Case Note & Summary
The Supreme Court allowed the appeal by Appellants, challenging the Delhi High Court's order that imposed liability for penalty under Section 4A(3)(b) of the Employees Compensation Act, 1923 on the insurance company. The case involved a claim by legal heirs of a deceased employee, Sandeep, who died while driving a commercial vehicle insured by the appellant. The Commissioner had awarded compensation of Rs. 7,36,680 with 12% interest and imposed a 35% penalty on the employer for delayed payment. The High Court, in appeal, shifted the penalty liability to the insurance company. The Supreme Court held that penalty under Section 4A(3)(b) is personal to the employer due to their default and cannot be borne by the insurer, as established in Ved Prakash Garg v. Premi Devi. The Court set aside the High Court's order, restoring the Commissioner's decision that the employer alone is liable for the penalty.
Headnote
The Supreme Court allowed the appeal filed by Appellants. against the Delhi High Court's order dated 21.05.2025 in F.A.O. No. 147 of 2021 -- The High Court had set aside the Commissioner's orders dated 19.11.2020 and 08.02.2021 and fastened liability for payment of penalty under Section 4A(3)(b) of the Employees Compensation Act, 1923 (EC Act) upon the insurance company -- The Supreme Court held that penalty under Section 4A(3)(b) of the EC Act is personal to the employer and cannot be imposed on the insurance company, relying on Ved Prakash Garg v. Premi Devi (1997) 8 SCC 1 -- The insurance company's liability under the policy is limited to payment of compensation and interest, not penalty -- The employer's failure to pay compensation within one month under Section 4A(1) of the EC Act without justification led to imposition of penalty by the Commissioner -- The High Court's order was set aside, restoring the Commissioner's imposition of penalty solely on the employer
Issue of Consideration
Whether the High Court erred in fastening liability for payment of penalty under Section 4A(3)(b) of the Employees Compensation Act, 1923 upon the insurance company (appellant) instead of the employer
Final Decision
The Supreme Court allowed the appeal, set aside the High Court's order dated 21.05.2025, and held that the penalty under Section 4A(3)(b) of the Employees Compensation Act, 1923 is solely the liability of the employer, not the insurance company -- The Commissioner's orders dated 19.11.2020 and 08.02.2021 were restored to the extent of imposing penalty on the employer
Law Points
- Interpretation of Section 4A(3)(b) of the Employees Compensation Act
- 1923 -- Liability for penalty under Section 4A(3)(b) is personal to the employer and cannot be imposed on the insurance company -- Insurance company's liability limited to compensation and interest under the policy -- Principle from Ved Prakash Garg v. Premi Devi (1997) 8 SCC 1 applies -- Employer's default in paying compensation within one month under Section 4A(1) triggers penalty -- Commissioner's power to impose penalty under Section 4A(3)(b) for unjustified delay
