New India Assurance Co. Ltd. v. J. Chellappan, Seetha Chellappan and Abraham Jacob

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR.JUSTICE K.HARILAL** **& THE HONOURABLE MR. JUSTICE A.M.BABU** **THURSDAY, THE 5TH DAY OF OCTOBER 2017/13TH ASWINA, 1939** ## **MFA.No. 5 of 2014 (A)** **---------------------** **WCC 81/2005 of THE COURT OF THE COMMISSIONER FOR WORKMEN'S COMPENSATION, THIRUVANANTHAPURAM.** ## **APPELLANT(S)/2ND OPPOSITE PARTY:** **-------------------------------** **THE NEW INDIA ASSURANCE COMPANY LIMITED, KOTTAYAM, NOW REPRESENTED BY ITS MANAGER, REGIONAL OFFICE, M.G.ROAD, KOCHI - 11.** **BY ADVS.SRI.MATHEWS JACOB (SR.) SRI.P.JACOB MATHEW** ## **RESPONDENT(S)/APPLICANTS AND 1ST OPPOSITE PARTY:** **------------------------------------------------** **1. J.CHELLAPPAN** **ADICHIRA VADAKKETHIL VEEDU, KUTTOOR P.O., THIRUVALLA, PIN - 689 320.** ## **2. SEETHA CHELLAPPAN** **ADICHIRA VADAKKETHIL VEEDU, KUTTOOR P.O., THIRUVALLA, PIN - 689 320.** ## **3. ABRAHAM JACOB** **MANAGING PARTNER, POABS ENVIROTECH PVT.LTD, WEST OTHERA, THIRUVALLA, PIN - 689 320.** **R3 BY ADV. SRI.N.JAMES KOSHY** **THIS MISC. FIRST APPEAL HAVING BEEN FINALLY HEARD ON 05-10-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **OKB** ## K.HARILAL & A.M.BABU, JJ. --------------------------M.F.A.No.5 of 2014 --------------------------Dated this the 5[th] day of October, 2017 ## JUDGMENT ## **Harilal, J.** The above appeal is directed against an order, passed by the Commissioner for Workmen's Compensation, Thiruvananthapuram in WCC No.81/2005, directing the appellant to pay a sum of Rs.4,39,900/- with 12% interest from the date of accident to the respondents 1 and 2 herein. The appellant Insurance Company is the second opposite party in the said order. The respondents 1 and 2 are the parents, who filed an application under section 22(2) of the Workmen's Compensation Act, claiming compensation for the loss sustained by them due to the death of their son by name Charles. According to the respondents 1 and 2/applicants, on 30/11/2004 the deceased Charles, while on duty as an electrician under the employment of the 3[rd] respondent herein, was found dead in the generator control room of the 3[rd] respondent's work site. It is further alleged that the accident arose out of and in the course _MFA_ .5/14-A **:2:** of the employment. The commissioner, after enquiry, found that the accident arose out of and in the course of the employment under the 3[rd] respondent and thereby he is liable to satisfy the claim. Since there was a valid insurance policy, the appellant is liable to indemnify the respondents 1 and 2. Consequently, the appellant was directed to pay the aforesaid amount as compensation with 12% interest from the date of accident. This appeal is filed mainly challenging the order directing the appellant to pay interest also from the date of accident when the policy specifically excluded payment of interest. 2. Heard the learned counsel for the appellant and the learned counsel for the 3[rd] respondent. 3. The sum and substance of the arguments advanced by the learned counsel for the appellant is that when the insurance policy specifically excluded payment of interest, the Commissioner for Workmen's Compensation went wrong by directing the appellant to pay interest also. In support of the said contention the learned counsel for the appellant cited **New** **India Assurance Co. Ltd. v. Harshadbhai Amrutbhai Modhiya [2006 (2) KLT 667 (SC)]** and the decision of this Court in MFA 8/2006. _MFA_ .5/14-A **:3:** 4. Per contra, the learned counsel for the 3[rd] respondent/employer contends that the exclusion in the insurance policy is not an absolute exclusion and it is a conditional exclusion from payment of interest in case the employer fails to comply with the requirements laid down under the Workmen's Compensation Act, 1923. Further it is contended that immediately after the accident the 3[rd] respondent sent a letter to the appellant informing the accident and stating that the accident arose out of and in the course of employment. So also made a request to the appellant to pay compensation to the dependents of the deceased at the earliest. Therefore, there was no failure from the part of the employer to discharge his duty under the Workmen's Compensation Act and in view of the liability of the insurance company to indemnify the insured the appellant the insurance company would have paid the amount to the dependents of the deceased immediately, on receipt of the said letter from the employer. According to the learned counsel for the 3[rd] respondent, in the absence of any failure from the part of the employer under the Workmen's Compensation Act, as contemplated in the exclusion clause, the insurance company is liable to pay interest also. _MFA_ .5/14-A **:4:** 5. In view of the submissions at the Bar, the question to be considered is, whether the insurance company is liable to pay interest on the compensation amount, where there is a conditional exclusion in the policy, excluding the insurance company to pay compensation, on failure from the part of the employer, to comply with the requirements laid down under the Workmen's Compensation Act, 1923. 6. In **New India Assurance Co. Ltd.** 's case (supra), the Supreme Court held that “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 provision like S.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.” Thus, it could be seen that the exclusion clause exonerating the insurance company is valid and sustainable under law. Further this court in MFA _MFA_ .5/14-A **:5:** No.8/2006 followed the aforesaid decision and held that it is open to the insurer to stipulate the exclusion of the liability to pay interest and whether there is an exclusion clause there is no justification for the commissioner to direct the payment of interest by the insurer. 7. But, here the point to be considered is, whether as per the exclusion clause, in the instant case, insurance company is completely excluded from payment of interest. In other words, the question is, is the exclusion clause an absolute exclusion clause? The exclusion clause reads as follows: “ 1. The workmen's Compensation Act, 1923 and subsequent amendments of the said Act Prior to the date of the issue of policy. 2. The Fatal Accident Act, 1855. It is hereby understood and agreed that the Workmen's Compensation (Amendment) Acts of 1959 (8 of 1959) and 1962 (64 of 1962) and 1976 (65 of 1976) and 1984 (22 of 1984) are deemed to be added to the Laws set out of in the Schedule to the Policy. Provided that the Insurance granted hereunder is not extended to include: - i. any interest and/or penalty imposed on the insured on account of his/their failure to comply with the requirements laid down under the W.C.Act 1923 and - ii. any compensation payable on account of occupational disease listed in part 'C' of Schedule III of the W.C.Act, 1923. The estimated amount of wages, salaries and other earnings on which premium is based.” _MFA_ .5/14-A **:6:** 8. On a close reading of the aforesaid exclusion clause, we are of the opinion that the aforesaid exclusion clause is not an absolute exclusion and it is a conditional one only. As per the said clause, the insurance company is not liable to pay interest or penalty, if the interest or penalty is imposed on account of the failure from the part of the employer to comply with the requirements laid down under the Workmen's Compensation Act, 1923. 9. Coming to the instant case, the accident occurred on 30/11/2004 and it is the case of the 3[rd] respondent/employer that immediately after the accident, the appellant insurance company was informed of the accident by a letter stating that the accident arose out of and in the course of the employment under him and the deceased was covered under the insurance policy issued to him. That apart, he made a request to pay the compensation to the dependents of the deceased, at the earliest. Going by the counter statement filed by the appellant, it is seen that the appellant has no case that the company was not promptly informed of the accident by the 3[rd] respondent or he failed to comply with the requirements laid down under the Workmen's Compensation Act, 1923, as contemplated under the _MFA_ .5/14-A **:7:** exclusion clause. We are of the opinion that when the exclusion clause is a conditional clause, it is for the insurance company to prove that the 3[rd] respondent/employer has failed to comply with the requirements laid down under the Workmen's Compensation Act and the interest was imposed on account of his failure only. But, in the instant case, no attempt was made by the insurance company to plead or prove that the interest was imposed, on account of the failure from the part of the employer to comply with the requirements laid down under the Workmen's Compensation Act. Thus the insurance company has failed to discharge the burden of proof cast on it under the conditional exclusion. Therefore, we find that the insurance company cannot escape from the liability to pay interest under the exclusion clause, even though the exclusion clause is a valid one, in view of the decision of the Supreme Court in **New India Assurance Co. Ltd** .'s case (supra). 10. That apart, we find that the accident had occurred on 30/11/2004 and the Commissioner for Workmen's Compensation passed the impugned order on 12/8/2011. When the employer admitted that the accident arose out of and in the course of employment, the insurance company alone disputed the claim of _MFA_ .5/14-A **:8:** the respondents 1 and 2/applicants contending that the death was caused by heart attack and contested the case upto this Court. The insurance company miserably failed to prove that the accident was caused by heart attack. However, before the Commissioner for Workmen's Compensation the insurance company alone disputed the claim of the respondents 1 and 2/applicants and the order rejecting the said contention was passed on 12/8/2011. Had the company not contested the case raising such a frivolous and unsustainable contention, certainly the respondents 1 and 2/applicants would have obtained the compensation, as early in the year 2005. But the company alone had resisted the claim at their risk. Moreover, even after the passing of the impugned order the appellant insurance company was hesitant to comply with the direction of the Commissioner for Workmen's Compensation and filed the present appeal in 2014, only after a long lapse of more than 800 days. The insurance company has deposited the amount on 28/11/2012 only. We find that even though the accident had occurred in the year 2005, the payment of compensation to the dependents of the deceased was belated on account of the failure to pay the compensation by the appellant insurance company only, _MFA_ .5/14-A **:9:** particularly when the employer fairly admitted the claim of the applicants as such. In the above context, we hold that in the cases wherein the employer has insurance coverage and he admitted the claim of the workman and intimated the same promptly to the insurance company; but the insurance company alone opposed the claim of the worker, it cannot be said that the employer has failed to comply with the requirements laid down under the Workmen's Compensation Act, 1923. It follows in such cases that the insurance company cannot escape from the liability to pay interest on the compensation amount under the exclusion clause. In the above view also, in the instant case, we find that the employer cannot be held liable to pay interest on the compensation. 11. The learned counsel for the appellant cited **New India Assurance Co. Ltd. v. Lilla Francis and others [2014 ACJ 1800]** and invited our attention to paragraph 7 of the aforesaid decision, and we have meticulously gone through the said paragraph. But we find that in the said decision also the Supreme Court held that it is open to the insurer to ward all the liability to pay interest in view of the contractual provision which enable it to do so. Thus the exclusion is governed and _MFA_ .5/14-A **:10:** controlled by the terms of contractual provision. When we apply this proposition to the instant case, we find that the contractual provision in this case is not an absolute exclusion and it is a conditional one only, as we held above. Therefore we find that this decision also will not render any assistance to the appellant to satisfy their contention. In the above analysis, we find that the appeal is devoid of merits and dismissed accordingly. All pending Interlocutory Applications will stand closed. **Sd/-** K.HARILAL, Judge. **Sd/-** A.M.BABU, Judge. okb.