Page 56 - Insurance Times September 2023

appellant was naturally under the impression that medical evidence from the employer and insurer, the Commissioner
bills would also be payable. The state commission had also of Workmen's Compensation ruled in favour of the workers
held that claims had to be released to as far as the appellant and awarded a total compensation amount of Rs.
is entitled to." 12,79,130, to be paid by the employer, with the United India
Insurance Company Limited directed to deposit the awarded
The Supreme Court allowed the appeal and set aside NCDRC
Order directing the respondents to pay 4 lakhs along with compensation as indemnification.
interest. It also imposed a nominal cost of 30,000 payable However, the Commissioner failed to address the issue of
to the appellant. interest and penalty as mandated by Section 4-A of the Act,
leading the workers to file appeals before the High Court.
Case title: Hem Raj v New India Assurance Co. Ltd.
Assailing the award the appellants primarily contended that
the Commissioner erred in denying them interest and
Employees' compensation Act - Insurer penalty, which are mandatory under Sub Section (a) and (b)
not automatically liable to indemnify of Section 4-A. Adjudicating upon the matter Justice Sanjeev
Kumar highlighted that the compensation under Section 4
employer for interest on delayed
of the Employees Compensation Act becomes payable as
payment of compensation: J&K High soon as it falls due on the date of the accident and not on

Court the date adjudication is made by the Commissioner under
Section 4 of the Act.
The Jammu and Kashmir &Ladakh High Court has ruled that
an insurance company cannot be, as a matter of rule, asked "In case the employer commits a default in making the
to indemnify an employer for the interest and penalty payment of compensation due under the Act within one
payable for delayed payment of compensation under the month from the date it fell due, the Commission is under an
Employee's Compensation Act, 1923. A single bench of obligation to direct the employer to pay in addition to the
Justice Sanjeev Kumar held, "It is true that under the policy amount of compensation, the simple interest @ 12% per
of insurance covering the injuries and death of the workmen annum or at such higher rate not e-xceeding the maximum
working under the employer, the insurer undertakes to of the lending rates of any scheduled bank as may be
indemnify the employer in respect of any compensation specified by the Central Government by a notification in the
payable to such injured/deceased workmen during the official gazette", the court elaborated.
course of his employment, but such contract to indemnify
Upon examining the case at hand, the court noted that the
the employer in respect of payment of compensation cannot Commissioner provided no explanation for not awarding
ipso facto extend to the payment of interest and penalty interest and penalty, thereby indicating an omission in its
that becomes due from the employer only in case he decision. It also clarified that the responsibility for paying
commits default in payment of compensation due within a interest and penalty lies squarely with the employer, unless
period of one month."
there is a specific agreement between the employer and
It said unless there is a specific contract of insurance the insurance company. Accordingly, the Court held the
between the employer and the insurer, that the insurer workers are entitled to receive interest at a rate of 12%
would indemnify the employer in respect of interest and per annum from the day of the accident-July 26, 2004.
penalty also, no liability can be fastened on the insurer to However, given the absence of determination by the
indemnify the employer for the amount of interest and Commissioner regarding any justification for the delayed
penalty that may become payable by the employer for payment, the court refrained from imposing a penalty on
committing a default in making the payment of the employer at this late stage, almost 19 years after the
compensation due under the Act within one month from the accident.
date of accident.
"Having regard to the facts and circumstances of the case
The bench was hearing appeals filed by four workers who and for the reasons explained above, I would like to put a
had sustained severe injuries during blasting operations lid on the litigation by providing that the employer, in
directed by their employer on July 26, 2004. The injuries addition to the interest as directed above, shall also be liable
resulted in permanent disabilities, rendering them unable to pay a penalty @ 10% of the awarded amount", the bench
to continue working. Seeking justice, the workers filed concluded.
separate claim petitions under Section 3 of the Employees'
Compensation Act, 1923. Upon reviewing the evidence Case Title: Mohd. Abdullah Vs Manager, Trumboo
presented by the workers and the absence of rebuttal Cement Industry Limited. T

50 September 2023 The Insurance Times