Gujarat High Court

Gujarat Water Supply And Sewerage Board vs Machabhai Parbatbhai Aka Pababhai ... on 17 June, 2025

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                            C/FA/2580/2023                                       JUDGMENT DATED: 17/06/2025

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                                    IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                                                R/FIRST APPEAL NO. 2580 of 2023

                                                            With
                                        CIVIL APPLICATION (FOR STAY) NO. 2 of 2023
                                             In R/FIRST APPEAL NO. 2580 of 2023

                       FOR APPROVAL AND SIGNATURE:


                       HONOURABLE MR. JUSTICE DEVAN M. DESAI

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                                   Approved for Reporting                       Yes            No

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                              GUJARAT WATER SUPPLY AND SEWERAGE BOARD
                                                 Versus
                        MACHABHAI PARBATBHAI AKA PABABHAI RATADIYA PARMAR & ANR.
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                       Appearance:
                       MR RITURAJ M MEENA(3224) for the Appellant(s) No. 1
                       MASUMI V NANAVATY(9321) for the Defendant(s) No. 2
                       MR VIBHUTI NANAVATI(513) for the Defendant(s) No. 2
                       MR VIJAY H NANGESH(3981) for the Defendant(s) No. 1
                       ==========================================================

                         CORAM:HONOURABLE MR. JUSTICE DEVAN M. DESAI

                                                          Date : 17/06/2025

                                                         ORAL JUDGMENT

1. The present First Appeal is filed under Section

30 of the Employees' Compensation Act, 1923 by the

appellant - original respondent No.1 challenging the

judgment and order dated 05.05.2022 passed by

Employees' Compensation Commissioner, Rajkot in

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Workman Compensation Application No.10 of 2016.

2. Heard learned advocate Ms.Sneha Joshi for

Mr.Rituraj Meena for the appellant, learned advocate

Ms.Masumi Nanavaty for respondent No.2 - Insurance

Company and learned advocate Mr.Vijay Nangesh for

respondent No.1 - original applicant.

3. Brief facts of the case are as under:

3.1 On 30.06.2011, claimant during the course of

employment with original opponent No.1 - present

appellant, received an electric shock while operating a

pump. Resultantly, he fell down and sustained injuries on

his left hand, right hand and knee. Claimant was admitted

in H.J. Doshi Hospital, Rajkot for treatment.

3.2 The appellant - original opponent No.1 failed

to comply with the statutory obligations and did not pay

compensation. Consequently, a claim petition seeking

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compensation of Rs.4,00,000/- along with 50% penalty and

12% interest, was filed against opponent No.1 and the

Insurance Company.

3.3 The claim application was resisted by opponents

by filing Written Statement and documentary evidence.

Issues were framed at Ex.11. Claimant examined himself at

Ex.26 and also examined Dr.Rajesh Gandhi at Ex.42.

Opponent No.1 - present appellant examined a witness -

Dilipbhai Jagjivan Gajjar at Ex.58. Opponent No.2 -

Insurance Company examined its Officers at Exs.69 and 76

and also produced documentary evidence in support of the

defence. After considering the evidence on record, learned

Commissioner allowed the claim application by directing

opponent Nos.1 and 2 jointly and severally to pay

Rs.4,86,314/- within 30 days. Opponent No.1 - employer

was directed to pay Rs.1,17,154/- towards medical

expenses, Rs.4,86,314/- with interest @ 12% and

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Rs.2,43,157/- 50% of penalty within 30 days.

3.4 Being aggrieved and dissatisfied with the

impugned judgment and order, appellant-original opponent

No.1, has filed the present First Appeal.

4. Learned advocate for the appellant, at the

outset, submitted that, challenge in the present First

Appeal is on the ground of fastening upon the liability to

pay interest and 50% penalty upon the appellant. It is

submitted that the main reason for non-compliance of

mandatory provisions of Workmen's Compensation Act is

that, on happening of accident, a claim was lodged with

the Insurance Company, however, the Insurance Company

rejected the claim on the ground of the absence of an

employee - employer relationship between the claimant

and appellant. Resultantly, amount of compensation could

not be deposited within the stipulated time, and this fact,

has not been taken into consideration by learned

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Commissioner while imposing penalty and interest upon

the appellant. Except above submissions, no other

submissions are canvassed.

5. Per contra, learned advocate for the Insurance

Company as well as learned advocate for claimant have

supported the judgment and order.

6. Learned advocate for respondent - Insurance

Company has submitted that the direction to pay

compensation to the claimant has already been complied

with and the Insurance Company has already deposited the

amount of compensation. So far as the liability of interest

and penalty is concerned, it is upon the employer, who

failed to make payment within 30 days from the

happening of the accident.

Reliance is placed upon Section 4A of the

Workmen's Compensation Act, which provides that if the

employer defaults in paying due compensation under the

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Act within one month from the date it falls due, the

Commissioner shall, in addition to the compensation and

interest, direct the employer to pay a further sum not

exceeding 50% of the compensation amount by way of

penalty. Learned Commissioner has rightly considered legal

provisions and directed the employer to pay interest @

12% per annum along with 50% penalty.

6.1 Learned advocate for respondent - Insurance

Company has placed reliance upon decision in the case of

New India Assurance Company Limited Vs. Harshadbhai

Amrutbhai Modhiya reported in 2006 (0) AIJEL-SC 37179.

It is submitted that the above decision holds

employer liable for interest and penalty on non-compliance

of provisions of Section 4A of the Act.

7. I have considered submissions canvassed by the

learned advocates for the respective parties and perused

the record and proceedings. The fact which is

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uncontroverted is that the claimant was in the employment

of the appellant and the said fact is appearing from the

Written Statement filed by appellant. The only question

that remains for consideration is whether the imposition of

interest and penalty upon the appellant is justifiable or

not. Section 4A(3)(b) of the Workmen's Compensation Act

is reproduced hereunder:-

"4A. Compensation to be paid when due and penalty for default:-

(3) Where any employer is in default in paying the compensation due under this Act within one month from the date it fell due, the Commissioner shall-

(a) .....

(b) if, in his opinion, there is no justification for the delay, direct that the employer shall, in addition to the amount of the arrears, and interest thereon pay a further sum not exceeding fifty per cent of such amount by way of penalty.

The said provisions mandates that in default of

paying compensation within one month from the date it

fell due, the Commissioner shall direct employer in

addition to the amount of arrears and interest, a penalty

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not exceeding 50% of such amount.

8. In the present case, it is undisputed fact that the

employer has not made the payment of compensation to

the employee within 30 days on the happening of the

accident. No material is placed on record to show that the

appellant complied with the mandatory provisions of the

Act. The reason given for non-compliance of payment of

compensation within statutory time limit is misconceived

and rightly not accepted by learned Commissioner. When

the employer has violated mandatory provisions of the Act,

learned Commissioner has no option but to impose penalty

and interest upon the employer.

The question of fastening of liability of interest

and penalty upon the employer is no more res integra in

the case of New India Assurance Company Limited Vs.

Harshadbhai Amrutbhai Modhiya, the Hon'ble Apex Court, in

Paragraph No.24, has observed as under:-

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"24. Section 17 of the Workmen's Compensation Act voids only a contract or agreement whereby a workman relinquishes any right of compensation from the employer for personal injury arising out of or in the course of the employment and insofar as it purports to remove or reduce the liability of any person to pay compensation under the Act. As my learned brother has noticed, in the Workmen's Compensation Act, there are no provisions corresponding to those in the Motor Vehicles Act, insisting on the insurer covering the entire liability arising out of an award towards compensation to a third party arising out of a motor accident. It is not brought to our notice that there is any other law enacted which stands in the way of an insurance company and the insured entering into a contract confining the obligation of the insurance company to indemnify to a particular head or to a particular amount when it relates to a claim for compensation to a third party arising under the Workmen's Compensation Act. In this situation, the obligation of the insurance company clearly stands limited and the relevant proviso providing for exclusion of liability for interest or penalty has to be given effect to. Unlike the scheme of the Motor Vehicles Act the Workmen's Compensation Act, does not confer a right on the claimant for compensation under that Act to claim the payment of compensation in its entirety from the insurer himself.

The entitlement of the claimant under the Workmen's Compensation Act is to claim the compensation from the employer. As between the employer and the insurer, the rights and obligations would depend upon the terms of the insurance contract. Construing the contract involved here it is clear that the insurer has specifically excluded any liability for interest or penalty under the Workmen's Compensation Act and confined its liability to indemnify the employer only against the amount of compensation ordered to be paid under the Workmen's Compensation Act. The High Court was, therefore, not correct in holding that the appellant insurance company, is also liable to pay the interest on the

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amount of compensation awarded by the Commissioner. The workman has to recover it from the employer."

9. The Hon'ble Apex Court has observed that the

claimant is entitled to compensation from the employer

under the Workmen's Compensation Act. As between the

employer and the insurer, the rights and obligations would

depend upon the terms of contract of Insurance. In the

absence of any clear condition excluding liability for

interest and penalty under the Workmen's Compensation

Act, the liability to indemnify employer on behalf of