Citation Codes

Equivalent Citations

citation codes

Case Number

Civil Writ Jurisdiction Case No. 5783 of 1983

Advocates

For Appellant/Petitioner/Plaintiff: Birendra Kumar Sinha
Adv.; For Respondents/Defendant: Satya Narayan Sharma
Rajeeva Sharma and Nilamber Prasad Verma
Advs.

Judges

S.B Sinha, J.

Acts

provisions of Workmen's Compensation Act, 1923 (hereinafter referred to as the Compensation Act)
SECTION 110 MOTOR VEHICLES ACT
case.6. Section 14 of the Compensation Act reads as follows:14. Insolvency of employer:(1)
SECTION 49 PRESIDENCY TOWNS INSOLVENCY ACT 1909
SECTION 61 PROVINCIAL INSOLVENCY ACT 1920
section 230 of the Indian Companies Act, 1913 (VII of 1913),
provisions of section 14 of the Compensation Act,
section 14 of the Compensation Act.
provisions of sub-section (4)
MOTOR VEHICLES ACT
sub-section (1).(7)

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Smart Summary

Judgment Summary — S.B. Sinha, J.

Factual and Procedural Background

The petitioner is an insurance company which insured a truck (registration no. BRJ 4221) owned by respondent no. 3. On 16.3.1978 the truck's driver, Kuldip Singh (respondent no. 2), met with an accident causing serious injuries that resulted in the amputation of one of his legs. Respondent no. 2 filed a claim under the Workmen's Compensation Act, 1923 ("the Compensation Act") before the Presiding Officer, Labour Court, asserting the accident arose out of and in the course of his employment. The insurance company (petitioner) was a party to that proceeding.

By order dated 4 August 1983 in W.C. Case No. 17/78, respondent no. 1 allowed the petition and awarded compensation of Rs. 30,240/-, directing that this amount be paid by the petitioner insurance company to respondent no. 2. The petitioner challenged that outcome in the present writ petition which is the subject of this opinion.

Legal Issues Presented

Whether the liability of the insurer in a workmen's compensation claim arises only under section 14 of the Workmen's Compensation Act (i.e., on the employer's insolvency or other conditions set out therein), so that the insurer is not liable merely because the employer was held liable in proceedings under the Compensation Act.
Whether, alternatively, the insurer's statutory obligations under the Motor Vehicles Act (particularly as amended in Chapter VIII and provisions such as sections 94–96 and section 110-AA) render the insurer liable to indemnify the owner even where the workman elects to pursue compensation under the Workmen's Compensation Act rather than under the Motor Vehicles Act.

Arguments of the Parties

Petitioner's Arguments

The Workmen's Compensation Act is a self-contained code; the insurer's liability arises only if the case falls within section 14 of the Compensation Act.
Under section 14 the insurer's liability arises when the employer becomes insolvent (or other conditions of section 14 are met), and not merely because the employer has been held liable to pay compensation.
The insurer's liability to indemnify the vehicle owner arises only when a claim petition is filed before the Claim Tribunal under section 110 of the Motor Vehicles Act. Reliance was placed on R.B. Moondra & Co. v. Mat. Bhanwari (1970 Labour & Industrial Cases 695).

Respondent no. 2's Arguments

Section 14 of the Compensation Act has lost much of its force because statutory amendments require vehicle owners to insure against risks to drivers, khalasis etc., so that insurance of the vehicle and covering of driver risk are statutory obligations under the Motor Vehicles Act.
The owner's statutory duty to insure, created by amendments to the Motor Vehicles Act (Chapter VIII), means section 14 of the Compensation Act is not applicable in the facts of this case.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
R.B. Moondra & Co. v. Mat. Bhanwari (1970 Labour & Industrial Cases 695)	Relied upon by the petitioner to support the proposition that an insurance company's liability arises under section 14 of the Compensation Act (e.g., on employer insolvency) or when a claim is filed before the Claim Tribunal under section 110 of the Motor Vehicles Act.	The court recorded that the petitioner relied on this decision but did not adopt that proposition as determinative in the present case.
Northern India Motor Owners Insurance Co. Ltd., Bombay v. Magan Shanaji Solanki (1974 Lab. I.C 72)	Referenced for the proposition that a motor insurance policy and the Motor Vehicles Act create statutory rights and liabilities on insurers, including liability to satisfy judgments in certain circumstances.	The court cited and said it respectfully agreed with this authority in supporting the view that insurer's statutory obligations under the Motor Vehicles Act cannot be avoided simply because a claim is prosecuted under the Compensation Act.
New India Assurance Co. Ltd. v. Smt. Fatmabai (1982 Lab. I.C 732)	Referenced in support of the principle that insurers have statutory duties under the Motor Vehicles Act and can be liable to indemnify even if not directly party to other proceedings.	The court cited and stated its agreement with this decision to support the ruling that insurer's statutory liability persists despite the claimant choosing the Compensation Act forum.
New India Assurance Co. v. M. Jayarama Naik (1982 Lab. I.C 1235)	Referenced as supporting authority for the statutory liability of insurers under the Motor Vehicles Act.	The court relied on and agreed with the decision as part of the body of authorities affirming insurer liability under the Motor Vehicles Act.
New India Assurance Co. Ltd., Dehradun v. Smt. Darshani Devi (1984 Lab. I.C 489)	Referenced to reinforce the position that insurers have statutory obligations under the Motor Vehicles Act to satisfy claims in appropriate circumstances.	The court cited this authority and expressly stated its agreement with it in reaching the conclusion that the insurer remained liable.

Court's Reasoning and Analysis

The court began by noting the basic legal distinction between employer and insurer: they are "absolutely separate and distinct persons" and the insurer does not become liable automatically simply because the employer has been held liable.

The court analysed section 14 of the Workmen's Compensation Act in detail. It observed that section 14 envisages two essential elements before the insurer's liability under that provision arises: (i) a contract entered into by the employer with an insurer in respect of any liability under the Compensation Act; and (ii) the liability in question must be one that arises under the Compensation Act (for example, the employer's insolvency). In short, section 14 applies in the particular circumstances set out in that provision.

The court then turned to the Motor Vehicles Act and emphasised that the statutory framework created by that Act—especially after amendments to Chapter VIII—significantly altered the practical relationship between vehicle owners, drivers (employees) and insurers. The Motor Vehicles Act (enacted in 1939 and subsequently amended) imposes a statutory requirement to insure vehicles used in public places (see section 94), prescribes the form and scope of insurance (section 95), and casts upon insurers duties to satisfy judgments and to bear specified liabilities (section 96). The court drew attention to the fact that an employee has a choice (per section 110-AA) to pursue a claim under section 110 of the Motor Vehicles Act or under the Compensation Act (but not both).

Critically, the court reasoned that the option of the employee to seek compensation under the Compensation Act does not, by itself, extinguish or negate the insurer's statutory obligations under the Motor Vehicles Act. An insurance policy in this field is intended to indemnify the insured for liabilities covered by the policy; section 96 shows that the insurer's obligations are statutory in nature and may extend even where the insurer is not a party to a proceeding. Therefore, the court concluded the insurer cannot avoid its statutory liability merely because the injured workman opted for the Compensation Act forum rather than a claim tribunal under the Motor Vehicles Act.

The court also placed reliance on a series of authorities that it regarded as supporting this statutory-liability perspective, and expressly stated agreement with those decisions.

Holding and Implications

Holding: The writ petition is dismissed. The petitioner (insurance company) is directed to pay the amount awarded by the Labour Court in its order dated 4.8.1983 (as set out in annexure-3) with interest at the rate of 12% per annum, and respondent no. 2 is entitled to costs of this petition from the petitioner quantified at Rs. 1,000/-.

(The Labour Court had awarded Rs. 30,240/- in W.C. Case No. 17/78 by its order dated 4.8.1983; the present judgment directs payment of the amount as thus awarded together with interest and costs as indicated above.)

Implications:

The direct effect is to require the insurer (petitioner) to satisfy the compensation order (subject to the particulars of the Labour Court award and annexure-3) with interest and to pay the specified costs to respondent no. 2.
The court's reasoning reaffirms that statutory obligations created by the Motor Vehicles Act (in relation to insurance and insurer liability) operate independently of a claimant's election to proceed under the Workmen's Compensation Act; therefore, an insured's election of forum under the Compensation Act does not automatically absolve the insurer from statutory liability under the Motor Vehicles Act.
The court did not purport to lay down a novel or sweeping new precedent; rather it aligned this case with existing authorities cited and explicitly stated its agreement with them.

This summary is limited to and strictly reflects the content and reasoning contained in the provided opinion. No facts or conclusions beyond those stated in the opinion have been added.

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The Oriental Fire And General Insurance Co. Ltd. Khalifabagh, Bhagalpur Through Sri Sadhu Saran, Divisional Manager v. The Presiding Officer Labour Court, Bhagalpur And Others

S.B Sinha, J.:—This writ petition involves a short but interesting question of law.

2. The petitioner is an insurance company and a truck bearing registration no. BRJ 4221 belonging to respondent no. 3 was insured with it. Kuldip Singh (respondent no. 2) who was a driver of respondent no. 3 of the said truck met with an accident no. 16.3.78 causing serious injuries on his person and as a result whereof one of his legs had to be amputated. Respondent no. 2 filed an application before the Presiding Officer, Labour Court under the provisions of Workmen's Compensation Act, 1923 (hereinafter referred to as the Compensation Act) claiming compensation for meeting with the aforesaid accident, which acc ording to him, arose out of and in course of employment. In the said proceeding the petitioner-company was also a party.

3. For the purpose of disposal of this application only shore facts which are required to be noted is that by order dated 4th August, 1983 passed in W.C Case no. 17/78, respondent no. 1 allowed a petition by awarding compensation to the extent of Rs. 30,240/- and further directed that the aforementioned amount be paid by the petitioner-company to the respondent no. 2.

4. The only question raised by Sri Birendra Kumar Sinha, learned counsel appearing on behalf of the petitioner, is that the workmen Compensation Act is a self-contained Code and the liability of the petitioner would arise only if the case comes within the purview of section 14 of the Compensation Act. He submits that under the aforementioned provision the Insurance Company's liability comes into being only when the employer becomes an insolvent. He further submits that the liability of the Insurance Company to indemnify to the owner of the insured vehicle arises only in the event a claim petition is filed before the Claim Tribunal in terms of the provisions of section 110 of the Motor Vehicles Act, 1939 (hereinafter referred to as the Act). Reliance in this connection has been placed by the learned counsel on the case of R.B Moondra and Co. v. Mat. Bhanwari (1970 Labour and Industrial Casts 695).

5. Mr. Satya Narain Sharma, learned counsel appearing on behalf of respondent no. 2, however, submitted that section 14 of the Compensation Act has lost much of its force and cannot now be taken recourse to in view of the fact that covering the risk of a driver, Khalasi etc. and also insuring the vehicles is now a statutory must. He submits that the liability of the owner to get the vehicle insured is a statutory liability so far as the driver is concerned. Developing his argument the learned counsel submits that extensive amendments were carried out in the Motor Vehicles Act with regard to the aforementioned provisions of getting the vehicle insured much after the Compensation Act came into force and as such section 14 thereof shall have no application whatsoever in the facts and circumstances of this case.

6. section 14 of the Compensation Act reads as follows:—

“14. Insolvency of employer:—(1) Where any employer has entered into a contract with any insurers in respect of any liability under this Act to any workman, then in the event of the employer becoming insolvent or making composition or scheme of arrangement with his creditors, or if the employer is a company, in the event of the company having commenced to be wound up, the rights of the employer against the insurers as respects that liability shall, notwithstanding anything in any law for the time being in force relating to insolvency or the winding up of companies, be transferred to and vest in the workman, and upon any such transfer the insurers shall have the same rights and remedies and be subject to the same liabilities as if they were the employ yer, so, however, that the insurers shall not be under any greater liability to the workman than they would have been under to the employer.”

“(2). If the liability of the insurers to the workman is less than the liability of the employer to the workman, the workman may prove for the balance in the insolvency proceeding or liquidation.”

“(3). Where in any case such as is referred to in sub-section (1) the contract of the employer with the insurers is void or voidable by reason of non compliance on the part of the employer with any terms or conditions of the contract other than a stipulation for the payment of premia, the provisions of that sub-section shall apply as if the contract were not void or voidable and the insurers shall be entitled to prove in the insolvency proceedings or liquidation for the amount paid to the workman;

Provided that the provisions of this sub-section shall not apply in any case in which the workman tails to give notice to the insurers if the happening of the accident and of any resulting disablement as soon as practicable after he becomes aware of the institution of the insolvency or liquidation proceedings.”

“(4). There shall be deemed to be included among the debts which under section 49 of the Presidency Towns Insolvency Act, 1909 (III of 1909), or under section 61 of the Provincial Insolvency Act 1920 (V of 1920), or under section 230 of the Indian Companies Act, 1913 (VII of 1913), are in the distribution of the property of an insolvent or in the distribution of the assets of a company being wound up to be paid in priority to all other debts, the amount due in respect of any compensation the liability where for accrued before the date of the order of adjudication of the insolvent of the date or the commencement of the winding up, as the case may be and those Acts shall have effect accordingly.”

“(5) Where the compensation is a half-monthly payment, the amount due in respect thereof, shall, for the purpose of this section, be taken to be the amount of the lump sum for which the half monthly payment could, if redeemable, be redeemed if application were made for that purpose under section 7, and a certificate of the Commissioner as to the amount of such sum shall be conclusive proof thereof.”

“(6) The provisions of sub-section (4) shall apply in the case of any amount for which the insurer is entitled to prove under sub-section (3), but otherwise those provisions shall not apply where the insolvent or the company being wound up has entered into such a contract with insurer as is referred to be sub-section (1).”

“(7) This section shall not apply where a company is wound up voluntarily merely for the purposes of reconstruction or of amalgamation with another company.”

7. There cannot be any doubt that the employer and insurer are absolutely separate and distinct persons and under the provisions of the said Act the insurer does not ipso facto becomes liable only because the employer has been held to be so. Under the provisions of section 14 of the Compensation Act, the liability of the insurer comes into being only in the event one or the other condition mentioned therein is fulfilled. However, from a perusal of the aforementioned provision it would be evident that the said provisions apply only if the employer had entered into a contract with any insurer in respect of any liability under the Compensation Act, (underlining is mine for the sake of emphasis). Therefore, it is absolutely clear that section 14 contemplates two situations-(i) that a contract must be entered into by an employer with an insurer in respect of the liability of the workman and (ii) such liability must arise under the said Act.

8. However, the situation is now completely changed in view of the extensive amendment made in Chapter VIII of the Motor Vehicles Act as noticed hereinafter. The Motor Vehicles Act was enacted in the year 1939. Chapter VIII of the Act provides for insurance of motor vehicles against 3rd party risk. Under the provisions of the Act also a test of competence to drive is provided for and such person who passes the test of competence only can be granted a licence to drive the vehicles.

9. Under the provisions of section 94 of the Act, a person is prohibited from using a motor vehicle in a public place unless the same is covered by a policy of insurance complying with the requirement of the said Chapter. Under sub-section (4) of section 95 of the Act the policy shall be by way of a certificate of insurance in the prescribed form within the meaning of section 93(b) of the Act. Section 95(1)(b) of the Act provides that in order to comply with the requirements of the said Chapter a policy of insurauce must be a policy which insures the person or classes of persons specified in the policy to the extent specified in sub-section (2). Proviso to the aforementioned provision specifically covers the case of an employee engaged in driving the vehicle. Under section 96(1) and (2) a statutory duty has been cast upon the insurer to satisfy the judgment against persons insured in respect of 3rd party's risk. Section 96 of the Act further provides for other rights, liability and obligation on the part of the insurer.

10. Although a Tribunal has been set up to entertain a claim arising out of an accident, by reason of use of a motor vehicle and an elaborate procedure has been laid down therefor but so far as an employee is concerned a separate option has been conferred upon him either to prefer a claim under section 110 of the Act or under the provision of Compensation Act, but not under the both as contained in Section 110-AA of the Act.

11. In view of the aforementioned provision of section 110-AA of the Act, a provision has been made enabling a person to adjudicate the forum. In my opinion, the very fact that the Motor Vehicle Act itself has made an exception with regard to an employee the same clearly demonstrates that a person, only because he prefers a claim under the Compensation Act and not under the Act, does not thereby ipsofacto loses his statutory right nor the insurer is absolved from its statutory liability to indemnify the owner of a vehicle to the extent it is made statutorily liable.

12. It is now well settled that a policy of insurance is entered into so that the insured may be indemnified by the insurer in the event it becomes liable to pay compensation in respect of the matters covered under the insurance policy and for which certificate of insurance has been obtained by him. From a perusal for the provisions of section 96 of the Act it is evident that the liability of the insurer extends to a case even where it is not made party as in that event also an award of compensation may be executed as against the insurer. From the scheme of the Act it is evident that the rights and liabilities of both the insurer as also the insured are statutory ones. In view of the statutory liability imposed upon the Insurer by reasons of the provisions engrafted in the Act, in my opinion, it cannot escape such liability only because a claim has been filed by an insured under the Compensation Act and not under the M.V Act. In this connection reference may be made to the cases of The Northern India Motor Owners Insurance Co. Ltd., Bombay v. Magan Shanaji Solanki (1974 Lab. I.C 72), The New India Assurance Co. Ltd. v. Smt. Fatmabai (1982 Lab I.C 732), New India Assurance Co. v. M. Jayarama Naik (1982 Lab. I.C 1235) and New India Assurance Co. Ltd. Dehradun v. Smt. Darshani Devi (1984 Lab. I.C 489). I respectfully agree with the aforementioned decisions.

13. In the result, the application is dismissed.

14. By an order dated 20th January, 1984 a Bench of this Court while admitting this application stayed the operation of the order as contained in annexure-3. In that view of the matter, the petitioner is hereby directed to pay the amount as directed by the respondent no. 1 in its order dated 4.8.83 as contained in annexure-3 to this petition with interest at the rate of 12 per cent per annum. On the facts and in the circumstances of the case, respondent no. 2 shall also be entitled to cost of this petition from the petitioner which is quantified at Rs. 1,000/-.

The Oriental Fire An... v. The Presiding Office...