[Cites 13, Cited by 0]
Kerala High Court
The Oriental Insurance Co.Ltd vs Noor Mohammed S on 9 January, 2026
MFA(ECC)No.9 of 2012 & 2026:KER:1402
I.A.No.3 of 2018
1
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE S.MANU
FRIDAY, THE 9TH DAY OF JANUARY 2026 / 19TH POUSHA, 1947
MFA (ECC) NO. 9 OF 2012
AGAINST THE ORDER DATED 08.06.2011 IN THE COURT OF
THE COMMISSIONER FOR WORKMEN'S COMPENSATION (DEPUTY LABOUR
COMMISSIONER), KOZHIKODE IN WCC NO.326 OF 2003
APPELLANT/3RD OPPOSITE PARTY:
THE ORIENTAL INSURANCE CO.LTD.
BRANCH OFFICE-VI,SOUTH GANDHI MAIDAN,
PATNA-800 001,REPRESENTED BY THE AUTHORISED
SIGNATORY,REGIONAL OFFICE,
NORTH RAILWAY STATION ROAD,
ERNAKULAM,KOCHI-682018.
BY ADV SRI.DINESH MATHEW J.MURICKEN
RESPONDENTS/APPLICANT AND OPPOSITE PARTIES 1 & 2:
1 NOOR MOHAMMED S.
S/O.IMBICHI ABDULLA,APNA GHAR,CHALIYAM ROAD,
KOZHIKODE-673301.
2 DEPUTY CHIEF ENGINEER (CONSTRUCTION)-1
EAST CENTRAL RAILWAY,SAHASA.P.O,BIHAR,PIN-852201.
3 MANAGING PARTNER
FOUNDATION ENGINEERS,CITY OFFICE,408,ADARSHILA
MAIDAN,PATNA-800 001.
BY ADV SHRI.JACOB ABRAHAM
THIS MFA (ECC) HAVING BEEN FINALLY HEARD ON
16.12.2025, THE COURT ON 09.01.2026 DELIVERED THE
FOLLOWING:
MFA(ECC)No.9 of 2012 & 2026:KER:1402
I.A.No.3 of 2018
2
S.MANU, J.
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MFA(ECC)No.9 of 2012
&
I.A.No.3 of 2018
-------------------------------------------------
Dated this the 09th day of January, 2026
JUDGMENT
The 3rd opposite party in WCC No.326 of 2003 of the
Court of the Commissioner for Workmen's Compensation
has filed this appeal challenging the order passed by the
Commissioner.
2. The 1st respondent herein filed the compensation
case. According to him he was employed under the 3 rd
respondent as welder in connection with dismantling
guarder work of an overbridge at Didarganj, New Patna, for
the East Central Railway. While he was engaged in the work
on 01.08.2002 at about 4.30 p.m. he fell from a height of 7
meters and sustained serious injuries. He was treated in
various hospitals for a long time and in spite of the
MFA(ECC)No.9 of 2012 & 2026:KER:1402
treatments availed he is now bedridden and his lower limb
is totally paralysed. He has no sensation below T 9 region.
He sought compensation of Rs.10 lakhs.
3. The 2nd respondent filed a written statement
contending that it was not liable to pay compensation to
the 1st respondent. The work was awarded to the 3 rd
respondent and as per the terms and conditions of the
agreement, the 2nd respondent was not liable to pay any
amount to the 1st respondent. The Railway contended that
in case it was found that the 1 st respondent was entitled for
compensation, the 3rd respondent as well as the appellant
were to be held liable. The 3 rd respondent did not appear
before the Commissioner and it was declared exparte. The
appellant filed written statement admitting insurance
coverage for seven welders with wages less than Rs.4000/-
under the 3rd respondent. Other averments in the claim
petition were disputed by the appellant.
4. On conclusion of the proceedings, the learned
MFA(ECC)No.9 of 2012 & 2026:KER:1402
Commissioner found that the 1st respondent was a worker
under the 3rd respondent and sustained injuries in the
accident happened on 01.08.2002. The Commissioner also
found that the 1st respondent was a workman under Section
2(1)(n) of the Workmen's Compensation Act and sustained
personal injuries out of an accident occurred during and in
the course of his employment on 01.08.2002. The
Commissioner concluded that the permanent disability was
100%. Workman was found entitled for a compensation of
Rs.4,61,136/-. It was further held that the 1 st respondent
shall be entitled to receive simple interest @ 12% from the
date of accident. The 3rd respondent was held liable to pay
compensation and the appellant being the insurer was
directed to pay the compensation along with simple interest
at the rate of 12% with effect from 11.08.2002 within 30
days from the date of receipt of the order, failing which the
amount was directed to be recovered with 30% penalty.
5. Case of the appellant is that as per the terms of the
MFA(ECC)No.9 of 2012 & 2026:KER:1402
policy, the appellant was not liable to pay interest. Further
it was also not liable to pay any penalty. Moreover, the
appellant contended that the policy covered only 7 welders
with monthly wages of Rs.4,000/- and as the 1 st
respondent claimed that he was drawing Rs.15,000/- per
month as wages the appellant was not liable to indemnify
the contractor with respect to the 1st respondent.
6. Heard the learned counsel for the appellant and the
learned counsel for the 1st respondent.
7. The learned counsel for the appellant invited
attention of the Court to an additional document produced
along with I.A.No.3 of 2018. He pointed out that the said
document, certified copy of the full-text of the Insurance
Policy, would show that it was made clear in the policy that
the insurer shall not be liable to indemnify the insured in
respect of any interest and/or penalty which may be
imposed on him/them on account of his/their failure to
comply with the requirements laid down under the
MFA(ECC)No.9 of 2012 & 2026:KER:1402
Workmen's Compensation Act, 1923 and subsequent
amendments of the said Act. He hence contended that the
liability to pay interest and penalty was specifically omitted
from the purview of the policy. He, therefore, contended
that the appellant is not liable to pay interest or penalty.
The learned counsel relied on the following judgments in
support of the contention that the insurer cannot be held
liable to pay interest ignoring the terms of the policy:
(1) Kunnel Engineers and Contractors Private Limited v.
New India Assurance Company Limited and Another [(2023) 15
SCC 776]
(2) New India Assurance Co. Ltd. v. Harshadbhai
Amrutbhai Modhiya and Another [(2006) 5 SCC 192]
8. Pertaining to the objections raised by the
respondents during the course of hearing regarding
production of the certified copy of the policy the learned
counsel relied on a judgment of this Court in General
Manager, BSNL v. P.J. Saramma (died) and Others [2017 (3)
KHC 502]. He contended that in the said case additional
documents produced by the appellant were accepted, taken
MFA(ECC)No.9 of 2012 & 2026:KER:1402
note of and the appeal was decided taking in to account
those documents also.
9. Learned counsel for the 1st respondent contended
that the appeal is devoid of merits and the appellant
Company is liable to pay the compensation penalty and
interest. He submitted that insurer cannot be permitted to
avoid the payment of any component of the liabilities under
the impugned order. The learned counsel submitted that
the Commissioner cannot be found fault with for passing
the impugned order. There was no material before the
learned Commissioner to hold otherwise. He took strong
exception to accepting the additional document and relying
on the same. The learned counsel asserted that no
substantial question of law is involved in the instant appeal
and hence the same is only to be rejected. The learned
counsel relied on the judgments of the Hon'ble Supreme
Court in the following cases:
(1). North East Karnataka Road Transport Corporation v.
MFA(ECC)No.9 of 2012 & 2026:KER:1402
Sujatha [(2019) 11 SCC 514]
(2). L.R. Ferro Alloys Ltd. v. Mahavir Mahto and Another
[(2002) 9 SCC 450]
(3). Ved Prakash Garg v. Premi Devi and Others [AIR
1997 SC 3854]
(4). Commissioner of Survey, Settlements and Land
Records, A.P., Hyderabad and Others v. Kunsam Saranarayana
and Others [AIR 1997 SC 3867]
10. Though various challenges have been raised in the
instant appeal, submissions at the time of hearing were
mainly pertaining to the liability to pay interest. The
learned counsel for the appellant had raised a contention
that the policy issued by the appellant covered only seven
welders with monthly wages of Rs.4,000/-. The 1 st
respondent had contended that he was drawing
Rs.15,000/- per month as wages. The learned counsel
therefore submitted that the Company was not liable with
respect to the 1st respondent who was drawing monthly
wages above Rs.4,000/-. I don't find any merit in the
contention. Solely for the reason that the 1 st respondent
MFA(ECC)No.9 of 2012 & 2026:KER:1402
claimed that he was drawing Rs.15,000/- as monthly
wages, the insurance company cannot be permitted to deny
the coverage. The Commissioner has accepted the monthly
wages of the 1st respondent as Rs.4,000/- only. That being
so, the appellant cannot be permitted to be heard that the
1st respondent was not within the coverage of the policy.
11. Now I shall deal with the prime issue, the liability
to pay interest. I.A.No.3 of 2018 was filed to produce
certified copy of the full text of the insurance policy. The
same was not produced before the Commissioner and the
reason stated by the appellant is that the same occurred
due to an inadvertent omission. Though the 1 st respondent
has objected to accepting of the additional evidence, he has
no case that the same is not a genuine document or a
relevant piece of evidence. The policy certificate as well as
the premium receipts were produced before the
Commissioner. The additional evidence sought to be placed
on record is the full text of the insurance policy. For a
MFA(ECC)No.9 of 2012 & 2026:KER:1402
proper adjudication of the dispute involved in this appeal
perusal of the full text is helpful. Therefore, I am of the
view that in the interest of justice, the additional evidence
produced along with the I.A. can be accepted on record.
Hence, I allow the I.A. and accept the documents produced
as additional evidence.
12. Perusal of the policy document shows that
compensation payable as per the Workmen's Compensation
Act 1923, Indian Fatal Accidents Act 1855 and their
subsequent amendments are covered under the policy. This
is specifically stated in the policy scheduled itself which was
marked as Annexure A2 during trial. The policy document
contains certain exceptions, an endorsement and
conditions. The endorsement reads as under:
" 10717 Warranted that in case of dishonour of premium
3/18/2002 cheque(s), the said document stands
automatically cancelled abinitio (from Inception)
Compensation Payable as per WC Act 1923, Indian Fatal
Accident Act 1855 and their subsequent Amendments"
13. Therefore, it is clear that the cover provided under
MFA(ECC)No.9 of 2012 & 2026:KER:1402
the policy was not extended to indemnify the insured in
respect of any interest and/or penalty which may be
imposed on account of failure to comply with the
requirements under the Workmen's Compensation Act,
1923 and subsequent amendments of the said Act.
14. The Hon'ble Supreme Court in New India Assurance
Co. Ltd. (Supra) held as under:
"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-à-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 minimise 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.
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MFA(ECC)No.9 of 2012 & 2026:KER:1402
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."
15. The Hon'ble Court took note of the judgments in
Ved Prakash Garg and L.R. Ferro Alloys Ltd. (Supra) and held
that the law laid down in those cases with respect to
insurance governed by the provisions of the Motor Vehicles
Act, 1988 cannot be applied as such with respect to
insurance for coverage of liabilities under the Employees
Compensation Act. The Hon'ble Supreme Court held that
the insurance company was not liable to pay interest in the
said case.
16. It is also worthy to note the following paragraphs
of the judgments of the Hon'ble Supreme Court in Kunnel
Engineers and Contractors Private Limited (Supra).
MFA(ECC)No.9 of 2012 & 2026:KER:1402
14. Notably, liability of the Insurance Company does not
fall under the Act and the same is governed only by the
terms of the contract. When parties have agreed upon the
terms of the insurance contract, the Court cannot interpret
the clauses in the contract, by adverting to equity
principles. It is because in commercial transactions, the
question of lack of bargaining power does not arise. This
was the view taken by a three-Judge Bench of this Court in
Oriental Insurance Co. Ltd. v. Narbheram Power and Steel
(P) Ltd. (2018) 6 SCC 534 : (2018) 3 SCC (Civ) 484
wherein this Court held as under : (SCC p. 541, para 10)
"10. The aforesaid principles are in the realm of settled
position of law. The natural corollary of the said
propositions is that the parties are bound by the
clauses enumerated in the policy and the court does not
transplant any equity to the same by rewriting a clause.
The court can interpret such stipulations in the
agreement. It is because they relate to commercial
transactions and the principle of unconscionability of
the terms and conditions because of the lack of
bargaining power does not arise. The said principle
comes into play in a different sphere."
15. In view of the foregoing discussion and having regard
to the exception clause incorporated in the insurance
contract between the employer and the Insurance
Company as extracted above, we see no infirmity with the
view taken by the High Court in declaring that the insurer
is not liable to satisfy the interest component payable by
the employer, in terms of the award of the Commissioner.
16. The employer is therefore required to satisfy the
balance sum payable towards the interest component and
we see no reason to disturb such finding of the High Court.
The appeal accordingly stands dismissed."
17. The Hon'ble Supreme Court upheld the judgment
of this Court directing the employer to pay interest on
MFA(ECC)No.9 of 2012 & 2026:KER:1402
compensation as against the order of the Commissioner
directing the insurer to pay compensation with interest
under the provisions of the Workmen's Compensation Act,
1923.
18. Therefore, the legal position is clear. It is not
mandatory for an employer under any provision of law to
obtain a policy to cover liabilities that may arise under the
Employees Compensation Act. The insurance policy is a
contract. The insurer and the insured are bound by the
terms and conditions of the policy. It is not for the Courts to
rewrite/overwrite the terms and conditions of the insurance
policies. In the case at hand, the endorsement noted
above clearly excludes the liability to pay interest and
penalty. That being so there is considerable merit in the
contentions of the appellant in this regard.
19. The learned counsel for the respondent had relied
on the judgment of the Hon'ble Supreme Court in Ved
Prakash Garg and L.R. Ferro Alloys Ltd. (Supra). However,
MFA(ECC)No.9 of 2012 & 2026:KER:1402
those judgments have been considered and distinguished in
New India Assurance Co. Ltd. (Supra) as already noticed.
20. The learned counsel for the respondent had
contended relying on North East Karnataka Road Transport
Corporation (Supra) that no question of law is involved as
according to him the questions raised in this appeal are
purely questions of fact. I am unable to accept this
contention. Whether the Commissioner was legally correct
in directing the appellant company to pay the compensation
as well as interest despite there being an exclusion of the
liability to pay interest in the policy is a substantial question
of law. In the light of the discussions in the foregoing
paragraphs, I find this question of law in favour of the
appellant.
In the result, the directions in the impugned order are
modified. The appellant is liable to pay only the
compensation granted by the Commissioner and the 3 rd
respondent shall be liable to pay the interest due under the
MFA(ECC)No.9 of 2012 & 2026:KER:1402
impugned order. With the said modification, the appeal is
disposed of.
Sd/-
S.MANU
JUDGE
MC
MFA(ECC)No.9 of 2012 & 2026:KER:1402
APPENDIX OF MFA(ECC)No.9 OF 2012
APPELLANT'S ANNEXURES
Annexure A THE CERTIFIED TRUE COPY OF THE FULL TEXT
OF THE INSURANCE POLICY ISSUED BY THE
PETITIONER HEREIN
