty to be levied on the employer under circumstances contemplated by Section 4A(3)(b) of the Compensation Act after issuing show cause notice to the employer concerned who will have reasonable opportunity to show cause why on account of some justification on his part for the delay in payment of the compensation amount he is not liable for this penalty. However, if ultimately the Commissioner after giving reasonable opportunity to the employer to show cause takes the view that there is no justification for such delay on the part of the insured employer and because of his unjustified delay and due to his own personal fault he is held responsible for the delay, then the penalty would get imposed on him. That would add a further sum up to 50 Per Cent on the principal amount by way of penalty to be made good by the defaulting employer. So far as

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his penalty amount is concerned it cannot be said that it automatically flows from the main liability incurred by the insured employer under the Workmen's Compensation Act. To that extent such penalty amount as imposed upon the insured employer would get out of the sweep of the term 'liability incurred' by the insured employer as contemplated by the proviso to Section 147(1)(b) of the Motor Vehicles Act as well as by the terms of the Insurance Policy found in provisos (b) and

(c) to sub-sec. (1) of Section II thereof. On the aforesaid interpretation of these two statutory schemes, therefore, the conclusion becomes inevitable that when an employee suffers from a motor accident injury while on duty on the motor vehicle belonging to the insured employer, the claim for compensation payable under the Compensation Act along with interest thereon, if any, as imposed by the Commissioner Sections 3 and 4A(3)(a) of the Compensation Act will have to be made good by the insurance company jointly with the insured employer. But so far as the amount of penalty imposed on the insured employer under contingencies contemplated by Section 4A(3)(b) is concerned as that is on account of personal fault of the insured not backed up by any justifiable cause, the insurance company cannot be made liable to reimburse that part of the penalty amount imposed on the employer. The latter because of his own fault and negligence will have to bear the entire burden of the said penalty amount with proportionate interest thereon if imposed by the Workmen's Commissioner."

7. Thus, in view of the statement made by learned

advocate for the respondent and also in view of the

settled principle of law as held by the Hon'ble

Supreme Court of India in the case of Harshadbhai

Amrutbhai Modhia (Supra) and Vedprakash

Garg (Supra), the liability of insurance company

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qua interest in the policy of workmen compensation

cannot be saddled upon the insurance company but

the liability of interest can only be saddled upon the