Penalty Imposed On Insured Due To Failure To Make Payment Under Workmen’s Compensation Act Not To Be Paid By Insurer: Himachal Pradesh HC

The Himachal Pradesh High Court observed that the penalty imposed on insured due to his failure to make payment of amount payable under the Workmen’s Compensation Act, 1923 is not to be paid by the insurer.

The Court was deciding an appeal filed by the National Insurance Company (insurer) under Section 30 of the Employees Compensation Act, 1923 against the order of the Commissioner, Employee’s Compensation, Solan by which the compensation amounting to Rs. 4,52,760/- along with an interest @ 12% per annum was awarded.

A Single Bench of Justice Sushil Kukreja said, “It is a settled law that the penalty imposed on the insured on account of his/her failure to make payment of amount payable under the Act is not to be paid by the insurer. In Ved Prakash Garg Vs. Premi Devi, (1997)8 SCC 1, the Hon’ble Apex Court observed that the insurance company is liable to pay not only the principal amount of compensation payable by insured employer but also interest thereon, if ordered by the Commissioner to be paid by the insured employer. Insurance company is liable to meet claim for compensation along with interest as imposed on insured employer by the Act on conjoint operation of Section 3 and 4A(3)(a) of the Act. It was, however, held that it was the liability of the insured employer alone in respect of additional amount of compensation by way of penalty under section 4-A (3)(b) of the Act.”

Advocate Suneet Goel represented the appellant while Senior Advocate Bimal Gupta with Advocates Y. Paul and Kusum Chaudhary represented the respondents.

Factual Background -

The deceased son of the respondents was engaged as conductor in a truck and used to work as a coolie as well in the said truck. One day, in the course of his employment, when he was travelling in the truck, the vehicle rolled down a valley due to rash and negligent driving of the driver which led to his death. As per the deceased’s parents/respondents, he died in the course of employment and that the vehicle was insured with the appellant/insurer.

The parents preferred a petition under Section 166 of the Motor Vehicles Act, 1988 but the same was withdrawn with liberty to file a fresh petition. The owner and driver of the vehicle said that the insurer was under obligation to indemnify as the accident occurred not due to the negligence of the driver but because he lost control over his vehicle. The insurance company took preliminary objection of maintainability of the said petition. However, the same was allowed and hence, the matter was before the High Court.

The High Court in the above context of the case noted, “In the case on hand, the Workmen's Compensation Commissioner held the appellant insurance company liable to make good the claim to pay the amount of compensation along with interest as well as penalty. However,in view of the law laid down by the Hon’ble Apex Court, the insurance company could not have been made liable to pay the amont of penalty and the same shall be paid by the owner of the offending vehicle (respondent No. 3 herein).”

The Court said that the direction issued by the W.C. Commissioner against the insurance company to pay the penalty is required to be set aside and that the same is only liable to pay the amount of compensation of Rs. 4,52,760/- to the claimants with an interest.

Accordingly, the High Court partly allowed the appeal.

Cause Title- National Insurance Company Ltd. v. Kalawati & Others (Neutral Citation: 2023:HHC:14067-DB)

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