IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA. FAO No. 265/2004 Decided on:4.9.2008 National Insurance Company Limited. …Appellant. Versus Kuldeep Singh and another. …Respondents Coram The Hon’ble Mr. Justice Rajiv Sharma, J. Whether approved for reporting ?1. No. For the Appellant : Mr. Deepak Bhasin, Advocate. For the Respondents : Mr. Naveen K. Bhardwaj, Advocate for respondent No.1. Mr. Anand Sharma, Advocate for respondent No.2. Rajiv Sharma, J. This FAO has been filed against the order dated 29.10.2003 passed by the Sub Divisional Magistrate-cum-Commissioner under the Workmen’s Compensation Act, Baijnath, District Kangra, H.P. in case No. 9/2002. The present FAO was admitted on the following substantial question of law: “Whether the appellant is not liable for payment of interest in view of the decision of the Supreme Court in 1 Whether the reporters of Local Papers may be allowed to see the judgment? No. 2 P.J. Narayan versus Union of India and others, 2004 ACJ 452?” The question raised in this appeal is no more res integra in view of the definitive pronouncement of law by their Lordships of the Hon’ble Supreme Court in New India Assurance Company Limited versus Harshadbhai Amrutbhai Modhiya and another, (2006) 5 SCC 192. Their Lordships have held as under: “By reason of the provisions of the Act, an employer is not statutorily liable to enter into a contract of insurance. Where, however, a contract of insurance is entered into by and between the employer and the insurer, the insurer shall be liable to indemnify the employer. The insurer, however, unlike under the provisions of the Motor Vehicles Act does not have a statutory liability. Section 17 of the Act does not provide for any restriction in the matter of contracting out by the employer vis-a-vis the insurer. The terms of a contract of insurance would depend upon the volition of the parties. A contract of insurance is governed by the provisions of the Insurance Act. In terms of the provisions of the Insurance Act, an insured is bound to pay premium which is to be calculated in the manner provided for therein. With a view to minimize his liability, an employer can contract out so as to make the insurer not liable as regards indemnifying him in relation to certain matters which do not strictly arise out of the mandatory provisions of any statute. Contracting out, as regards payment of interest by an employer, therefore, is not prohibited in law. As indicated hereinbefore, a contract of insurance is governed by the provisions of the Insurance Act. Unless the said contract is governed by the provisions of a statute, the parties are free to enter into a contract as for their own volition. The Act does not contain a 3 provision like Section 147 of the Motor Vehicles Act. Where a statute does not provide for a compulsory insurance or the extent thereof, it will bear repetition to state, the parties are free to choose their own terms of contract. In that view of the matter, contracting out, so far as reimbursement of amount of interest is concerned, in our opinion, is not prohibited by a statute.” In the present case, it is clear from the contents of the insurance policy Ex.RW-1/A that it does not include any provision or clause to indemnify the owner for the payment of interest under the Workmen’s Compensation Act, 1923. To the contrary the insurance company has contracted out from paying the interest as well as penalty. In view of the specific endorsement in Ex.RW-1/A, the Commissioner under Workmen’s Compensation Act could not direct the appellant-insurance company to pay the interest. The interest is to be paid in the present case by the employer i.e. respondent No.2. Consequently, in view the law laid down by their Lordships in the case cited above, this FAO is allowed. The order dated 29.10.2003 is modified to the extent that the appellant-insurance company is not liable to pay interest on the principle amount as directed by the Commissioner under Workmen’s Compensation Act, Baijnath, District Kangra, H.P. The interest shall be paid by respondent No.2. There shall be no order as to costs. 4.9. 2008 (Rajiv Sharma ), J. *awasthi*