Full Judgment Text
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CASE NO.:
Appeal (civil) 2333 of 2006
PETITIONER:
New India Assurance Co. Ltd.
RESPONDENT:
Harshadbhai Amrutbhai Modhiya & Anr.
DATE OF JUDGMENT: 28/04/2006
BENCH:
P.K. BALASUBRAMANYAN
JUDGMENT:
J U D G M E N T
(ARISING OUT OF .S.L.P) NO.20126 OF 2005)
P.K. BALASUBRAMANYAN, J.:
1. I respectfully agree and would allow the appeal
as proposed by my learned brother.
2. The law relating to contracts of insurance is part
of the general law of contract. So said Roskill Lord Justice
in Cehave vs. Bremer ([1976] Q.B. 44). This view was
approved by Lord Wilberforce in Reardon Smith vs.
Hanson-Tangen (1976 [1 WLR] 989, wherein he said "it is
desirable that the same legal principles should apply to
the law of contract as a whole and that different principles
should not apply to the different branches of that law". A
contract of insurance is to be construed in the first place
from the terms used in it, which terms are themselves to
be understood in their primary, natural, ordinary and
popular sense. ( See Colinvaux’s Law of Insurance 7th
Edition paragraph 2-01). A policy of insurance has
therefore to be construed like any other contract. On a
construction of the contract in question it is clear that the
insurer had not undertaken the liability for interest and
penalty, but had undertaken to indemnify the employer
only to reimburse the compensation the employer was
liable to pay among other things under the Workmen’s
Compensation Act. Unless one is in a position to void the
exclusion clause concerning liability for interest and
penalty imposed on the insured on account of his failure
to comply with the requirements of the Workmen’s
Compensation Act of 1923, the insurer cannot be made
liable to the insured for those amounts.
3. 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
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company to indemnify to a particular head or to a
particular 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\027 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.