THE NEW INDIA ASSURANCE CO LTD. v. SMT. SHANTHIDHARAMAN & Ors.

CORAM: HON'BLE MS. JUSTICE TARA VITASTA GANJU ORAL JUDGMENT

1. The present appeal seeks to challenge a Judgment and Award dated 19.03.2018, in ECA No.20/2017, passed by the learned Motor Accident Tribunal, Court of Small Causes, at Bengaluru (hereinafter referred to as ‘Impugned Award’). By the Impugned Award, the petition filed under Section 22 read with Section 4 of the Workmen's Compensation Act, 1923 (hereinafter referred to as “E.C. Act”) has been allowed and the compensation of Rs.6,92,760/- has been awarded in favour of the respondents No.1 and 2/claimants No.1 and 2.

2. None appears for the respondents No.1 and 2, despite service. The record also shows - 2 - NC: 2026:KHC:7097 MFA No. 6064 of 2018 HC-KAR respondents have not been appearing regularly. The respondents accordingly, are proceeded with ex-parte.

3. The brief facts are that the respondents No. 1 and 2 are the wife and the son respectively of one deceased Dharman. The deceased was employed with respondent no.3 as a lorry driver to deliver the Three HGV Trailer Jeeps from Chennai to Faridabad. On 03.08.2016, the deceased was driving lorry bearing registration number TN-18-TC-0818 and when they reached near Anand Honda Show Room, NH-7, Attibele, they stopped on the Bangalore-Hosur road for having tea. At that time, the deceased discovered that there was a jam in the clutch of the vehicle and in order to clear the blockage, the deceased went under the vehicle. Unfortunately, the vehicle moved suddenly and ran over the deceased, as a result of which, the deceased was seriously injured and succumbed to his injuries at the hospital. - 3 - NC: 2026:KHC:7097 MFA No. 6064 of 2018 HC-KAR

4. It was the case of the claimants that the deceased was earning a sum of Rs.20,000/- per month and was contributing to the income of the family and after the accident, the respondents/claimants have been facing severe financial difficulties. Hence a claim petition was filed.

5. The matter was contested by the respondent/owner as well as the Appellant/Insurance Company before the learned Tribunal and several defences were raised. However, there was no dispute that the deceased was employed by the respondent no.3/owner.

6. On the basis of the pleadings of the parties, the learned Tribunal framed the following issues: “1. Whether the Petitioners prove that deceased Dharman was a Driver/employee under the Respondent No.2.?

2. Whether the Petitioners prove that, Sri. Dharman was in the course of and arising out employment under the Respondent No.2?

3. Whether the Petitioners are entitled for compensation? If so, what is the quantum and from whom?

4. What Order or Award?” - 4 - NC: 2026:KHC:7097 MFA No. 6064 of 2018 HC-KAR

7. The Learned Tribunal after examining the evidence of the parties awarded compensation in a sum of Rs.6,92,760/- along with interest at the rate of 12% from the date of accident i.e., from 03.08.2016 till its realisation. The learned Tribunal also held that the respondents No.1 and 2 are jointly and severally liable to pay the compensation.

8. Learned counsel the appellant/Insurance Company submits that he is not challenging the quantum of the compensation awarded and his challenge is only on one aspect. He submits that the appellant/Insurance Company cannot be made jointly liable to pay the interest awarded by the learned Trial Court in terms of the contract between the appellant and respondent No.3/employer in terms of which, this amount is to be paid by the employer/respondent No.3. In this behalf, reliance is placed by learned counsel for the appellant/Insurance - 5 - NC: 2026:KHC:7097 MFA No. 6064 of 2018 HC-KAR Company on the following judgment of the Supreme Court as well as the Division Bench of this Court: i) The New India Assurance Co.,Ltd., v. Harshadbhai Amruth Bhai Modhiya and another1 ii) The Oriental Insurance Co., Ltd, v. Raju and Others.2

9. The substantial question of law that arises in the present case is: “Whether the Court below is justified in fixing the liability to pay interest on the compensation awarded on the appellant Insurance Company?”

10. The learned counsel for the appellant/Insurance Company has also taken us through the Insurance Policy (Workmen Compensation Policy), dated 26.07.2016, and its clauses to submit that the policy of insurance is a private policy and unlike the policies in the case of the Motor Vehicles Act, 1988, which provide for compulsory third party policies, this particular policy provides for an exclusion, wherein, the interest or penalty would not be 1 (2006) 5 SCC 192 2 1992 SCC OnLine Kar 294 - 6 - NC: 2026:KHC:7097 MFA No. 6064 of 2018 HC-KAR applicable to the account of the insurer, but to the owner of the policy.

11. This Court has examined the policy which forms part of contract between the appellant and respondent No.3. The policy, while being in the name of the respondent no. 3, does set out that, in the case of personal injury by accident or death arising out of the cause of employment, the insured shall be liable to pay for such injury under law, but subject to terms and exceptions contained herein the policy itself. The Policy also provides for an exclusion of the interest and penalty on any such claims. The relevant extract of the policy is set out below: "NOW THIS POLICY WITNESSETH that if any time during the period of insurance any employee in the insured's immediate service shall sustain personal injury by accident or disease arising out of and in the course of his employment by the insured in the Business and if the Insured shall be liable to pay compensation for such injury either under the Laws (s) set out in the Schedule or at Common Law then subject to the terms exception and conditions contained herein or endorsed hereon the Company will indemnify the Insured against all sums for which the insured shall be so liable and will in addition be responsible for all costs and - 7 - NC: 2026:KHC:7097 MFA No. 6064 of 2018 HC-KAR expenses incurred with its consent in defending any claim for such compensation. PROVIDED ALWAYS that in the event of any changes in the law(s) or the substitution of other legislation thereof this policy shall remain in 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 Workmen's Compensation Act, 1923 and subsequent amendments of the said Act, prior to the date of the issue of 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 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 W. C. Act. 1923 (ii) any compensation payable on account of occupational diseases listed in part 'C' of schedule III of the W.C. Act, 1923” [Emphasis supplied]

12. The policies of this nature have been interpreted time and again by the Courts. The Supreme Court in the case of Harshadbhai Amrutbhai Modhiya's case, while interpreting this issue, has relied on a judgment of LR - 8 - NC: 2026:KHC:7097 MFA No. 6064 of 2018 HC-KAR Ferro Alloys Ltd.,3 as well as a judgment of PJ Narayan v. Union of India,4 to set out that, the liability including penalty and interest would not be paid for by the Insurance Company, but by the owner himself. The relevant extract of the judgment in the case of Harshadbhai Amrutbhai Modhiya's case5 is set out below: “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. xxx xxx xxx

16. In Ved Prakash Garg [(1997) 8 SCC 1] this Court undoubtedly held that 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 stating: (SCC p. 15, paras 12-13) “A conjoint reading of these provisions in the insurance policy shows that the insurance company