Karnataka High Court

The New India Assurance Co. Ltd vs Smt. Janaki on 14 December, 2023

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                                                               NC: 2023:KHC:45562
                                                             MFA No. 1994 of 2017




                           IN THE HIGH COURT OF KARNATAKA AT BENGALURU

                             DATED THIS THE 14TH DAY OF DECEMBER, 2023

                                               BEFORE
                                 THE HON'BLE MR JUSTICE C M JOSHI
                      MISCELLANEOUS FIRST APPEAL NO. 1994 OF 2017 (WC)
                      BETWEEN:

                      THE NEW INDIA ASSURANCE CO., LTD.,
                      COFFEE KRIPA BUILDING, RAJA SEAT ROAD,
                      MADIKERI, KODAGU.
                      REPRESENTED BY REGIONAL OFFICE,
                      MOTOR THIRD PARTY CLAIMS HUB,
                      NO.2-B, UNITY BUILDING ANNEXE,
                      MISSION ROAD, BANGALORE-560027.
                      BY ITS DULY CONSTITUTED ATTORNEY
                                                                     ...APPELLANT
                      (BY SRI RAVISHANKAR C.R., ADVOCATE)

                      AND:

                      1 . SMT. JANAKI,
                          AGED ABOUT 52 YEARS,
                          W/O LATE KEPU.
Digitally signed by
VIJAYALAKSHMI         2 . SRI RAVI,
BN
Location: High            AGED ABOUT 28 YEARS,
Court of                  S/O LATE KEPU.
Karnataka

                      3.    SMT. KAMALA,
                            AGED ABOUT 30 YEARS,
                            D/O LATE KEPU.

                            THE RESPONDENTS NO.1 TO 3 ARE
                            R/AT "KATTEMAD ESTATE",
                            KATTEMAD POST, MADIKERI TALUK,
                            KODAGU DISTRICT-571201.

                      4.    SRI RAM BOPAIAH,
                            AGED ABOUT 61 YEARS,
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                                             NC: 2023:KHC:45562
                                          MFA No. 1994 of 2017




    S/O LATE MAJ. B.S. BOPAIAH,
    R/AT "KATTEMAD ESTATE",
    KATTEMAD POST, MADIKERI TALUK,
    KODAGU DISTRICT-571201.
                                                ...RESPONDENTS
(BY SRI AKSHAY RAM AND
    SRI MUKESH KUMAR ADVOCATES FOR R1;
    R2 IS SERVED BUT UNREPRESENTED)

     THIS MFA IS FILED U/S 30(1) OF WC ACT, AGAINST THE
JUDGMENT AND AWARD DATED 10.11.2016 PASSED IN E.C.A
NO.19 OF 2014 ON THE FILE OF THE SENIOR CIVIL JUDGE AND
CJM, AND C.E.C. MADIKERI, AWARDING COMPENSATION OF
RS. 2,61,955/- WITH INTEREST AT 12% P.A. FROM ONE
MONTH AFTER THE DATE OF INCIDENT TILL REALIZATION.

     THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT AND COMING ON FOR PRONOUNCEMENT OF
JUDGMENT THIS DAY THROUGH VIDEO CONFEENCING AT
KALABURAGI, THE COURT DELIVERED THE FOLLOWING:

                            JUDGMENT

Being aggrieved by the judgment and award passed

in ECA.No.19/2014 dated 10.11.2016 by learned Senior

Civil Judge and Commissioner for Employees

Compensation, Kodagu, Madikeri, the respondent No.2-

Insurance Company has approached this Court in appeal.

2. The brief facts of the case that are relevant are

as below:

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The petitioner Nos.1 to 3 who are the respondent

Nos.1 to 3 in this appeal filed a claim petition before the

learned Commissioner contending that the husband of the

petitioner No.1 and father of the petitioner Nos.2 and 3,

was employed in the coffee estate of the respondent No.4

herein, (who was the respondent No.1 before the learned

Commissioner) claiming compensation on account of his

death. It was alleged that on 17.06.2012, while the

deceased Kepu was working in the estate of the

respondent No.1, a tree fell on him and died due to the

injuries sustained in the incident. It is contended that the

incident was during the course of the employment under

respondent No.1 and the respondent No.1 had insured all

his employees with respondent No.2. Therefore, the

respondents claimed compensation from the respondent

Nos.1 and 2.

3. The respondent Nos.1 and 2 appeared before

the learned Commissioner and filed their separate

objections. While the respondent No.1 in his objections

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denied the claim, he contended that he had insured all his

employees with the respondent No.2 and therefore, if at

all any liability fastened upon him, the same has to paid

by respondent No.2.

4. The respondent No.2 in its objection contended

that the respondent No.1 insured 6 employees with the

respondent No.2 but however, the compensation claimed

by the petitioners is highly exorbitant, imaginary and they

are not entitled for any compensation.

5. After framing appropriate issues, the petitioners

examined the petitioner No.1 as PW.1 and Exs.P1 to P10

and also the copy of the policy which is at Ex.R1 were

marked. Learned Commissioner heard the arguments and

after appreciating the evidence on record, held that the

petitioners are entitled for compensation of Rs2,61,955/-

along with interest at 12% per annum and fastened the

liability on the respondent No.2.

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6. Being aggrieved by the said judgment, the

respondent No.2-Insurance Company has approached this

Court in appeal contending that though the claimants

claimed interest at 9% per annum, the learned

Commissioner has awarded interest at 12% per annum

fixing the liability on the Insurance Company. It was

contended that the Clause-2(i) of the Policy excluded any

interest to be fastened upon the insured to be paid by the

insurer. Therefore, in view of the express terms and

conditions of the insurance policy, the learned

Commissioner could not have fastened the liability

regarding the interest on the Insurance Company. It is

contended that the conclusions arrived by the learned

Commissioner are not proper and correct and fastening

the interest on the Insurance Company is totally illegal,

perverse, capricious and not sustainable in law.

7. On issuance of notice, the respondent No.1 has

appeared through her counsel. Despite service notice to

respondent Nos.2, 3 and 4 they did not appear.

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8. The trial Court records has been secured and

the arguments by both the sides are heard.

9. Learned counsel appearing for the appellant-

Insurance Company contends that the learned

Commissioner erred in fastening the portion of the interest

on the Insurance Company. He contends that the terms

and conditions of the policy are of pivotal importance and

when the condition mentioned in the policy excluded the

interest to be fastened upon the Insurance Company, the

Tribunal erred in holding that the Insurance Company is

also liable to pay the interest at 12% per annum. In this

regard, he has relied on the decisions in the case of NEW

INDIA ASSURANCE CO. LTD. VS. HARSHADBHAI

AMRUTBHAI MODHIYA AND ANOTHER1. He also relied

on an unreported decision of a Co-ordinate Bench of this

Court in MFA.No.3651/2018, which had followed the

decision of the Apex Court in the case of HARSHADBHAI

AMRUTBHAI MODHIYA (supra).

(2006) 5 SCC 192

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10. Per contra, learned counsel appearing for

respondent No.1 contended that the question regarding

interest had been dealt by the Apex Court in the case of

VED PRAKASH GARG VS. PREMI DEVI AND OTHERS2

and also that the said decision was followed by this Court

in the case ORIENTAL INSURANCE CO. LTD. VS.

SUNDARI AND OTHERS3. He further relied on the

decision in the case of ORIENTAL INSURANCE CO. LTD.

VS. SRI.S.A.CHENAPPA AND OTHERS4.

11. The only point that arise in this appeal is

whether the appellant-Insurance Company is liable to pay

the interest at 12% per annum from one month after the

date of incident, till its deposit.

12. The perusal of the conditions of the policy,

which is produced at Ex.R1 shows that the policy excluded

any interest or penalty imposed on the insured on account

of his or her failure to comply with the requirements laid

(1997) 8 SCC 1

2006 SCC OnLine Kar 786 : (2007) 2 An WR 569

2015 SCC OnLine Kar 5627

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down under the Workmen's Compensation Act, 1923.

Therefore, the conditions of the policy show that it is a

Workmen's Policy but not a motor vehicle policy. This

distinction requires to be borne in mind while considering

the decisions relied by the learned counsels appearing for

the appellant and the learned counsel appearing for

respondent No.1.

13. The judgment in the case of HARSHADBHAI

AMRUTBHAI MODHIYA5 (Supra), it was held as below:

"4. However, therein a proviso has been added which reads as under:

"Provided that the insurance granted hereunder is not 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 WC Act, 1923, and

(ii) any compensation payable on account of occupational diseases listed in Part 'C' of Schedule III of the WC Act, 1923."

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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

(2006) 5 SCC 192

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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.

20. The views taken by us find support from a recent judgment of this Court in P.J. Narayan v. Union of India [(2006) 5 SCC 200] wherein it was held:

"This writ petition is for the purposes of directing the insurance company to delete the clause in the insurance policy which provides that in cases of compensation under the Workmen's Compensation Act, 1923, the insurance company will not be liable to pay interest. We see no substance in the writ petition. There is no statutory liability on the insurance company. The statutory liability under the Workmen's Compensation Act is on the employer. An insurance is a matter of contract between the insurance company and the insured. It is always open to the insurance company to refuse to insure. Similarly, they are entitled to provide by contract that they will not take on liability for interest. In the absence of any statute to that effect, insurance companies cannot be forced by courts to take on liabilities which they do not want to take on. The writ petition is dismissed. No order as to costs.

21. For the reasons aforementioned, the impugned judgment cannot be sustained. It is set aside accordingly. The appeal is allowed. The appellant is not liable for the interest. However, we make it clear that the employer shall be liable to pay the amount of interest to the claimant. In the facts and circumstances of the case, there shall be no order as to costs."

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

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14. The said decision has been followed in about 6

judgments of the Apex Court. Learned counsel for

respondent No.1 relied upon the decision in the case of

VED PRAKASH GARG Vs. PREMI DEVI AND OTHERS6

(Supra), wherein, it was held that the Insurance Company

will not only be liable to pay principal amount of the

compensation but also the interest thereon, if any,

imposed by the Commissioner on the insured employer

under Section 3A and 4 of the Employees Compensation

Act, 1923 but the insurance company will not be liable to

reimburse the additional amount of compensation by way

of penalty imposed by the Commissioner. Therefore, the

learned counsel appearing for respondent No.1 contends

that no fault can be found with the impugned judgment.

He also relied on two other decisions of this Court in the

case of SUNDARI (Supra) as well as in the case of

SRI.S.A.CHENAPPA (Supra). Though the decision in the

case of SRI.S.A.CHENAPPA (Supra) delve much into the

question of liability to pay the interest, the decision in the

(1997) 8 SCC 1

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case of SUNDARI (Supra) deals elaborately with respect

to the interest to be paid but it does not clarify as to

whether it was dealing with a policy issued under the

Motor Vehicles Act or Workmen's Compensation Act.

15. It is pertinent to note that the decision in the

case of VED PRAKASH GARG and the decision of the

Apex Court in the case of HARSHADBHAI AMRUTBHAI

MODHIYA was distinguished by the Apex Court in the

case of KAMLA CHATURVEDI V. NATIONAL

INSURANCE CO. Ltd.7. In the case of KAMLA

CHATURVEDI it was held as below:

"8. In New India Assurance Co. Vs Harshadbhai case, [(2006) 5 SCC 192] Ved Prakash Garg case [(1997) 8 SCC 1] was distinguished on facts. It was observed that in the said case the Court was not concerned with a case where an accident had occurred by use of motor vehicle in respect whereof the contract of insurance will be governed by the provisions of the Motor Vehicles Act, 1988 (in short "the MV Act"):

19. ... a contract of insurance is governed by the provisions of the Insurance Act [, 1938 (in short '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 [per] their own volition. The Act does not contain a provision like

(2009) 1 SCC 487

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Section 147 of the Motor Vehicles Act. Where a statute does not provide for a compulsory insurance or the extent thereof, ... the parties are free to choose their own terms of contract. In that view of the matter, contracting out, so far as [the] reimbursement of amount of interest is concerned, ... is not prohibited by a statute."

This position has been reiterated in P.J. Narayan v. Union of India [(2006) 5 SCC 200]. In the instant case the position is different. The accident in question arose on account of vehicular accident and the provisions of the MV Act are clearly applicable. We have gone through the policy of insurance and we find that no such exception as was the case in New India Assurance Co. Vs Harshadbhai case [(2006) 5 SCC 192] was stipulated in the policy of insurance. Therefore, the Insurance Company is liable to pay the interest."

16. Thus, it is evident that the Apex Court was

dealing with a case under the Motor Vehicles Act and the

policy issued was issued under the Motor Vehicles Act. The

terms and conditions of the policy issued by the insurance

company covered the part of the interest also. The Policy

was covered by the provisions of the Motor Vehicles Act.

Therefore, the Apex Court had fastened the liability to pay

the interest on the insurance company.

17. In the case on hand, obviously, the policy was

issued under the Employees Compensation Act. Therefore,

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