National Insurance Co., Ltd. Vs Sri Subramani

THIS MFA IS FILED U/S 30(1) OF THE WORKMENS’ COMPENSATION ACT AGAINST THE ORDER DATED 06.12.2014 PASSED ON E.C.A NO.77/2014 ON THE FILE OF THE I ADDITIONAL SENIOR CIVIL JUDGE AND JMFC, CHIKMAGALUR, AWARDING COMPENSATION OF RS.84,595/- WITH INTEREST @ 12% P.A, AFTER EXPIRY OF 30 DAYS FROM 23.02.2005, TILL THE DATE OF PAYMENT.

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THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR JUDGMENT ON 25.11.2025 AND COMING ON FOR PRONOUNCEMENT THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:

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CORAM: HON'BLE DR. JUSTICE K.MANMADHA RAO

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CAV JUDGMENT

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This appeal is filed by the insurer being aggrieved by

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the judgment and decree dated 06.12.2014 passed by the

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I Addl. Senior Civil Judge and JMFC, Chikkamagalur to Itinerate at Mudigere in ECA.No.77/2014.

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MFA No. 2525 of 2015

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This appeal is admitted to consider the following

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substantial question of law:

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i. Whether the Tribunal acted contrary to law in making the appellant liable to indemnify their insured against the entire award amount ignoring the contractual terms of policy marked at Ex.R-1?

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ii. Whether the Tribunal acted perversely while mulcting entire liability to the appellant to pay compensation with interest at 12% per annum, which is not contracted under the policy obtained by the second respondent?

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Heard the arguments of learned counsel for the

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appellant.

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Since the facts are not in dispute; there is no

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need to discuss them in detail.

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The insurer is in appeal challenging its liability to pay the entire amount of compensation awarded by the Tribunal on the ground that, as per Ex.R1 – insurance policy, respondent No.2 had declared the monthly wages of the workman at Rs.833.33 and taken insurance. On this

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MFA No. 2525 of 2015

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basis, the insurer contends that it is liable to pay compensation to the extent of monthly salary declared by the respondent No.2 at the time of taking the policy i.e., Rs.833.33 and the remaining amount shall be paid by the respondent No.2. However, the Tribunal determined the income of the claimant at Rs.3,250/- per month and awarded compensation accordingly. Therefore, the insurer submits that it is not liable to pay the entire amount of compensation, but only a portion thereof, i.e., Rs.21,708/as calculated in the appeal memo.

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The second contention of the learned counsel

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for the appellant is that the Tribunal erred in directing payment of interest at the rate of 12% per annum and in fastening the said liability on the insurer. It is submitted that, in view of Section 4A of the Employees’ Compensation Act, the default is attributable to the employer and therefore, the insurer is not liable to pay interest. Hence, prays to set aside the same.

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MFA No. 2525 of 2015

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Service of notice to respondent No.1 is held sufficient vide order dated 09.03.2022 and despite service of notice to respondent No.2, he remained unrepresented.

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The policy of insurance is a contract between the insured and the insurer and its terms and conditions are specified in Ex.R1. Appellant – the insurer, is disputing its liability to pay the compensation, though it does not dispute the quantum of compensation awarded by the Tribunal. Therefore, even if the appeal is allowed, it would not affect the rights of claimant and amount awarded by the Tribunal.

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The terms of the policy, as per Ex.R1, reveal that the insurer had accepted the premium based on the declaration given by the insured that he was paying wages of Rs.10,000/- per annum to every temporary worker. On that basis, appellant/insurer had calculated the premium. Therefore, the remaining amount of compensation calculated on the basis of the claimant’s income is at Rs.6,750/-, which shall be payable by the insured.

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MFA No. 2525 of 2015

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Section 4(A) of the Employees Compensation

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Act, 1953 reads as under:

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4A. Compensation to be paid when due and penalty for default.-

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(1) Compensation under section 4 shall be paid as soon as it falls due.

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(2) In cases where the employer does not accept the liability for compensation to the extent claimed, he shall be bound to make provisional payment based on the extent of liability, which he accepts, and, such payment shall be deposited with the Commissioner or made to the employee, as the case may be, without prejudice to the right of the employee to make any further claim.

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[(3) Where any employer is in default in paying the compensation due under this Act within one month from the date it fell due, the Commissioner shall-

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(a) direct that the employer shall, in addition to the amount of the arrears, pay simple interest thereon at the rate of twelve per cent. per annum or at such higher rate not exceeding the maximum of the lending rates of any scheduled bank as may be specified by the Central Government, by notification in the Official Gazette, on the amount due; and

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(b) if, in his opinion, there is no justification for the delay, that the employer shall, in addition to the amount of the arrears an interest thereon, pay a further sum not exceeding fifty per cent. of such amount by way of penalty:

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Provided that an order for the payment of penalty shall not be passed under clause (b) without giving a reasonable opportunity to the employer to show cause why it should not be passed.

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As per the above said Section, upon receipt of

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intimation of the incident within 30 days, the employer is required to calculate the compensation and deposit the

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MFA No. 2525 of 2015

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same before the Tribunal. If the employer fails to do so, it becomes his responsibility to pay interest and penalty. In the present case, it is not the case of the insured that any such amount was deposited before the Tribunal under the Employees’ Compensation Act. Since respondent No.1 remained absent before the Tribunal, there is no material on record to show that information regarding the accident was immediately furnished to the insurer with a request to deposit the compensation amount. Under such circumstances, the failure to deposit the compensation constitutes a default of the insured under Section 4A of the Employees’ (Workmen’s) Compensation Act. In view of the terms of the policy, the insurer is not liable to pay interest and penalty on the said amount. Accordingly, the impugned award requires modification.

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For the aforesaid discussions, I proceed to pass

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the following:

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ORDER

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i. The appeal is allowed in-part.

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MFA No. 2525 of 2015

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ii. The judgment and award dated 06.12.2014 passed by the I Additional Senior Civil Judge and JMFC, Chikkamagaluru, in ECA.No.77/2014 is modified in respect of liability to pay the compensation.

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iii. Appellant – Insurer shall pay the compensation of Rs.21,708/- out of Rs.84,595/and balance amount with interest @ 12% per annum shall be payable by the insured.

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iv. Remaining part of the award is not disturbed.

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v. The amount deposited by the Insurance Company shall be transmitted to the Tribunal for refunding to the appellant/Insurance Company.

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vi. Registry is directed to return the Trial Court Records to the Tribunal, along with certified copy of the judgment passed by this Court forthwith without any delay.

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Sd/(DR.K.MANMADHA RAO) JUDGE

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MH/-

National Insurance Co., Ltd. v. Sri Subramani

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National Insurance Co., Ltd. v. Sri Subramani

Case brief

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