Case Note & Summary
The case involves an appeal by the New India Assurance Company Ltd. against an order of the Commissioner for Workmen's Compensation and Judge, Labour Court, Ahmednagar, dated 04.08.1993 in Application (WC) No.5 of 1992. The Commissioner had directed the employer and the Insurance Company to jointly and severally pay compensation of Rs.44,302/- with interest at 6% p.a. from 25.09.1990 till realisation, and also to pay 50% of the penalty amount i.e. Rs.22,151/- to the applicants (respondents No.1 to 3), who were the original claimants. The Insurance Company challenged only the part of the order directing it to pay 50% of the penalty amount. The short question raised was whether the Insurance Company could be held liable for payment of the penalty. The appellant argued that the Insurance Company had expressly agreed to indemnify the employer only in respect of statutory liability, and penalty is not covered by statutory liability but is the personal liability of the employer. The court found that the point was squarely covered by the decision of the Apex Court in New India Assurance Company Ltd. Vs. Harshadbhai Amrutbhai Modhiya, reported in 2006 (5) SCC 192, which held that the Insurance Company is not liable to pay the penalty amount as it is the personal liability of the employer. Accordingly, the court allowed the appeal, set aside the direction in paragraphs (B) and (C) of the impugned order insofar as it directed the Insurance Company to pay 50% of the penalty amount, and directed the employer to pay the penalty amount. The rest of the order was confirmed.
Headnote
A) Workmen's Compensation - Insurance Liability - Penalty - Workmen's Compensation Act, 1923, Section 4A - Insurance Company not liable for penalty imposed on employer for delayed payment of compensation - The Apex Court in New India Assurance Company Ltd. Vs. Harshadbhai Amrutbhai Modhiya held that penalty is not covered by statutory liability and is personal liability of employer - Insurance Company only liable to indemnify employer for compensation and interest, not penalty (Paras 4-7).
Issue of Consideration
Whether the Insurance Company can be held liable for payment of 50% of the penalty amount under the Workmen's Compensation Act, 1923.
Final Decision
Appeal allowed. The direction in paragraphs (B) and (C) of the impugned order insofar as it directs the Insurance Company to pay 50% of the penalty amount is set aside. The employer is directed to pay the penalty amount. Rest of the order is confirmed.
Law Points
- Insurance company not liable for penalty under Workmen's Compensation Act
- 1923
- Penalty is personal liability of employer
- Indemnity only covers statutory compensation
