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 & 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 appealed only against the direction to pay the penalty amount, contending that the insurance policy only indemnifies the employer against statutory liability and does not cover penalty, which is the personal liability of the employer. The court considered the short question of whether the Insurance Company can be held liable for payment of 50% of the penalty amount. The court found that the issue 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 for penalty under the Workmen's Compensation Act, 1923. 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 that the penalty amount shall be recovered from the employer alone. The rest of the order was confirmed.
Headnote
A) Workmen's Compensation - Insurance Liability - Penalty - Workmen's Compensation Act, 1923, Section 4A - The issue was whether an insurance company can be held liable for payment of penalty imposed on the employer for delayed payment of compensation. The court held that the insurance company is not liable for penalty as it is the personal liability of the employer and not covered by the statutory liability under the insurance policy. The decision of the Apex Court in New India Assurance Company Ltd. Vs. Harshadbhai Amrutbhai Modhiya, 2006 (5) SCC 192 was followed. (Paras 4-7)
Issue of Consideration
Whether the Insurance Company can be held liable for payment of 50% of the penalty amount as directed by the Commissioner 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 penalty amount shall be recovered from the employer alone. 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 does not cover penalty
