All HC | In case owner of vehicle does not intimate Insurance Company about the accident, can Insurance Company be exempted from paying interest? HC explains

Allahabad High Court: Dr Kaushal Jayendra Thaker, J., observed that if the insurance co. will not be liable to pay interest, then it will be against the spirit of taking an insurance policy, and the very object for introducing insurance policy will get frustrated.

Appeals in the instant matter are out of the decision and award passed by the Commissioner, Workmen’s Compensation Act, 1923 being Additional Labour Commissioner, Kanpur awarding a sum of Rs 6,30,062 with interest at the rate of 9% in favour the claimants.

The owner was saddled with the liability to pay interest.

Question of law in the instant case:

Whether in the given facts and circumstances of the case, the Commission has committed a manifest error of law holding that if the respondent has failed to deposit the awarded amount within 30 days from the date of judgment then only claimants are entitled to the interest at the rate of 9% from the date of award till the amount is deposited.

Owner’s Counsel submitted that the Commissioner committed patent error directing the owner to pay interest.

Counsel for the insurance Company tried to point out that the judgment and order impugned was just and proper as it was the duty of the owner to notify the insurance company about the accident which was not done and hence the owner was saddled with the payment of interest till the date of the decision.

While dealing with the above question of law, the Court found it appropriate to reproduce Section 4A of the Act. 

Section 4A. Compensation to be paid when due and the penalty for default.

Supreme Court’s decision in Oriental Insurance Company v. Siby George, 2012 (4) T.A.C 4(SC) wherein it was held that the payment of interest is a consequence of default and it has to be directed to be paid without going into the reasons for the delay and only in case where the delay is without justification, the employer might also be held liable to a penalty after giving him a show-cause notice. Thus, just because the owner had not intimated to the Insurance Company, it cannot be the reason for not directing the Insurance Company to pay the interest.

Hence, in the findings that the Insurance Company will not be liable for interest is against the spirit of taking the insurance policy and the very object for introducing insurance policy would get frustrated.

High Court in view of the several Supreme Court decisions partly allowed the appeals.

Hence Judgment and award of the Commissioner shall stand modified to the aforesaid extent namely to the extent that the Insurance Company shall deposit the decretal amount with interest at the rate of 12% from one month after the date of accident till the amount is deposited.

In the present matter, it is the parents who were demanding from one son for the death of another son and they have claimed from Insurance Company with whom the vehicle was insured to make payment. Therefore, the minimum penalty of Rs 10,000 would suffice on the Insurance Company. 

Appellants shall deposit a sum of Rs 10,000 which would be a substitution for the penalty. [Chanda Begum v. Shahnawaz, 2020 SCC OnLine All 1487, decided on 16-12-2020]

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