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Karnataka High Court
The Divisional Manager vs Bettappa S/O Shankrappa @ on 17 February, 2026
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MFA No.101530 of 2018
®
IN THE HIGH COURT OF KARNATAKA, AT DHARWAD
DATED THIS THE 17TH DAY OF FEBRUARY, 2026
BEFORE
THE HON'BLE DR. JUSTICE K.MANMADHA RAO
MISCELLANEOUS FIRST APPEAL NO.101530 OF 2018 (ECA)
BETWEEN:
THE DIVISIONAL MANAGER,
NATIONAL INSURANCE CO. LTD.,
2ND FLOOR, ARIHANT PLAZA, KUSUGAL ROAD, HUBBALLI.
NOW REPRESENTED BY ITS ADMINISTRATIVE OFFICER.
...APPELLANT
(BY SRI. SURESH S. GUNDI, ADVOCATE)
AND:
1. BETTAPPA S/O SHANKRAPPA @
SHANKARAGOUDA HOTTIGOUDRA,
AGE:43 YEARS, OCC: NIL (LABOUR IN SATEESH
GINNING FACTORY RENEBENNUR),
SINCE BOTH HANDS ARE AMPUTATED HENCE,
REPRESENTED BY HIS NEXT FRIEND,
SMT. VISHHALA W/O BETTAPPA
Digitally signed
SHANKRAPPA @ SHANKARAGOUDA HOTTIGOUDRA,
by
MOHANKUMAR
AGE. 37 YEARS, OCC: HOUSEHOLD WORK,
B SHELAR R/O JPYISARAHARALAHALLI,
Location: High
Court of TQ: RANEBENNUR, DIST: HAVERI-581115.
Karnataka,
Dharwad Bench
2. SATEESH GINNING FACTORY,
KUNABEVU ROAD,
RANEBENNUR, DIST: HAVERI-581115.
...RESPONDENTS
(NOTICE TO R1 & R2-SERVED)
THIS MISCELLANEOUS FIRST APPEAL IS FILED UNDER SECTION
30(1) OF THE EMPLOYEES COMPENSATION ACT, PRAYING TO SET
ASIDE THE JUDGMENT DATED 28.12.2017 PASSED IN ECA
NO.90/2015 ON THE FILE OF THE IIND ADDL. SENIOR CIVIL JUDGE
AND ADDL. MACT, RANEBENNUR & ETC.
THIS MFA HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT ON 05.02.2026 AND COMING ON FOR PRONOUNCEMENT
THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:
CORAM: THE HON'BLE DR. JUSTICE K.MANMADHA RAO
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MFA No.101530 of 2018
CAV JUDGMENT
The present appeal is filed by the Insurance Company
under Section 30(1) of the Employees Compensation Act,
1923 (hereinafter referred to as "the EC Act" for short) to
modify the judgment and award dated 28.12.2017, in ECA
No.90/2015 on the file of the II Addl. Senior Civil Judge and
Addl. MACT, Ranebennur (hereinafter referred to as "the
Commissioner" for short).
2. The appellant-Insurance Company herein is
respondent No.2, respondent No.1 herein is the claimant
and respondent No.2 herein-Owner of the factory is
respondent No.1 before the Commissioner.
3. For convenience, the parties herein are referred
to as per their rankings before the Commissioner.
4. The petitioner instituted the claim petition on
31.10.2013 under Section 22 of the Employees'
Compensation Act, 1923 seeking compensation of
Rs.30,00,000/- with interest at 18% p.a. and costs.
5. The brief facts of the case are that:-
The claimant/petitioner had been employed as a
labourer for about one year in Satish Ginning Factory of
respondent No.1 at Kunabevu Road, Ranebennur. On
31.10.2013 at about 4:30 p.m., during the course of
employment, both his hands came into contact with the
cotton bailing machine resulting in crushing and amputation
of both hands. He was initially treated at OM Hospital,
Ranebennur and thereafter at SPARSHA Hospital, Bengaluru
for nearly two months, incurring medical expenses
exceeding Rs.5,00,000/-. At the time of accident he was
drawing a salary of Rs.9,000/- per month with daily batta of
Rs.100/-, and he has suffered permanent disability. It is
further pleaded that the factory was insured with
respondent No.2-Insurance Company under the Employees'
Compensation Act, 1923, making both respondents jointly
and severally liable.
6. Respondent No.1-Employer, while admitting the
employer-employee relationship and the existence of
insurance coverage with respondent No.2, contended that
the claimant was receiving wages of Rs.9,000/- per day
along with Rs.100/- daily batta and asserted that
respondent No.2 alone is liable to indemnify, seeking
dismissal of the claim against him. Respondent No.2,
however, denied all material averments including the
validity of insurance coverage, alleged non-compliance of
mandatory notice by respondent No.1, failure to take safety
precautions, non-maintenance of statutory registers, and
characterized the compensation claim as exorbitant.
7. Based on the pleadings, oral and documentary
evidence, the Commissioner framed issues and partly
allowed the claim petition and awarded the compensation of
Rs.16,70,000/- with interest at the rate of 12% per annum
from the date of one month after the accident till realization
and the liability to pay compensation award was fastened
on the respondent No.2-Insurance Company.
8. The learned counsel appearing for the appellant-
Insurance Company would contend that the Commissioner
had failed to appreciate that the policy is purely an
indemnity contract, under which the primary statutory
liability to pay compensation rests upon the employer, who
may thereafter seek reimbursement from the insurer strictly
in accordance with the policy terms. The award of medical
expenses and interest against the insurer is thus contrary to
the contract of insurance.
9. It is submitted that respondent No.2 herein-
owner of the factory had erroneously produced the old
policy terms before the Commissioner due to a bona fide
clerical mistake, which in no manner alters or varies the
actual contract of insurance. The correct and applicable
Employees Compensation Insurance Policy now produced
before this Court by way of interlocutory application which
expressly excludes liability for medical expenses and
interest.
10. It is further submitted that the policy clearly
stipulates that no premium was collected for such coverage
and that these heads of liability are specifically excluded
under the policy conditions. Further, the Commissioner has
misconstrued the scope of the insurance contract and
wrongly fastened liability for interest and medical expenses
upon the insurer, contrary to Exclusion (e) of the policy
which bars liability for medical expenses connected with
treatment of employee injuries.
11. The learned counsel for the appellant-Insurance
Company had raised the below substantial questions of law
for consideration of this Court:-
(i) Whether the Judgment passed by the
Commissioner for Employee's Compensation is in
accordance with section 4(2A) of Employees'
Compensation Act, as much as imposing liability of
medical expenses on the appellant in view of the
Exclusion clause contained in the contract of policy?
(ii) Whether the Commissioner is justified in
coming to the conclusion that the Respondent No.2/
appellant is liable to pay interest as per Section 4-A
of Employees' Compensation Act, as against
exclusion clause in the policy condition?
12. Heard learned counsel appearing for the
appellant and perused the material available on record.
13. Upon hearing the learned counsel for the
appellant-Insurance Company and on a careful examination
of the impugned award, this Court finds that the liability of
the insurance company under the Employees' Compensation
Act, 1923 is required to be examined strictly in accordance
with the statutory scheme of the EC Act and the terms of
the contract of insurance.
14. Further, Section 4 of the EC Act prescribes the
manner of computation of compensation, while Section 4-A
of the EC Act mandates that the employer shall pay
compensation as soon as it falls due and provides for
interest and penalty in the event of default. Thus, the
obligation to pay compensation together with interest and
penalty is statutorily fastened on the employer alone. The
EC Act does not contain any provision analogous to the MV
Act compelling the insurer to satisfy the entire award in
favour of the claimant. The right of the claimant under the
EC Act is to recover compensation from the employer, and
not directly from the insurer. The liability of the insurance
company arises only by virtue of a contract of insurance
entered into with the employer and is therefore one of
indemnification, governed exclusively by the terms and
conditions of the policy.
15. In view of the above this Court deems it
appropriate to place reliance on the judgment of the Apex
Court in the case of the New India Assurance Co. Ltd. V.
Harshadbhai Amrutbhai Modhiya and another reported
in (2006) 5 SCC 192, while interpreting Section 17 of the
EC Act, has categorically held that the said provision merely
prohibits a contract which absolves or reduces the liability
of the employer vis-à-vis the workman, but does not
prohibit the employer and insurer from entering into a
contract limiting the extent of indemnification. It has been
clearly laid down that, in the absence of a statutory
mandate, contractual exclusions in an insurance policy
excluding liability towards interest or penalty must be given
effect to. The Apex Court in paragraph 24 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
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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."
16. In the present case, the insurance policy placed
on record expressly excludes liability towards payment of
interest under Section 4-A of the EC Act and it is not
disputed that no additional premium was paid to cover such
liability. In view of the law declared by the Apex Court in
the aforesaid judgment, the Commissioner committed a
clear error of law in fastening liability on the appellant-
Insurance Company to pay interest on the compensation
amount. Consequently, the liability to pay interest under
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Section 4-A of the EC Act rests solely upon the employer
not on the insurer.
17. Similarly, the EC Act does not treat medical
expenses as a component of "compensation" payable under
Section 4 of the EC Act. Reimbursement of medical
expenses is not a statutory liability imposed on the insurer
under the Act. Where the insurance policy specifically
excludes liability towards medical expenses incurred for
treatment of injuries sustained by an employee, and no
premium is paid for such coverage, the insurer cannot be
fastened with liability contrary to the terms of the contract.
Any direction requiring the insurer to reimburse medical
expenses, despite an express exclusion in the policy, is
therefore unsustainable in law and beyond the scope of the
insurer's contractual obligation. With regard to the
determination of wages, is concerned, the wages taken by
the Commissioner is just and proper which is in accordance
with policy.
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18. In view of the above, the wages of the claimant
is Rs.8,000/- per month and that premium was paid on that
basis alone. Hence, considering the wages of the claimant
at Rs.8,000/-, 60% of Rs.8,000/- comes to Rs.4,800/-
(Rs.8000/- x 60%). In respect of loss of earning capacity of
the claimant is taken into consideration to multiply the
same from the relevant factor i.e., Rs.4,800/- x 100%
disability = 4,800. As per Schedule IV of the EC Act, for the
age of 42 years, the relevant factor is 178.49. Considering
the same, the loss of earning capacity of the claimant
comes to 4800 x 178.49 = Rs.8,56,752/-.
19. In view of the aforesaid statutory provisions and
the binding precedent of the Apex Court, the impugned
award insofar as it fastens liability on the appellant-
Insurance Company to pay the interest is legally
unsustainable and warrants interference while leaving the
employer's statutory liability under the Employees'
Compensation Act intact.
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20. In view of the foregoing discussions, calculation,
and the law laid down by the Apex Court in Harshadbhai
Amrutbhai's case (supra), the claimant is entitled for the
compensation of Rs.8,56,752/- as against Rs.16,69,414/-
awarded by the Commissioner.
21. In the result, this Court proceeds to pass the
following:-
ORDER
(i) This appeal is allowed in part.
(ii) The judgment and award dated 28.12.2017, in
ECA No.90/2015 on the file of the M.A.C.T. No.
III, Bagalkot is hereby modified.
(iii) The claimant is entitled for total compensation
of Rs.8,56,752/- as against Rs.16,69,414/-
awarded by the Commissioner.
(iv) The appellant-Insurance Company is liable
only to pay the said total compensation
amount and is not liable to pay medical
expenses and interest on the compensation
amount awarded by the Commissioner.
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(v) The appellant-Insurance Company shall
deposit Rs.8,56,752/-, if not already deposited,
within a period of four weeks and any excess
amount deposited shall be refunded to the
appellant.
(vi) On deposit, the amount shall be released in
favour of the claimant, in accordance with law.
(vii) No order as to costs.
Sd/-
(DR. K.MANMADHA RAO)
JUDGE
Rsh,CT:VP
