FA/3581/2006 1/4 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD FIRST APPEAL No. 3581 of 2006 For Approval and Signature: HONOURABLE MR.JUSTICE KS JHAVERI ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ?-Yes. 2 To be referred to the Reporter or not ? -No. 3 Whether their Lordships wish to see the fair copy of the judgment ?-No. 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ?-No. 5 Whether it is to be circulated to the civil judge ?-No. ========================================================= NEW INDIA ASSURANCE CO. LTD - Appellant(s) Versus LEHRICHAND LAKHAMSHI SHAH & 2 - Defendant(s) ========================================================= Appearance : MR KV GADHIA for Appellant(s) : 1, RULE SERVED for Defendant(s) : 1, 3, MR MUKESH H RATHOD for Defendant(s) : 1, SERVED BY AFFIX.-(R) for Defendant(s) : 2, ========================================================= CORAM : HONOURABLE MR.JUSTICE KS JHAVERI Date : 29/08/2008 ORAL JUDGMENT 1. This appeal is directed against the judgment and award dated 16/11/2005 passed by the learned Commissioner under the FA/3581/2006 2/4 JUDGMENT Workmen's Compensation Act, 1923, Gandhidham – Kutch in W.C. (N.F) Application No.40 of 1996 (New) (W.C. (N.F.) Application No.118 of 1993 (old)) whereby, the said application was allowed and the appellant – Insurance Company was held liable to pay an amount of compensation of Rs.1,01,925/- with 12% interest and 50% penalty from the date of application till its realisation. 2. The facts in brief are that Shri Lehrichand Lakhamshi Shah- applicant, opponent no.1 herein was working with opponent no.2. Opponent no.1 was alleged to be met with an accident on 27/2/1987 while he was on duty on truck No.GTY-6414. As a result of said accident, he received several injuries. Therefore, he has filed W.C. (N.F.) Application No.40 of 1996 before the Presiding Officer, Labour Court, Ex-Officio W.C. Commissioner. The Court below, after appreciating the evidence on record, allowed the said application and issued directions as stated in the earlier part of this judgment. Hence, this appeal. 3. Heard learned counsel for the respective parties. The issue involved in this appeal is squarely covered by a decision of the Apex Court in the case of New India Assurance Co. Ltd. V. Harshadbhai Amrutbhai Modhiya, reported in 2006 AIR SCW 2352 in paras 14, 15 and 21 it is held as under: 14. By reason of the provisions of the Act, an employer is not statutorily liable to enter into a contract FA/3581/2006 3/4 JUDGMENT 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. 15. 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. 21. For the reasons aforementioned, the impugned judgement cannot be sustained. It is set aside accordingly. The appeal is allowed. The appellant is not liable for the interest. However, we make it clear that the employer shall be liable to pay the amount of interest to the claimant. In the facts and circumstances of the case, there shall be no order as to costs.” 4. In view of the above decision, the insurance company can be held liable only for the amount of compensation payable to the original claimant but no liability qua interest and penalty on the compensation can be fastened upon the respondent no.2 Insurance Company. 5. In the premises aforesaid, the appeal is, partly allowed. The amount of compensation shall be paid by the insurance company and the amount of interest and penalty shall be paid by the FA/3581/2006 4/4 JUDGMENT employer. The award of the Tribunal is modified accordingly. The rest of the impugned award stands confirmed on the same terms. It shall be open to the original claimant to recover the amount of penalty from the employer concerned. If the amount is already withdrawn, the appellant – Insurance Company shall recover the same from the employer and not the original claimant. The appeal stands disposed of accordingly. No order as to costs. (K. S. JHAVERI, J.) (ila)