Case Note & Summary
The case involves an appeal by the claimants (widow and minor son of deceased Rajesh Sonawne) against the order of the Labour Court/Commissioner under the Employee's Compensation Act, 1923, which fastened liability on the employer to pay interest at 12% per annum from the date of accident till the date of order. The appellants contended that as per the Supreme Court decision in Ved Prakash Garg v. Premi Devi, the Insurance Company is liable to pay both principal and interest. The respondent Insurance Company argued that since the claimants and employer did not notify the accident to them, they are not liable for interest. The High Court, relying on the Supreme Court judgment, held that the Insurance Company is liable to pay interest as well, and the employer's failure to notify does not absolve the Insurance Company. The Court modified the impugned order to direct the Insurance Company to pay interest at 12% per annum from the date of accident till realization, while the employer is liable only for the principal amount.
Headnote
A) Employee's Compensation - Interest Liability - Insurance Company's Liability - Employee's Compensation Act, 1923, Section 4A - The issue was whether the Insurance Company is liable to pay interest on compensation when the employer failed to notify the accident. The Court held that as per the decision in Ved Prakash Garg v. Premi Devi, the Insurance Company is liable to pay the principal amount as well as interest, and the employer's failure to notify does not shift the liability to the employer. (Paras 3-6)
Issue of Consideration
Whether the Insurance Company is liable to pay interest on the amount of compensation awarded under the Employee's Compensation Act, 1923, when the employer failed to notify the Insurance Company about the accident.
Final Decision
The appeal is allowed. The impugned order is modified. The Insurance Company is directed to pay interest at 12% per annum on the amount of compensation from the date of accident till realization. The employer is liable to pay only the principal amount of compensation.
Law Points
- Liability of Insurance Company to pay interest on compensation under Employee's Compensation Act
- 1923
- Employer's failure to notify accident does not absolve Insurance Company of interest liability
- Interest payable from date of accident till realization
Case Details
2020 LawText (BOM) (02) 156
First Appeal No.133 of 2019
Mr. A.J. Pathak for appellants, Mr. Joshi for respondents
Seema wd/o. Rajesh Sonawne and Abhishek s/o. Rajesh Sonawne
Harish s/o. Jagdish Fulbandhe and The Shriram General Insurance Co. Ltd.
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Nature of Litigation
Appeal against order of Labour Court/Commissioner under Employee's Compensation Act, 1923 regarding liability to pay interest on compensation.
Remedy Sought
Appellants sought modification of the order to direct the Insurance Company to pay interest on compensation.
Filing Reason
The Labour Court fastened liability on the employer to pay interest at 12% p.a. from date of accident till date of order, which the appellants contended should be borne by the Insurance Company.
Previous Decisions
Labour Court/Commissioner under Employee's Compensation Act, 1923 passed an order directing employer to pay interest at 12% p.a. from date of accident till date of order.
Issues
Whether the Insurance Company is liable to pay interest on compensation under the Employee's Compensation Act, 1923 when the employer failed to notify the accident to the Insurance Company.
Submissions/Arguments
Appellants: As per Ved Prakash Garg v. Premi Devi, the Insurance Company is liable to pay principal amount as well as interest.
Respondent Insurance Company: Since claimants and employer did not notify the accident, the Insurance Company is not liable to pay any interest.
Ratio Decidendi
The Insurance Company is liable to pay interest on compensation under the Employee's Compensation Act, 1923, even if the employer failed to notify the accident, as per the Supreme Court decision in Ved Prakash Garg v. Premi Devi.
Judgment Excerpts
Hon’ble Apex Court in the above cited Judgment has held in para no.14 as under : On a conjoint operation of the relevant schemes of the aforesaid twin Acts, in the light of the aforesaid decisions, it must be held that the insurance company under the contract of insurance undertakes to indemnify the employer against all sums which the employer shall become liable to pay under the Act. The liability of the employer to pay interest under Section 4A(3)(a) of the Act is a part and parcel of the statutory liability and the insurance company is liable to pay the same.
Procedural History
The Labour Court/Commissioner under Employee's Compensation Act, 1923 passed an order directing the employer to pay interest at 12% p.a. from date of accident till date of order. The claimants appealed to the High Court. The appeal was admitted and heard finally with consent of both parties.
Acts & Sections
- Employee's Compensation Act, 1923: Section 4A
