- 1 - NC: 2025:KHC:16104 MFA No. 8967 of 2018 C/W MFA No. 321 of 2019 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 17TH DAY OF APRIL, 2025 BEFORE THE HON'BLE MR JUSTICE T.M.NADAF MISCELLANEOUS FIRST APPEAL NO.8967 OF 2018 (WC) C/W MISCELLANEOUS FIRST APPEAL NO.321 OF 2019 (WC) IN MFA No. 8967/2018: BETWEEN: THE NEW INDIA ASSURANCE CO. LTD., BRANCH OFFICE, VIJAYASHREE COMPLEX, B D ROAD, CHITRADURGA REPRESENTED BY REGIONAL OFFICE, NO.2-B, UNITY BUILDING ANNEX MISSION ROAD, BANGALORE – 560 027 REP BY ITS REGIONAL MANAGER …APPELLANT (BY SRI. RAVISHANKAR C R, ADVOCATE) AND: 1. SMT. SONI YADAV AGED ABOUT 25 YEARS W/O LATE AJAY KUMAR YADAV 2. CHI ANIKET AGED ABOUT 07 YEARS S/O LATE AJAY KUMAR YADAV 3. KUM ANSHIK AGED ABOUT 06 YEARS D/O LATE AJAY KUMAR YADAV Digitally signed by MADHUSHREE H Location: High Court of Karnataka - 2 - NC: 2025:KHC:16104 MFA No. 8967 of 2018 C/W MFA No. 321 of 2019 4. CHI DIVYANSHU AGED ABOUT 05 YEARS S/O LATE AJAY KUMAR YADAV THE RESPONDENT NOS.1 TO 4 ARE MINORS, REPRESENTED BY THEIR MOTHER & NATURAL GUARDIAN SMT. SONI YADAV THE RESPONDENT NOS.1 TO 4 ARE RESIDENTS OF WARD NO.12, JUDIYAN VILLAGE, SAHJANWA TOWN GORAKHPUR DISTRICT UTTAR PRADESH STATE – 273 209 5. M/S ENTIRE CERAMICS LTD., MARADIHALLI VILLAGE, HIRIYUR TALUK, CHITRADURGA DISTRICT – 577 558, REPRESENTED BY ITS MANAGING DIRECTOR …RESPONDENTS (BY SRI. PRAMOD, ADVOCATE FOR R1 TO R4; VIDE ORDER DATED 17.01.2023, SRI. SPOORTHY HEGDE NAGARAJA, ADVOCATE FOR R5; R2 TO R4 ARE MONORS REP BY R1) THIS MFA IS FILED UNDER SECTION 30(1) OF THE ECA ACT, PRAYING TO SET ASIDE / MODIFY THE JUDGMENT AND AWARD DATED 01.08.2018 PASSED IN ECA NO.48/2017 ON THE FILE OF THE I ADDITIONAL SENIOR CIVIL JUDGE & COMMISSIONER FOR EMPLOYEES COMPENSATION AT CHITRADURGA AND EXONERATE THE LIABILITY TO PAY INTEREST ON COMPENSATION AMOUNT FIXED ON THE APPELLANT INSURANCE COMPANY AND PASS SUCH OTHER ORDERS AS DEEMED FIT IN THE CIRCUMSTANCES OF THE CASE, IN THE INTEREST OF JUSTICE AND EQUITY. - 3 - NC: 2025:KHC:16104 MFA No. 8967 of 2018 C/W MFA No. 321 of 2019 IN MFA NO.321/2019: BETWEEN: 1. SMT. SONI YADAV W/O LATE AJAY KUMAR YADAV AGED ABOUT 25 YEARS HOUSE WIFE 2. ANIKET S/O LATE AJAY KUMAR YADAV AGED ABOUT 07 YEARS 3. ANSHIK D/O LATE AJAY KUMAR YADAV AGED ABOUT 06 YEARS 4. DIVYANSHU S/O LATE AJAY KUMAR YADAV AGED ABOUT 05 YEARS THE APPELLANT NOS.2 TO 4 ARE MINORS, REP BY THEIR MOTHER & GUARDIAN SMT. SONI YADAV ALL ARE RESIDENT OF WARD NO.12, JUDIYAN VILLAGE, SAHJANWA TOWN GORAKHPUR DISTRICT UTTAR PRADESH – 273 209 …APPELLANTS (BY SRI. B.PRAMOD, ADVOCATE) AND: 1. ENTIRE CERAMICS LTD., MARADIHALLI VILLAGE, HIRIYUR TALUK, CHITRADURGA DISTRICT - 577 322, REP BY ITS MANAGING DIRECTOR. - 4 - NC: 2025:KHC:16104 MFA No. 8967 of 2018 C/W MFA No. 321 of 2019 2. THE BRANCH MANAGER THE NEW INDIA ASSURANCE CO. LTD., BRANCH OFFICE VIJAYSHREE COMPLEX, B.D. ROAD, CHITRADURGA TOWN, PIN - 577 501. ...RESPONDENTS (BY SRI. SPOORTHY HEGDE NAGARAJ, ADVOCATE FOR R1; SRI. C.R.RAVISHANKAR, ADVOCATE FOR R2) THIS MFA IS FILED UNDER SECTION 30(1) OF THE EMPLOYEE'S COMPENSATION ACT, PRAYING TO MODIFY THE ORDER AND AWARD DATED 01/08/2018 PASSED IN ECA NO.48/2017 BY THE COURT OF THE 1ST ADDITIONAL SENIOR CIVIL JUDGE AND COMMISSIONER FOR EMPLOYEES COMPENSATION, CHITRADURGA BY ALLOWING THE ABOVE APPEAL, ETC THESE APPEALS COMING ON FOR HEARING THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE T.M.NADAF ORAL JUDGMENT These two appeals are filed by the insurance company, as well as the claimant, against the judgment and award dated 01.08.2018, passed by 1st Additional Senior Civil Judge and Commissioner of Employees Compensation, Chitradurga in ECA No.48/2017. 2. MFA No.8967/2018 is filed by the respondent - New India Insurance Company, before the Workmen - 5 - NC: 2025:KHC:16104 MFA No. 8967 of 2018 C/W MFA No. 321 of 2019 Compensation Commissioner / Presiding Officer, Chitradurga. 3. This appeal is admitted to consider the following substantial question of law, with the consent of the learned counsel for the parties: Whether the Tribunal is right in saddling with the liability to pay the interest on the amount of compensation, on the respondent insurance company, in the presence of condition of insurance policy contained in the Proposal Form of the insurance policy at Exhibit-P2? 4. Heard the learned counsel appearing for the parties, perused the material on record. 5. The grounds urged in MFA No.8967/2018 is in narrow compass, which is in respect of a clause in the Insurance Proposal Form, which is at Exhibit-R2 wherein there is a clause which states as under: “The insurance does not cover any interest and / or penalty which may be imposed on the - 6 - NC: 2025:KHC:16104 MFA No. 8967 of 2018 C/W MFA No. 321 of 2019 insured on account of failure to comply with the requirements of the said Workmen’s Compensation Act, 1923 as amended.” 6. It is the further contention that the contract is a pure contractual obligation between the employer and the insurance company wherein the employer has agreed to the terms and condition put forth in the proposal form and he is signatory to the same. In view of the same, unlike the statutory obligation, the obligation is pure contractual obligation and the both the parties are bound under the contractual obligation enumerated in the proposal form and insurance policy issued in terms of the proposal form wherein the condition supra is contained. 7. Sri. Ravi Shankar submitted that the Insurance Company has examined its Officer as RW-1 before the Tribunal and has taken a specific contention in his evidence producing the proposal Form at Ex.R-2 and stated as follows: - 7 - NC: 2025:KHC:16104 MFA No. 8967 of 2018 C/W MFA No. 321 of 2019 “As per terms and conditions of the policy our Insurance Company does not cover any interest / or Penalty which may be imposed on the insured and as per our Insurance Policy terms and conditions our Insurance company is not liable to pay interest or penalty in case arrived by the Hon’ble Court.” 8. The Workmen Compensation Commissioner has failed to consider the same while awarding the compensation, making the insurance company to pay interest at 9% per annum, 30 days from the date of the accident till realization. 9. So far as the quantum of compensation, the learned counsel submits that he is not disputing the quantum of compensation awarded by the Workmen’s Compensation Commissioner. The Insurance company is under the obligation to indemnify the employer in terms of the policy issued. So far as the interest portion is concerned, it is as per the terms of the proviso to the condition contained in the proposal Form, on which the insurance policy is issued. - 8 - NC: 2025:KHC:16104 MFA No. 8967 of 2018 C/W MFA No. 321 of 2019 10. To buttress his arguments he relied on the judgment of the Hon’ble Apex Court in the case of NEW INDIA COMPANY LIMITED VS. HARSHADBHAI AMURTBHAI MODHIYA1, wherein the Hon’ble Apex Court at paragraph Nos.14, 15 and 24 has held as under: “14. 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-à-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 1 2006 AIR SWC 2352 - 9 - NC: 2025:KHC:16104 MFA No. 8967 of 2018 C/W MFA No. 321 of 2019 which is to be calculated in the manner provided for therein. With a view to minimise 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. xxx 24. Section 17 of the Workmen's Compensation Act voids only a contract or agreement whereby a workman relinquishes any right of compensation from the employer for personal injury arising out of or in the course of the employment and insofar as it purports to remove or reduce the liability of any person to pay compensation under the Act. As my learned Brother has noticed, in the Workmen's Compensation Act, there are no provisions corresponding to those in the Motor Vehicles Act, insisting on the insurer covering the entire liability arising out of an award towards compensation to a third party arising out of a motor accident. It is not brought to our notice that there is any other law enacted which stands in the way of an insurance company and the insured entering into a contract confining the obligation of the insurance company to indemnify to a particular head or to a particular - 10 - NC: 2025:KHC:16104 MFA No. 8967 of 2018 C/W MFA No. 321 of 2019 amount when it relates to a claim for compensation to a third party arising under the Workmen's Compensation Act. In this situation, the obligation of the insurance company clearly stands limited and the relevant proviso providing for exclusion of liability for interest or penalty has to be given effect to. Unlike the scheme of the Motor Vehicles Act the Workmen's Compensation Act does not confer a right on the claimant for compensation under that Act to claim the payment of compensation in its entirety from the insurer himself. The entitlement of the claimant under the Workmen's Compensation Act is to claim the compensation from the employer. As between the employer and the insurer, the rights and obligations would depend upon the terms of the insurance contract. Construing the contract involved here it is clear that the insurer has specifically excluded any liability for interest or penalty under the Workmen's Compensation Act and confined its liability to indemnify the employer only against the amount of compensation ordered to be paid under the Workmen's Compensation Act. The High Court was, therefore, not correct in holding that the appellant Insurance Company, is also liable to pay the interest on the amount of compensation awarded by the Commissioner. The workman has to recover it from the employer.” - 11 - NC: 2025:KHC:16104 MFA No. 8967 of 2018 C/W MFA No. 321 of 2019 11. He further relies on the judgment of a Coordinate Bench of this Court reported in the case of ORIENTAL INSURANCE COMPANY LIMITED VS. SMT. THAYAMMA AND OTHERS2, wherein, at paragraph No.16, this Court has held as follows: “16. Therefore, when the matter stood distinguished, the liability to pay the interest would be governed by the terms and conditions in the policy. In the case on hand, though the policy was produced by the appellant Insurance Company, before the Learned Commissioner, it was not marked. The insured did not dispute the policy. A perusal of the policy shows that the following endorsement is found: "It is hereby understood and agreed that the cover provided under this policy shall not extend to indemnify the Insured/Insured's 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." 2 ILR 2024 KAR 848 - 12 - NC: 2025:KHC:16104 MFA No. 8967 of 2018 C/W MFA No. 321 of 2019 12. Refuting the contentions of the learned counsel appearing for the appellant, learned counsel Sri.Spoorthy Hegde, learned counsel appearing for the respondent / employer vehemently submitted that the insurer was made known of the claim filed by the claimant seeking compensation on the date of issuance of notice, so in view of the same it is the obligation of the insurance company to indemnify him, in the event he is saddled with any liability along with interest as ordered by the Tribunal. 13. Sri.B. Pramod, learned counsel appearing for the claimant / respondent relying on the judgment of the Hon’ble Apex Court in the case of SHOBHA AND OTHERS vs. CHAIRMAN VITHALRAO SHINDE SAHAKARI KARKHANA LIMITED AND OTHERS3, submitted that the interest awarded by the Workmen Compensation Commissioner shall be from the date of the accident, instead of 30 days from the date of the accident. 3 2022 SCC ONLINE 308 - 13 - NC: 2025:KHC:16104 MFA No. 8967 of 2018 C/W MFA No. 321 of 2019 14. This appeal is admitted to consider the following substantial question of law: “Whether the Workmen Compensation Commissioner / Court Below is justified in directing the insurance company to pay the interest on the compensation amount from 30th day of the accident till realisation? 15. My answer to the above question is partly in affirmative, for the following reasons: Section-4A of Employees Compensation Act,1923 has been inserted by Act No.45 of 2009, w.e.f. 18.01.2010, which reads as under: “4A. Compensation to be paid when due and penalty for default.- (1) Compensation under section 4 shall be paid as soon as it falls due. (2) In cases where the employer does not accept the liability for compensation to the extent claimed, he shall be bound to make provisional payment based on the extent of liability which he accepts, and, such payment shall be deposited with the Commissioner or made to the "[employee], as the case may be, without prejudice to the right of the*[employee] to make any further claim. - 14 - NC: 2025:KHC:16104 MFA No. 8967 of 2018 C/W MFA No. 321 of 2019 (3) Where any employer is in default in paying the compensation due under this Act within one month from the date it fell due, the Commissioner shall-- (a) direct that the employer shall, in addition to the amount of the arrears, pay simple interest thereon at the rate of twelve per cent. per annum or at such higher rate not exceeding the maximum of the lending rates of any scheduled bank as may be specified by the Central Government, by notification in the Official Gazette, on the amount due; and (b) if, in his opinion, there is no justification for the delay, direct that the employer shall, in addition to the amount of the arrears and interest thereon, pay a further sum not exceeding fifty per cent, of such amount by way of penalty: Provided that an order for the payment of penalty shall not be passed under clause (b) without giving a reasonable opportunity to the employer to show cause why it should not be passed. Explanation – For the purposes of this sub-section, “scheduled bank” means a bank for the time being included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934). (3A) The interest and the penalty payable under sub- section (3) shall be paid to the [employee] or his dependant, as the case may be.” - 15 - NC: 2025:KHC:16104 MFA No. 8967 of 2018 C/W MFA No. 321 of 2019 16. The language used in the said clause is manifestly clear that in the event of default in paying the compensation under the Act by the employer within one month from the date it fell due, the Commissioner shall direct that the employer shall, in addition to the amount of payment of the arrears, pay simple interest thereon at the rate of twelve per cent. This in terms of the words used amounts to ‘penalty’. 17. As per the clause – 1(i) of the proposal Form at Exhibit-R2, produced by the insurance company there is a clear stipulation, which reads as follows: “Law(s) 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 Accidents 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) and 1995 (30 of 1995) and 2000 (46 of 2000) and deemed to be added to the Laws set out in the Schedule to the Policy. - 16 - NC: 2025:KHC:16104 MFA No. 8967 of 2018 C/W MFA No. 321 of 2019 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/her failure to comply with the requirements laid down under the W. C. Act. 1923 and” 18. The said proviso clearly suggests an exception in favour of the insurance company exonerating its liability to pay the interest, which is imposed by way of penalty for the default committed by the employer. In view of the settled position of law as per the judgments supra, this Court is of the opinion that the Workmen Compensation Commissioner / trial court committed an error in saddling the liability on the insurance company to pay the interest from 30th day of the date of accident till realisation and in view of the explicit proviso, the insurance company is liable to pay the interest at 12% per annum from the date of disposal of the claim petition i.e., from 01.08.2018. In view of the default committed by the employer, he is made liable to pay the interest at 12% per annum in terms of the proviso from the date of the accident, instead of - 17 - NC: 2025:KHC:16104 MFA No. 8967 of 2018 C/W MFA No. 321 of 2019 30th day from the date of the accident, as per the judgment of the Hon’ble Apex Court in the case of SHOBHA AND OTHERS vs. CHAIRMAN VITHALRAO SHINDE SAHAKARI KARKHANA LIMITED AND OTHERS4, supra till the date of disposal of the claim petition. To that extent, the judgment and award passed by the trial court is modified. Accordingly, the appeal in MFA No.8967/2018 is allowed. MFA NO.321/2019 : 19. This appeal is filed by the claimant seeking for enhancement under two heads, i.e., (i) in respect of interest from the date of accident and (ii) for non-granting of funeral expenses as envisaged under sub-section-(4) of Section-4 of the Employees Compensation Act, 1923. 20. Heard the learned counsel appearing for the parties. This appeal is admitted to consider the following substantial questions of law: 4 2022 SCC ONLINE 308 - 18 - NC: 2025:KHC:16104 MFA No. 8967 of 2018 C/W MFA No. 321 of 2019 i) Whether the Commissioner for compensation / Court below is justified in awarding 9% interest on the compensation amount instead of 12% as contemplated under the provisions of Section 4A(3)(a) of Employees Compensation Act, 1923 (‘Act of 1923’ for short)? ii) Whether the Commissioner for compensation / Court below is justified in not awarding ‘Funeral Expenses’ as per the provisions of sub-section (4) of Section 4 of the Employees Compensation Act?” 21. In so far as the payment of interest is concerned, in view of the judgment of the Hon’ble Apex Court in the case of SHOBHA AND OTHERS supra interest is to be from the date of accident and 12% p.a., instead of 9% p.a. as per the provisions of the Act of 1923. 22. In so far as payment of interest is concerned in view of the clause contained in the Insurance Proposal Form, which is the basis for the issuance of insurance policy to which the employee is a signatory and the - 19 - NC: 2025:KHC:16104 MFA No. 8967 of 2018 C/W MFA No. 321 of 2019 obligation being the contractual obligation, the insurance company is exonerated from payment of interest on the compensation amount. The entire amount of compensation Rs.8,13,640/- deposited before this Court shall be transferred to the concerned court along with accrued interest for disbursement in favour of the claimants. 23. The respondent – insurance company shall deposit a sum of Rs.5,000/- towards funeral charges, awarded in appeal MFA No.8967/2018, within a period of six weeks from the date of receipt of a copy of this order, before the concerned court below. Both the substantial questions of law are answered in favour of the claimant and against the employer and insurer. 24. For the foregoing reasons, this Court proceeds to pass the following: ORDER i) MFA No.8967/2018 is Allowed. Insurance Company is exonerated from paying interest at - 20 - NC: 2025:KHC:16104 MFA No. 8967 of 2018 C/W MFA No. 321 of 2019 the rate of 12% per annum from the date of accident till the date of disposal of the claim petition. Insurance company shall pay interest at 12% per annum on the compensation from the date of disposal of the claim petition till realization. ii) Respondent No.1 is directed to pay interest at 12% per annum from the date of accident till the date of disposal of the claim petition. iii) MFA No.321/2019 is allowed-in-part. The judgment and award dated 01.08.2018, passed in ECA No.48/2017, on the file of the I Additional Senior Civil Judge & Commissioner For Employees Compensation At Chitradurga, is hereby modified, granting Rs.5,000/- towards ‘funeral expenses’ in addition to amount of compensation already been awarded by the trial court, along with interest at 12% per annum, with the above terms on respondent Nos.1 and 2. - 21 - NC: 2025:KHC:16104 MFA No. 8967 of 2018 C/W MFA No. 321 of 2019 iv) Respondent No.2 – Insurance company shall deposit Rs.5,000/- along with 12% per annum from the date of disposal of the claim petition, till realization within six weeks from the date of receipt of copy of this order. v) Respondent No.1 – employer shall deposit interest @ 12% per annum on Rs.5,000/- awarded in the appeal from the date of accident till disposal of claim petitions, within six weeks from the date of receipt of copy of this order. vi) Amount in deposit shall be transferred to the concerned Tribunal forthwith, for disbursement. vii) No orders as to costs. Sd/- (T.M.NADAF) JUDGE JJ List No.: 1 Sl No.: 34