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Judgment
This miscellaneous appeal under Section 30 of the Workman Compensation Act, 1923 has been preferred by the appellant/Insurance Company for setting aside the impugned award dated 25.05.2024 passed by the Commissioner, Labour Court, Jabalpur in Case No.16/2015.
The brief facts of the case is that the deceased, Saleem Md. @ Javed, was allegedly employed by Respondent No. 2 as a driver and died in a motor accident during the course of employment in the intervening night of 11/12.03.2011 while travelling from Jabalpur to Katni for dropping passengers. The claimants filed a claim petition seeking compensation of Rs. 8,00,000/-, alleging that the deceased was earning Rs. 8,000/- per month. However, the claim petition was filed on 06.02.2015, nearly four years after the accident. Initially, only Respondent No. 2 was impleaded, and the Appellant-Insurance Company was added as a party only on 24.07.2019. The Appellant Company contested the claim, contending that the vehicle was insured under a package policy and was not registered for commercial use. It was alleged that the vehicle was being used for carrying passengers on hire, which constituted a breach of the policy conditions, thereby absolving the Insurance Company of liability. The Appellant further objected to the maintainability of the claim petition on the ground of limitation and also pointed out that the FIR had been lodged after a delay of about eight months from the date of the accident. After trial, the learned Tribunal awarded compensation of Rs. 5,42,275/- along with interest @ 12% per annum from 30 days after the date of the accident, fastening liability upon the Appellant Company.
Learned counsel for the appellant, Shri Shreyas Dubey, submits that the accident in question occurred on 12.03.2011, whereas the appellant/Insurance Company was impleaded as a party only on 24.04.2019. Therefore, the appellant cannot be saddled with liability to pay interest for the period prior to its impleadment. It is further submitted that the Commissioner under the Employees’ Compensation Act wrongly imposed interest and penalty from the date of accident despite the fact that the appellant was not a party to the proceedings at the relevant time. Counsel submits that the original ex parte award dated 23.12.2016 passed in Case No.16/2015 was against employer Kishor Nibhani alone and no opportunity of hearing was granted to the appellant. Thereafter, in recovery proceedings, the employer filed an application under Order IX Rule 13 CPC and the Commissioner, by order dated 09.01.2019 passed in Case No.119/2018, set aside the ex parte proceedings subject to deposit of fifty percent of the awarded amount. Against the said order, Kishor Nibhani preferred M.P. No.449/2019 before the High Court. By order dated 29.01.2019, the Co-ordinate Bench modified the condition of deposit and directed to deposit Rs.2,00,000/- within thirty days while keeping the remaining directions intact. It is submitted that only after restoration of the claim petition, the appellant/Insurance Company was impleaded as defendant No.2 on 24.04.2019. Hence, fastening liability of interest for the period prior thereto is illegal and unsustainable. It is therefore prayed that the impugned order be modified to the extent that the appellant shall not be liable to pay interest prior to 24.04.2019 and the liability, if any, for the earlier period may remain upon the employer.
Shri Shreyas Dubey, Advocate for the appellant has also submitted that as per judgment of the Supreme Court in the case of New India Assurance Company Ltd. Vs. Rekha Chaudhary and Others 2026 SCC OnLine SC 294, Insurance Company is not liable to pay the penalty in this case. Thus, the penalty imposed against the Insurance Company is also liable to be set aside.
Learned counsel for the respondents, Shri Ravish Deolia, submits that the Commissioner, Employees’ Compensation Act, Jabalpur had originally passed the award in Case No.16/2015 on 23.12.2016 in favour of the claimants. Thereafter, when the awarded amount was not paid, recovery proceedings were initiated, in which employer Kishor Nibhani appeared and filed an application under Order IX Rule 13 CPC seeking setting aside of the ex-parte award. The Commissioner, by order dated 09.01.2019 in Case No.119/2018, allowed the application and directed the employer to deposit fifty percent of the awarded amount, i.e., Rs.4,00,000/-. The said order was challenged before the High Court in M.P. No.449/2019, wherein the Co-ordinate Bench modified the deposit condition and directed deposit of Rs.2,00,000/- within thirty days. The said amount has already been deposited before the Commissioner. It is further submitted that after restoration of the claim petition, the Insurance Company was impleaded as defendant No.2 on 24.04.2019 and thereafter participated in the proceedings. Learned counsel fairly submits that since the Insurance Company was impleaded subsequently, the liability of interest prior to 24.04.2019 may not be fastened upon the appellant and the same may remain recoverable from the employer.
Heard learned counsel for the parties and perused the record.
As far as on behalf of the respondent, learned counsel for the respondent submitted that Kishore Kumar, Non-applicant No. 1, deposed that he came to know about the incident on 12 March 2011. After receiving information regarding the incident, he visited the office of the insurance company and met the Branch Manager, K.P. Jaiswal, to whom he narrated the incident in detail. Thereafter, Mr. Jaiswal instructed him to lodge the complaint with the office clerk, Manoj Tiwari. Accordingly, he approached Manoj Tiwari, reduced the information regarding the incident into writing on a plain paper, and submitted the same to him. However, in paragraph 4 of his cross-examination, Kishore Kumar admitted that he had not obtained any acknowledgment or receipt from Manoj Tiwari regarding the alleged notice/information. In view of the aforesaid admission, it appears that the testimony of Kishore Kumar with respect to informing the Branch Manager of the insurance company is not reliable. His statement appears to have been made only to absolve himself of liability. Therefore, his testimony on this aspect does not inspire confidence and cannot be relied upon.
It is not disputed that the accident occurred on 12.03.2011 and the appellant/Insurance Company was impleaded as defendant No.2 only on 24.04.2019 after restoration of the claim petition. The original award dated 23.12.2016 was passed ex parte against employer Kishor Nibhani and the appellant was not a party to the proceedings at that stage. The record further reflects that the ex parte order was subsequently set aside in proceedings under Order IX Rule 13 CPC and the Co-ordinate Bench of this Court in M.P. No.449/2019 vide order dated 29.01.2019 modified the condition regarding deposit of the awarded amount.
The Supreme Court in the case of Rekha Choudhary (supra) in paragraphs No.22 to 25 has held as under :
"22.Further the submission on the part of respondent that the Insurance policy covered all the components of financial liability under the ambit of policy which included compensation, interest and penalty cannot be accepted for two reasons, firstly, the respondent has not produced the extant insurance policy that was governing the field at the time of incident to persuade us on the said submission and secondly, which in our view, is further more significant is the presence of statutory obligation fastened upon the employer by virtue of Section 4(A)(3) which mandates the payment of compensation determined under section 4 within the time span of one month from the date it fell due. Thus, when the statute itself has obligated the employer to make the payment within one month, such obligation cannot be countenanced as sub-servient to any contractual obligation or bypassing the statutory obligation, as the same would tantamount to disregard of the legislative intent envisaged under the said provision.
23.Further, the submissions on behalf of the respondent are contrary and in teeth of the law laid down by this Court in case of Ved Prakash Garg (supra) wherein the Division bench of this Court had dealt with similar issue and had held:
“13.The short question is whether the phrase “liability arising under the Compensation Act” as employed by the proviso to sub-section (1) of section 147 of the Motor Vehicles Act and as found in proviso to clause (i) of sub-section (1) of Section II of the insurance policy, would cover only the principal amount of compensation as computed by the Workmen’s Commissioner under the Compensation Act and made payable by the insured employer or whether it could also include interest and penalty as imposed on the insured employer under contingencies contemplated by Section 4-A(3)(a) and (b) of the Compensation Act?”
14………..Therefore, the conclusion becomes inevitable that when an employee suffers from a motor accident injury while on duty on the motor vehicle belonging to the insured employer, the claim of compensation payable under the Compensation Act along with interest thereon, if any, as imposed by the Commissioner, sections 3 and 4-A(3)(a) of the Compensation Act will have to be made good by the Insurance company jointly with the insured employer. But so far as the amount of penalty imposed on the insured employer under contingencies contemplated by section 4-A(3)(b) is concerned as that is on account of personal fault of the insured not backed up by any justifiable cause, the insurance company cannot be made liable to reimburse that part of the penalty amount imposed on the employer. The latter because of his own fault and negligence will have to bear the entire burden of the said penalty amount with proportionate interest thereon if imposed by the Workmen’s Commissioner. …..
19.As a result of the aforesaid discussion it must be held that the question posed for our consideration must be answered partly in the affirmative and partly in the negative. In other words the insurance company will be liable to meet the claim for compensation along with interest as imposed on the insured employer by the Workmen’s Commissioner under the Compensation Act on the conjoint operation of Section 3 and Section 4-A sub-section (3)(a) of the Compensation Act. So far as additional amount of compensation by way of penalty imposed on the insured employer by the Workmen’s Commissioner under Section 4-A(3)(b) is concerned, however, the insurance company would not remain liable to reimburse the said claim and it would be the liability of the insured employer alone.”
24.This court in Sheela Devi and Another v. Oriental Insurance Company Limited & Another wherein one of us was part of the bench (Justice Aravind Kumar) while dealing with a supplementary question of reduction of penalty amount had reiterated the view taken by this court in Ved Prakash Garg (supra) and observed that :
“10.It is settled law that statutory penalty which is imposed upon the employer under section 4-A(3)(b) of the Act is not to be indemnified by the Insured. In Ved Prakash Garg (supra), this court has held that the Insurance company shall compensate the Insured- Employer for the principal amount of compensation as well as interest thereon, however, in case of any additional amount of compensation is awarded by the commissioner by way of penalty, the same would be the liability of the Insured-employer alone and not of the Insurance Company. The decision in Ved Prakash Garg (Supra) has been followed in L.R. Ferro Alloys Ltd. v. Mahavir Mahto holding that the Insurer is liable to indemnify the owner only for the compensation along with interest thereon and not the penalty imposed on the employer for default in payment of amount within one month from the date of incident. In view of the above, the direction of the High Court, fixing the liability to pay statutory penalty on the Employer only, requires no interference from this court.”
CONCLUSION
25.Hence, in the light of aforesaid discussion, we are of the considered view that the present Appeal deserves to be allowed. Accordingly, it stands allowed. Consequently, the Impugned Judgement and Order dated 21.05.2025 passed in F.A.O No. 147 of 2021 is set aside, so far as it imposes the liability of paying the penalty under Section 4A(3)(b) of Employees’ Compensation Act, 1923 on the Appellant-Insurance Company and the said liability is fastened upon the Employer i.e., Respondent no. 4 herein to pay the amount of penalty of Rs. 2,57,838/- (Two Lakhs Fifty-Seven Thousand Eight Hundred Thirty-Eight Rupees Only) as Ordered by the Commissioner by Order dated 08.02.2021 within a period of eight (8) weeks from today. Rest of the findings of the High Court remains undisturbed."
In view of the law laid down by the Hon’ble Supreme Court in Rekha Chaudhary (supra), it is settled that though the Insurance Company is liable to satisfy the compensation amount along with interest but the liability to pay penalty is upon the employer alone as the employer has to inform the insurance company immediately after the accident but the employer did not comply the aforesaid duty.
Accordingly, the penalty imposed against the Insurance Company is hereby set aside. The liability to pay the penalty amount shall rest solely upon the employer, who alone shall be responsible for payment of the said amount in accordance with law. However, the Insurance Company shall remain liable for payment of the compensation amount along with applicable interest, as awarded by the Commissioner. The amount already deposited by the employer shall be adjusted accordingly.
With the aforesaid modification, the appeal stands allowed in part and disposed of.