IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.N.KRISHNAN THURSDAY, THE 1ST OCTOBER 2009 / 9TH ASWINA 1931 MFA.No. 91 of 2009(C) ----------------------- (AGAINST THE ORDER OF COMMISSIONER FOR WORKMEN'S COMPENSATION (DEPUTY LABOUR COMMISSIONER, ERNAKULAM IN W.C.C.65 OF 2003) ......................... APPELLANT(S): 2ND OPPOSITE PARTY --------------------------------------------- THE ORIENTAL INSURANCE CO.LTD., REPRESENTED BY THE ASST.MANAGER, DIVISIONAL OFFICE, R.S.ROAD, ALUVA-683 101. BY ADV. SRI.M.JACOB MURICKAN RESPONDENT(S): APPLICANT AND IST OPPOSITE PARTY ----------------------------------------------- 1. SAROJAM.M.K., D/O.LATE KRISHNANKUTTY, MARAMATTU PARAMBIL, POIKKATTUSSERY, CHENGAMANADU P.O., ERNAKULAM DISTRICT. 2. V.A.SHAJI, VALLATHERRY HOUSE, KIDANGOOR, ANGAMALY P.O., ERNAKULAM DISTRICT. ADV. SRI.MKS.MENON FOR R1 THIS MISC. FIRST APPEAL HAVING BEEN FINALLY HEARD ON 01/10/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: M.N. KRISHNAN, J. = = = = = = = = = = = = = = M.F.A. NO. 91 OF 2009 = = = = = = = = = = = = = = = Dated this the 1st day of October, 2009. J U D G M E N T This appeal is preferred against the order of the Commissioner of Workmen's Compensation, Ernakulam in W.C.C.65/03. The applicant sustained an employment injury and the Compensation Commissioner has awarded a sum of Rs.40,362/- with 12% interest from 1.10.2004 till the date of deposit of the amount. The owner was directed to deposit with the Court an amount of RS.14,865/- towards interest from 24.11.2001 to 30.9.2004. It is challenging the liability to pay interest from the date of receipt of notice, this appeal is preferred. The substantial question of law formulated is as follows. “Whether the direction in the impugned order making the appellant (Insurance Company) liable to pay interest is sustainable in view of the principles laid down by the Apex Court in New India Assurance Co. Ltd. v. Harshadbhai Amrutbhai Modhiya & another (2006 AIR SCW 2352)”. M.F.A. 91 OF 2009 -:2:- Point: 2. The point deals with the question whether the insurance company shall be made liable to pay interest from 1.10.2004 on which date they have received the notice. The contention of the insurance company is to the effect that by virtue of the endorsement in the admission, i.e. the terms of contract, it is not liable to pay any interest. The insurance company relies on the endorsement, “It is hereby understood and agreed that the cover provided under the Policy shall not extend to indemnify the insured/insureds in respect of any interest and/or penalty which may be imposed on him/them on account of his/their failure to comply with the requirements laid down under the Workmen's Compensation Act, 1923 and subsequent amendments of the said Act.” What will be the impact of such an endorsement is considered by the Apex Court in the decision reported in New India Assurance Co. Ltd. v. Harshadbhai Amrutbhai M.F.A. 91 OF 2009 -:3:- Modhiya & another (2006 AIR SCW 2352)” which is extracted as follows. “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. S.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 therefore depend upon the volition of the parties. 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”. M.F.A. 91 OF 2009 -:4:- 3. In the light of the dictum laid down in the said decision the insured and the insurer are free to contract, exclude the interest as well and therefore as the contract of insurance does not cover the payment of interest the insurance company cannot be made liable to pay the interest. So the finding of the Workmen's Compensation Commissioner that interest has to be paid from 1.10.2004 by the insurance company is liable to be set aside and I do so. But it does not mean that the applicant is not entitled to the interest. He is entitled to the interest from the date of accident till the amount is deposited and it is to be paid by the employer(2nd respondent in appeal). The order is modified accordingly. The excess amount deposited by way of interest by the insurance company be reimbursed to the insurance company on appropriate application. M.N. KRISHNAN, JUDGE. ul/-