New India Assurance Co vs Harshadbhai Amrutbhai Modhiya ...
2021 Latest Caselaw 5023 HP

      IN THE HIGH COURT OF HIMACHAL PRADESH AT SHIMLA

                 ON THE 25th DAY OF OCTOBER, 2021




                                                        .

                         BEFORE
             HON'BLE MS. JUSTICE JYOTSNA REWAL DUA





          FIRST APPEAL FROM ORDER No. 82 of 2013

    Between:-





    THE NEW INDIA ASSURANCE
    COMPANY             LIMITED,
    DIVISIONAL OFFICE, HOSPITAL
    ROAD     MANDI,   HIMACHAL
    PRADESH-THROUGH ITS SR.

    DIVISIONAL MANAGER, THE

    NEW INDIA ASSURANCE CO.
    LTD. DIVISIONAL OFFICE, 3RD
    FLOOR,    BLOCK    -7   SDA
    COMPLEX       SHIMLA-171009
    (H.P).



                                     ........ APPELLANT.
    ( BY MR. PRANEET GUPTA, ADVOCATE)




    AND





    1. SMT.  BHUVNESHWARI
    DEVI WIDOW OF LATE SH.





    DURGA DUTT SHARMA,

    2. ANJALI   SHARMA    D/O
    LATE      DURGA      DUTT
    SHARMA, BOTH RESIDENTS
    OF HOUSE NO. 217/2 PURANI
    MANDI,    MANDI     TOWN,
    HIMACHAL        PRADESH,
    175001.

    3. M/S BEHL    MOTORS,
    THROUGH ITS PARTNER SH.
    SOM NATH BEHL SON OF
    SH. DINA NATH BEHL,




                                       ::: Downloaded on - 31/01/2022 23:13:27 :::CIS
                                           2



    INDUSTRIAL AREA, SAULI
    KHAD,   MANDI,  DISTRICT




                                                                          .
    MANDI,         HIMACHAL





    PRADESH.

                                                            ..RESPONDENTS





    ( BY. MR. VARUN CHAUHAN,
    ADVOCATE, FOR RESPONDENTS
    NO. 1 AND 2.)





    ( MR. BIMAL GUPTA, SR. ADVOCATE
    WITH     MS.  PUNAM     MOGHTA,
    ADVOCATE,    FOR    RESPONDENT
    NO.3.)


    This petition coming on for hearing this day, the Court passed the following:-

                              JUDGEMENT

Learned Commissioner Employee's Compensation

Act, vide award dated 26.11.2012 allowed the claim petition,

filed by respondents No.1 and 2, under Section 22 of the

Workmen's Compensation Act, 1923. Compensation amount

of Rs.4,30,560/- alongwith interest at the rate of 12% per

annum w.e.f 6.2.2006 (i.e one month after the accident) till

deposit of the amount in the Court was awarded in favour of

claimants/respondents No.1 and 2. The liability to pay the

compensation amount including the interest was imposed

upon the insurance company.

2. Feeling aggrieved, the insurer has filed instant

.

appeal under Section 30 of the Employee's Compensation

Act, 1923. This appeal was admitted on 12.6.2013 on

following substantial questions of law:-

"1. Whether the liability to pay interest to

the employee by the insurance company is

contrary to Terms Conditions of the insurance

Ex. RW-1/B.

2. Whether the interest as contemplated

in Section 4-A (3) of Employee's Compensation

Act, 1923 is payable from one month after the

date of adjudication or after the one month as

wrongly held by the Learned Commissioner,

Employee's Compensation Mandi."

3. I have heard learned counsel for the parties and

with their assistance, have also gone through the record.

During hearing of the case, learned counsel for the appellant

did not press substantial question of law No.2. Arguments

were advanced by learned counsel for the parties only on

question of law No.1. Therefore, question of law No.2 having

been given up is not being considered.

Substantial Question of law No.1:-

.

4. Learned counsel for the appellant argued that the

insurance policy Ex.RW-2/A executed between the employer

(respondent No.3) and the appellant contained a clause that

interest and penalty, if any, imposed upon the insured under

the Workmen's Compensation Act would not be payable by

the insurer. In view of this clause, liability to pay interest

could not be fastened upon the insurer. Impugned award in

so far as it directs the appellant insurance company to pay

interest on the compensation amount is therefore bad and

contrary to the specific terms of the contract.

In opposition, learned Senior counsel for the

employer/respondent No.3 contended that the ground being

urged now by the insurer was not raised before the learned

Commissioner, hence the appellant is estopped from raising

this ground in the instant appeal.

5 (i). It will be apt to extract hereinafter the relevant

clauses from the workmen's compensation policy (Ex.RW-

2/A) executed by the parties.

"PROVIDED ALWAYS that in the event of any

.

changes in the law(s) or the substitution of other

legislation thereof this policy shall remain force but the liability of the Company shall be limited to

such sum as the Company would have been liable to pay if the Law(s)had remained unaltered. Law(s)

1. The Workman's Compensation Act, 1923

and subsequent amendments of the said Act, prior to the date of the issue of the Policy.

2. The Fatal Accidents Act, 1855.

It is hereby understood and agreed that the Workmen's Compensation (Amendment) Acts, of 1959 (8 of 1959), and 1962 (64 of 1962) and 1976 (65 of 1976) and 1984 (22 of 1984) and

1995(30 of 1995) and 2000 (46 of 2000) and deemed to be added to the Laws set out in the

Schedule to the Policy.

Provided that the insurance granted hereunder is no extended to include:

(i) any interest and/or penalty imposed on

the insured on account of his/her failure to comply with the requirements laid down under the W.C Act, 1923 and

(ii) any compensation payable on account of occupation diseases listed in part 'C' of schedule III of the W. C Act, 1923."

5(ii). The substantial question of law is no more res

integra in view of the pronouncement of Hon'ble Apex Court

in (2006) 5 SCC 192 titled New India Assurance Company

.

Ltd. vs. Harshadbhai Amrutbhai Modhiya and another. It

was held therein that under the Workmen's Compensation

Act, the employer is not statutory liable to enter into contract

of insurance. Section 17 of the Act does not restrict

contracting out by employer vis-à-vis the insurer. Liability of

insurer is contractual and not statutory. The terms of such

insurance contract depend upon volition of parties. Employer

can vis-à-vis the insurer contract out any matter not

statutorily mandatory such as payment of interest or penalty.

Placing reliance upon the judgment in Harshadbhai's case

(supra), this Court while deciding FAO (WCA) No. 419 of

2012 titled The New India Assurance Co. Ltd. versus Sh.

Lachhman Thapa & Ors. on 22.3.2021, held as under:-

"4(ii)(a) In Ved Prakash Garg's case supra the

Hon'ble Apex Counsel was considering the question as to

whether the insurance coverage as available to the insured

employers-owners of the motor vehicles in relation to their

liabilities under the Workmen's Compensation Act on

account of motor accident injuries caused to their workmen

would include additional statutory liability foisted on the

insured employers under Section 4-A(3) of the

.

Compensation Act. The precise question framed therein

runs as under:

"Where an employee receives a personal injury

in a motor accident arising out of and in the

course of his employment while working on the

motor vehicle of the employer, whether the

insurance company, which has insured the

employer-owner of the vehicle against third

party accident claims under Motor Vehicles Act,

1988 (hereinafter referred to as 'the Motor

Vehicles Act') and against claims for

compensation arising out of proceedings under

the Workmen's Compensation Act, 1923

(hereinafter referred to as 'the Compensation

Act') in connection with such motor accidents, is

liable to meet the awards of Workmen's

Commissioner imposing penalty and interest

against the insured employer under Section

4A(3) of the Compensation Act."

4(ii)(b) Judgment in Ved Prakash Garg's case

supra as well as the judgment in L.R. Ferro Alloys Ltd. vs.

Mahavir Mahto, reported in (2002) 9 SCC 450 came up for

consideration before the Apex Court in New India

.

Assurance Co. Ltd. Vs. Harshadbhai Amrutbhai Modhiya,

(2006) 5 SCC 192.

The question involved in Harshadbhai's case

was whether interest was payable by an insurer while

indemnifying the insured the amount of compensation

awarded against him under the Workmen's Compensation

Act. The policy involved therein contained a proviso that

"the insurance granted is not extended to include any

interest and/or penalty imposed on the insured on account

of his/her failure to comply with the requirements laid down

under the WC Act." While answering the question the

judgment passed in Ved Prakash Garg was also noticed. It

was observed that in Ved Prakash Garg's case it was held

'in terms of the contract of insurance entered into by and

between the employer and the insurer under the provisions

of the Motor Vehicles Act, 1988 which would also apply in a

given case to the claim under the provisions of the

Workmen's Compensation Act, the insurer would also be

liable for payment of interest.' The court also took note of

the judgment rendered in LR. Ferro Aloys Ltd. Supra

wherein it was observed that if the amount of compensation

is not deposited within a period of one month, then the

insurance company would be liable to reimburse the owner

.

the amount of compensation with interest but not the

penalty. Taking note of the above judgments, the Apex

Court in Harshadbhai's case held as under:

"13. Section 12 of the Act provides for the mode

and manner of payment of compensation by a

principal employer and/or his contractor. Section

17 of the Act nullifies contracting out in the

following terms:

"17.Contracting out.- Any contract or agreement

whether made before or after the

commencement of this Act, whereby a workman

relinquishes any right of compensation from the

employer for personal injury arising out of or in

the course of the employment, shall be null and

void in so far as it purports to remove or reduce

the liability of any person to pay compensation

under this Act."

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.

19. As indicated hereinbefore, a contract of

.

insurance is governed by the provisions of

the Insurance Act. Unless the said contract

is governed by the provisions of a statute,

the parties are free to enter into a contract as

for their own volition. The Act does not

contain a provision like Section 147 of the

Motor Vehicles Act. Where a statute does not

provide for a compulsory insurance or the

extent thereof, it will bear repetition to state

that the parties are free to choose their own

terms of contract. In that view of the matter,

contracting out, so far as reimbursement of

amount of interest is concerned, in our

opinion, is not prohibited by a statute."

Hon'ble Justice P.K. Balasurbramanayan while concurring

and supplementing the above judgment of Hon'ble Justice

S.B. Sinha also held as under:

"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 amount

of compensation awarded by the

Commissioner. The workman has to recover

.

it from the employer."

4(ii)(c) It has thus been clearly held in

Harshadbhai's case that the judgment rendered in Ved

Parkash Garg's case was in context of the liability of the

insurance company in respect of a contract of Insurance

under the Motor Vehicles Act, which would also apply in a

given case to a claim under Workman's Compensation

Act. The Apex Court has clearly held in Harshadbhai's

case supra that the Employee's Compensation Act does

not contain a provision like Section 147 of the Motor

Vehicles Act. Employee's Compensation Act does not

provide for compulsory compensation. Therefore, the

contracting parties are free to choose their own terms of

the contract. Instant also is not a case where an accident

had occurred by use of a motor vehicle governed by

provision of Motor Vehicles Act. The terms of the

insurance policy involved in the case (extracted earlier)

are not much different to the terms of the policy

interpreted by the Apex Court in Harshadbhai's case. The

appellant- Assurance company has clearly contracted out

any liability to pay interest on account of employer's

failure to comply with the requirement under the

Worksmen's/Employee's Compensation Act. The

.

insurance policy is not in dispute. Its terms are not in

dispute. In light of the law laid down by Hon'ble Apex

Court, the contention of the appellant-Assurance

company that it is not liable to pay interest upon the

compensation amount awarded by the Employees

Compensation Commissioner, is justified. Learned

Counsel for the respondent has cited various authorities

to show that in many cases insurance companies have

been fastened upon the liability to pay the interest on the

compensation amount. Suffice to note that each case

under the Employee's Compensation Act has to be

determined in terms of the insurance policy executed

between the contracting parties. In the instant case there

is no dispute that the contracting parties had excluded

foisting the liability for paying interest upon the insurance

company. Accordingly, I find merit in the appeal and the

same is allowed. Impugned judgment passed by

Employee's Compensation Commissioner, to the extent it

fastens the liability to pay interest on the compensation

amount upon the appellant-Assurance Company, is

quashed and set aside. It is ordered that the liability to

pay the interest awarded by learned Employee's

Compensation Commissioner shall be borne by

.

employer/respondent No. 2/Dot Ram. Pending

application(s), if any, shall also disposed of."

5(iii). The facts of the instant case are not dissimilar

to the facts of Lachhman Thapa's case supra. The

contracting parties out of their free volition, had chosen the

terms of the contract/insurance policy, under which the

liability to pay interest and penalty was not to be borne by

the insurance company. The Hon'ble Apex Court in

Harshadbhai's case supra has clearly laid down that there is

no statutory liability on the Insurance company. The statutory

liability under the Workmen's Compensation Act is on the

employer. [Also refer (2006) 5 SCC 200 titled P.J Narayan

Vs. Union of India. In view of the specific terms and

conditions of the insurance policy Ex. RW-2/A, the appellant

cannot be held liable to pay interest on the awarded

compensation amount.

5(iv). The contention of the learned Senior

Advocate for respondent No.3 that the insurance Company

is debarred from raising substantial question of law No.1 in

the instant appeal is also not tenable.

In (2009) 3 Sim.LC 211 titled National Insurance

.

Company Ltd. versus Smt. Asha Devi and others, a

question was raised by the Insurance Company that under

the terms of policy, the liability of the insurance company in

respect of the employees/laborers, was limited only to the

amount payable under the Workmen's Compensation Act,

1923 and therefore the insurance company could be held

liable only to pay the amount which could be assessed under

the Workmen's Compensation Act and not the entire

awarded amount. A preliminary objection was raised by the

respondent therein that the insurance company could not be

permitted to raise this ground in appeal since it had not

raised the plea of limited liability in the written-statement nor

it led any evidence to prove this fact. The Court considered

the question as to whether the insurance company is entitled

to raise the plea that it cannot be held liable to pay an

amount which it had not taken to indemnify in the insurance

policy. It was held in the judgment that when a person seeks

indemnification of an amount, the amount payable is that

which is payable under the terms of policy and no other

amount. It was further held that while passing the award, it

.

is the duty of the Court to see the terms of the policy and

that the Court must ensure that the insurance company is

made liable in terms of policy which is on record. The

relevant paragraphs of judgment are as under:-

"15. A bare reading of sub section (1) of

Section 149 shows that notwithstanding the fact

that the insurer may be entitled to cancel or may

have cancelled the policy, the insurer shall, subject

to the provisions of the section, pay to the persons

entitled to the benefit of the award any sum not

exceeding the sum assured payable thereunder.

Sub section (5) specifically provides that if the

amount which an insurer becomes liable to pay in

respect of a liability incurred by a person insured

by a policy exceeds the amount for which the

insurer would be liable under the policy, the insurer

is entitled to recover the excess from that person.

A conjoint reading of sub section (1) and (5) makes

it clear that the Insurance Company cannot be

made liable to pay the amount beyond that which

is covered under the policy of insurance. Even if

such amount is paid, under sub Section (5), the

.

Insurance Company has a right to recover the

excess amount from the owner. It is a well settled

principle of law that an insurer by issuing the policy

agrees to indemnify the insured under the terms of

the policy. When a person seeks indemnification of

an amount, the amount payable is that which is

payable under the terms of the policy and no other

amount.

17. Another aspect is that a specific issue

was framed as to what compensation is payable to

the petitioner and by whom it is to be paid. This

issue was wide enough to cover the question as to

the extent of liability of the insurance company. We

cannot loose sight of the fact that proceedings

under the Motor Vehicles Act are not governed by

the strict rules of the procedure. The procedure

has to be just and fair. When the Insurance

Company is being held liable to pay compensation

under the terms of a policy which is on record, it is

in the fairness of things that the Tribunal while

passing the award must ensure that the Insurance

Company is made liable in terms of the policy. To

this extent, I am in respectful dis-agreement with

.

the judgment of the Madhya Pradesh High Court in

Koushal Bai's case supra. I am of the view that it is

the duty of the Tribunal to see what are the terms

of the policy and to fix the liability of the

respondents in terms of the policy.

18. In taking this view, I am fortified by

the provisions of Section 168 of the Motor Vehicles

Act which clearly specify that the Claims Tribunal

while making the award shall specify the person or

persons to whom the compensation is to be paid

and at the same time, the Claims Tribunal shall

specify the amount which shall be paid by the

insurer or owner or driver of the vehicle involved in

the accident. Thus under the terms of Section168

itself a duty is cast on the Tribunal to specify the

amount payable by the insurer. The Tribunal can

exercise this function only if it goes through the

terms of the policy and the Act. As such, I do not

agree with the law laid down in Koushal Bai's case

that the Tribunal is not bound to examine the

record and search for the proof of the insurer's

limited liability.

19. As far as judgment in Prahlad

.

Singh's case is concerned, no law has been laid

down in the said judgment and the judgment was

given in view of the fact that only a meagre sum

had been awarded for the death of a minor.

Similarly in Narinder Kour's case, the Jammu and

Kashmir High Court rejected the plea of the

Insurance Company mainly on the ground that the

plea had been raised after 23 years. These two

cases were decided in their own peculiar facts and

cannot be treated as precedents.

20. Therefore, I am of the considered

view that the Insurance Company is entitled to

raise this point in the appeal.

In the instant case, the appellant has raised a

question about its liability to pay interest under the

Workmen's Compensation Act in view of specific clauses of

the Insurance Policy. The policy is on record and is admitted

by insured employer/respondent No.3. The appeal was

admitted on the question of liability of insurance company to

pay interest on the compensation amount awarded by the

learned Commissioner. Learned Commissioner while

passing the impugned award has not considered the clauses

.

of insurance policy whereunder the insured employer has

contracted out vis-à-vis insurance company (appellant) in

respect of payment of interest and penalty on the

compensation amount. In the facts of the case, insurer is

held entitled to raise substantial question of law No.1.

In view of the above discussion, it is clearly proved

on record that in terms of insurance policy Ex. RW-2/A, the

employer vis-à-vis the insurer (appellant) had contracted out

liability of payment of interest and/or penalty on the

compensation amount awarded by the learned

Commissioner under the Workmen's Compensation Act. The

Insurance policy was admitted and duly proved on record. In

view of the legal position settled in the afore mentioned

pronouncements, the appellant insurer could not be saddled

with liability to pay interest on the awarded compensation

amount. This appeal is therefore allowed. Impugned award

dated 26.11.2012 in as much as it imposes the liability of

payment of interest @ 12% per annum on the awarded

compensation amount of Rs.4,30,560/- w.e.f 6.2.2006 upon

the appellant/insurer is set aside. The liability to pay interest

.

on the compensation amount in terms of the award has to be

borne by the employer i.e respondent No.3. The claimants

are entitled to recover the interest component of the award

from the insured employer/respondent No.3.

The appeal is allowed in the aforesaid terms. All

pending applications stand disposed of accordingly.

    25th October, 2021                      Jyotsna Rewal Dua
       (priti)                                   Judge.