New India Assurance Co. Ltd. Vs Rekha Chaudhary And Others (Supreme Court of India)
The appeal before the Supreme Court was confined to a limited issue: whether the Delhi High Court erred in fastening liability on the Insurance Company to pay the penalty imposed under Section 4A(3)(b) of the Employees’ Compensation Act, 1923 (EC Act), in addition to compensation and interest.
The claim arose from the death of Shri Sandeep, a commercial driver employed by Respondent No. 4. He collapsed while driving on 13.02.2017 and was declared dead. His legal heirs filed a claim under the EC Act. The Commissioner held that an employer-employee relationship existed and that the death occurred during the course of employment. Compensation of Rs. 7,36,680/- was awarded along with 12% interest from the date of the incident. Since a valid insurance policy was in force, the employer was permitted to claim indemnification from the insurer. The Commissioner also issued a show cause notice to the employer regarding delay in payment of compensation within one month as required under Section 4A. As the employer neither appeared nor responded, the Commissioner imposed a 35% penalty, amounting to Rs. 2,57,838/-.
The claimants appealed to the Delhi High Court seeking enhancement and challenging the liability findings. While declining enhancement, the High Court set aside the Commissioner’s order to the extent that it imposed primary liability on the employer, and instead fastened liability for compensation, interest, and penalty on the insurer. The insurer accepted liability for compensation and interest but challenged the imposition of penalty.
