Case Note & Summary
The Supreme Court allowed the appeal by Appellants, challenging the Delhi High Court's order that imposed liability for penalty under Section 4A(3)(b) of the Employees Compensation Act, 1923 on the insurance company. The case involved a claim by legal heirs of a deceased employee, Sandeep, who died while driving a commercial vehicle insured by the appellant. The Commissioner had awarded compensation of Rs. 7,36,680 with 12% interest and imposed a 35% penalty on the employer for delayed payment. The High Court, in appeal, shifted the penalty liability to the insurance company. The Supreme Court held that penalty under Section 4A(3)(b) is personal to the employer due to their default and cannot be borne by the insurer, as established in Ved Prakash Garg v. Premi Devi. The Court set aside the High Court's order, restoring the Commissioner's decision that the employer alone is liable for the penalty.
Headnote
The Supreme Court allowed the appeal filed by Appellants. against the Delhi High Court's order dated 21.05.2025 in F.A.O. No. 147 of 2021 -- The High Court had set aside the Commissioner's orders dated 19.11.2020 and 08.02.2021 and fastened liability for payment of penalty under Section 4A(3)(b) of the Employees Compensation Act, 1923 (EC Act) upon the insurance company -- The Supreme Court held that penalty under Section 4A(3)(b) of the EC Act is personal to the employer and cannot be imposed on the insurance company, relying on Ved Prakash Garg v. Premi Devi (1997) 8 SCC 1 -- The insurance company's liability under the policy is limited to payment of compensation and interest, not penalty -- The employer's failure to pay compensation within one month under Section 4A(1) of the EC Act without justification led to imposition of penalty by the Commissioner -- The High Court's order was set aside, restoring the Commissioner's imposition of penalty solely on the employer
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Issue of Consideration: Whether the High Court erred in fastening liability for payment of penalty under Section 4A(3)(b) of the Employees Compensation Act, 1923 upon the insurance company (appellant) instead of the employer
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Final Decision
The Supreme Court allowed the appeal, set aside the High Court's order dated 21.05.2025, and held that the penalty under Section 4A(3)(b) of the Employees Compensation Act, 1923 is solely the liability of the employer, not the insurance company -- The Commissioner's orders dated 19.11.2020 and 08.02.2021 were restored to the extent of imposing penalty on the employer
2026 LawText (SC) (02) 55
Civil Appeal No. 174 of 2026
ARAVIND KUMAR J. , PRASANNA B. VARALE J.
Shri Salil Paul, Shri Manish Maini
New India Assurance Co. Ltd.
Rekha Chaudhary and Others
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Nature of Litigation: Civil appeal challenging the imposition of penalty liability on an insurance company under the Employees Compensation Act, 1923
Remedy Sought
Appellant (New India Assurance Co. Ltd.) sought setting aside of the High Court's order fastening penalty liability on it under Section 4A(3)(b) of the EC Act
Filing Reason
The High Court, in F.A.O. No. 147 of 2021, set aside the Commissioner's orders and imposed liability for penalty on the insurance company, which the appellant contested as contrary to law
Previous Decisions
Commissioner's Order dated 19.11.2020 awarded compensation and interest; Order dated 08.02.2021 imposed 35% penalty on the employer; High Court's Impugned Order dated 21.05.2025 fastened penalty liability on the insurance company
Issues
Whether the High Court erred in fastening liability for payment of penalty under Section 4A(3)(b) of the Employees Compensation Act, 1923 upon the insurance company instead of the employer
Submissions/Arguments
Appellant argued that penalty under Section 4A(3)(b) is personal to the employer and cannot be imposed on the insurance company, citing Ved Prakash Garg v. Premi Devi -- Respondents argued that Section 4A does not distinguish liability between employer and insurer, and the insurance company is contractually bound to pay
Ratio Decidendi
Penalty imposed under Section 4A(3)(b) of the Employees Compensation Act, 1923 is a personal liability of the employer due to their default in paying compensation within the stipulated period, and it cannot be shifted to the insurance company -- This principle is based on the judgment in Ved Prakash Garg v. Premi Devi, which holds that such penalty results from the employer's personal fault and negligence
Judgment Excerpts
Held that the burden of payment of penalty as imposed by the Commissioner under Section 4A(3)(b) of EC Act has to be made good by the employer himself and same cannot be imposed upon the Insurance company since imposition of penalty under the said provision is the result of personal fault and negligence on the part of the employer -- Para 10
Procedural History
Claim petition filed on 13.07.2017 before the Commissioner -- Commissioner's Order dated 19.11.2020 awarded compensation and interest -- Commissioner's Order dated 08.02.2021 imposed 35% penalty on employer -- Appeal filed as F.A.O. No. 147 of 2021 before Delhi High Court -- High Court's Impugned Order dated 21.05.2025 fastened penalty liability on insurance company -- Supreme Court appeal filed as Civil Appeal No. 174 of 2026
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