Orissa High Court
Case Details
Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 04-Dec-2025 18:50:39 IN THE HIGH COURT OF ORISSA AT CUTTACK FAO No.242 of 2024 (An appeal under Section 30 of the Employee’s Compensation Act, 1923) New India Assurance Company Limited, Cuttack …. Appellant (s) -versus- Sushil Mahakud & Ors. …. Respondent (s) Advocates appeared in the case through Hybrid Mode: For Appellant (s) For Respondent (s) : : Adam Ali Khan, Adv. Mr. Biswajit Mohanty, Adv. (for R-1 & 2) Mr. Samar Pratap Mohanty, Adv. (for R-3) CORAM: DR. JUSTICE SANJEEB K PANIGRAHI DATE OF HEARING:-14.11.2025 DATE OF JUDGMENT:-29.11.2025 Dr. Sanjeeb K Panigrahi, J. 1. The instant First Appeal (FAO) has been instituted by the Appellant, assailing the order dated 30.01.2024 passed by the learned Commissioner for Employees’ Compensation-cum- Divisional Labour Commissioner, Dhenkanal in E.C. Case No. 07 of 2017. I. FACTUAL MATRIX OF THE CASE: 2. The brief facts of the case are as follows: Page 1 of 20 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 04-Dec-2025 18:50:39 (a) The deceased, Raghab Mahakud, was employed as a skilled labourer, stone breaker and dresser under M/s Shree Gobindraj Stone Crusher. On 02.02.2017, while discharging his duties at the worksite, he met with an accident and sustained grievous injuries, to which he later succumbed. In connection with the said incident, Motanga P.S. Case No. 26 of 2017 was registered on 03.02.2017, and a charge-sheet was subsequently submitted against the proprietor of the stone crusher unit. (b) The employer had obtained Employee’s Compensation Policy No. 55040336160100000068 from the present appellant, valid from 12.09.2016 to 11.09.2017. The policy covered the risk of one unnamed semi-skilled worker with monthly wages of ₹7,500, and two unnamed unskilled labourers with monthly wages of ₹6,000 each. (c) Upon receipt of notice, the proprietor of the stone crusher filed his written statement admitting the employment of the deceased as well as the fact of his death. He asserted that liability to pay compensation lay with the insurer as his establishment was covered under the aforesaid policy. (d) The appellant–Insurance Company filed its written statement contesting the claim. It pleaded that only such persons who fall within the definition of “workman” under the Employees’ Compensation Act would be covered under the policy. It was further pleaded that under Section 3 of the Act, the employer Page 2 of 20 Signature Not Verified
Legal Reasoning
Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 04-Dec-2025 18:50:39 is primarily liable to pay compensation and may thereafter seek reimbursement from the insurer subject to the terms of the policy. The appellant contended that the applicants failed to establish employer–employee relationship by producing documents such as the muster roll, wage register or registration records. On these grounds, the appellant submitted that it was not a necessary party and that the application as against it was not maintainable. (e) The learned Commissioner, upon consideration of the materials on record, directed the appellant to pay compensation of ₹8,67,640 within 30 days from the date of the order. It was further directed that in the event of default, penalty up to fifty percent and interest at the rate of twelve percent per annum from the date the amount fell due would be imposed. (f) Being aggrieved by the judgment dated 30.01.2024 passed by the learned Commissioner for Employees’ Compensation- cum-Divisional Labour Commissioner, Dhenkanal in E.C. Case No. 07 of 2017, the appellant has preferred the present II. 3. appeal. SUBMISSIONS ON BEHALF OF THE APPELLANT: Learned counsel for the Appellant earnestly made the following submissions in support of his contentions: Page 3 of 20 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 04-Dec-2025 18:50:39
Legal Reasoning
i. Learned counsel for the appellant assailed the findings of the learned Commissioner as illegal, arbitrary and contrary to the evidence on record, and therefore liable to be set aside. ii. It was submitted that although the Employees’ Compensation Insurance Policy was issued by the appellant–Insurance Company in favour of M/s Shree Gobindraj Stone Crusher covering certain categories of labourers, under the terms of the policy the employer was required to satisfy the award in the first instance and thereafter seek indemnification. The learned Commissioner erred in fastening direct liability on the insurer. iii. It was contended that the insurance policy is a contract exclusively between the insurer and the employer, and there is no privity of contract between the deceased workman and the Insurance Company. The direction to pay the compensation amount directly to the claimants was therefore unsustainable. This aspect was not considered by the learned Commissioner. iv. It was further contended that under Section 14 of the Employees’ Compensation Act, the insurer may be directed to pay compensation only in cases of insolvency of the employer, which has neither been pleaded nor proved. In the absence of such a contingency, the liability could not have been shifted onto the insurer. Page 4 of 20 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 04-Dec-2025 18:50:39 v. It was submitted that although the employer, examined as OPW-1, admitted the employment of the deceased and the fact of his death during duty hours, he failed to produce the muster roll, wage register or any other statutory record to establish the employer–employee relationship. In the absence of such material, the insurer could not be held liable under the policy. The learned Commissioner failed to consider this in its proper legal perspective. vi. It was submitted that even assuming, without admitting, that the deceased was covered under the policy, the compensation ought to have been computed on monthly wages of ₹6,000, which was the wage basis for calculation of premium. The learned Commissioner committed illegality in assessing wages at ₹8,000 for computation. vii. viii. It was further submitted that the quantum of compensation awarded is excessive, exorbitant and wholly unjustified. It was contended that the learned Commissioner erred in directing payment of penalty up to fifty percent along with interest at twelve percent per annum, which, in any event, could not have been imposed on the insurer in view of the settled position of law. ix. It was finally submitted that the impugned judgment is otherwise illegal, arbitrary and unsustainable in law. Page 5 of 20 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 04-Dec-2025 18:50:39 III. SUBMISSIONS ON BEHALF OF THE RESPONDENTS/CROSS APPELLANTS: 4. Learned Counsel for the Respondents/Cross Appellants earnestly made the following submissions in support of his contentions: i. Per contra, learned counsel for the Respondents / Cross- Appellants submitted that the learned Commissioner failed to take note of the omission of Explanation II to Section 4 of the Employees’ Compensation Act, 1923 relating to wage ceilings, and further ignored the sworn testimony of the employer, who was the pay master. It was submitted that the deceased was earning ₹12,000 per month (₹9,000 towards monthly wages and ₹3,000 towards daily food allowance), but the learned Commissioner illegally restricted the monthly wage to ₹8,000. It was therefore submitted that the compensation requires enhancement. ii. It was submitted that the learned Commissioner, in disregard of Section 4(4) of the Employees’ Compensation Act, failed to award the statutory amount towards funeral expenses and the cost incurred for transporting the dead body from the post- mortem centre to the native village of the deceased. In view of this omission, enhancement of the award was sought. iii. It was submitted that although the materials on record clearly show that the Insurance Company dragged the proceedings for nearly seven years from the date of filing, the learned Commissioner did not award any litigation cost. Instead, the learned Commissioner imposed a penalty under a default Page 6 of 20 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 04-Dec-2025 18:50:39 clause. It was contended that this omission warrants appropriate modification and enhancement of the award. iv. It was submitted that the learned Commissioner most illegally ignored the settled principles of law laid down by the Constitution Bench of the Supreme Court in Pratap Narain Singh Deo v. Srinivas Sabata1, Oriental Insurance Co. Ltd. v. Siby George2 and North East Karnataka Road Transport Corpn. v. Sujatha3. It was contended that, contrary to these decisions, the learned Commissioner awarded interest on the basis of a default clause instead of granting interest at the rate of twelve percent per annum from the date of the accident to the date of payment. In view of this gross illegality, the impugned judgment is liable to be modified and enhanced accordingly. v. Learned counsel submitted that F.A.O. No. 242 of 2024, preferred by the Insurance Company, is based solely on findings of fact and not on any substantial question of law as mandated under the first proviso to Section 30 of the Employees’ Compensation Act. It was contended that the appeal suppresses the material evidence on record, including police papers as well as the oral testimony of PW-1 and that of Opposite Party No.1, the employer, which clearly established employer–employee relationship, the skilled nature of the