The Supreme Court slammed insurance firms for filing frivolous appeals, emphasizing that delays in compensation cannot be justified on technical grounds. The Bench ruled, “Insurer would be liable to indemnify the employer” under the Employees’ Compensation Act.
The Supreme Court strongly criticized insurance companies for filing unnecessary appeals based on overly technical grounds, which delay rightful compensation and undermine the objectives of welfare legislation.
The Court reiterated that both the employer and the insurer are jointly and severally liable to compensate employees injured during their work under the Employees’ Compensation Act of 1923.
A Bench comprising Justices Manoj Misra and N. Kotiswar Singh set-aside a Calcutta High Court decision that had freed the insurer from direct liability, ruling instead that the employer alone was responsible for compensation but could seek reimbursement from the insurer later.
The Supreme Court reinstated the original order from the Commissioner for Workmen’s Compensation, which held both parties jointly and severally liable.
The Bench stated that once an employer enters into a valid insurance contract that covers liability under the Act, the insurer must indemnify the employer.
Noting that there was no clause in the policy exempting the insurer from this liability, the Court clarified,
“Where a contract of insurance is entered into by and between the employer and the insurer, the insurer would be liable to indemnify the employer,”
The Court expressed strong disapproval of the insurer’s actions, highlighting the increasing trend of insurance companies to pursue appeals on technicalities, even when their ultimate liability under the policy is not in question.
The Court stated,
“Before parting, we must express our anguish at the practice of insurance companies unnecessarily filing appeals by raising technical pleas, more so when they do not deny their ultimate liability under the contract of insurance,”
It emphasized that such tactics cause delays in providing timely compensation to injured employees and contradict the welfare aims of the law. The Court criticized the High Court for taking a “hyper-technical approach” and ignoring Section 19 of the 1923 Act, which pertains to the Commissioner’s jurisdiction in determining liability.
As a result, the Supreme Court imposed a fine of Rs.50,000 on the insurance company for filing a frivolous appeal before the High Court and delaying payment to the claimant. This amount is to be paid to the injured employee (the second respondent).
The Court concluded,
“The High Court modified the Commissioner’s award to the disadvantage of the employee when there was no dispute regarding the insurer’s liability. Such an approach cannot be sustained,”
The appeal was thus allowed, and the Commissioner’s original order was restored.
Case Title: Alok Kumar Ghosh v. The New India Assurance Company Ltd. & Anr.
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