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Insurance company not liable to pay interest: SC

Written by: Staff

New Delhi, May 2 (UNI) The Supreme Court has ruled that an Insurance company is not liable to pay interest on the amount of compensation awarded under the Workmen's Compensation Act 1923.

A bench comprising Justice S B Sinha and Justice P K Balasubramanyan, in the judgement dated April 28, ruled that as far as interest is concerned, the workman has to recover it from his employer.

Writing separate but concurring judgement, the court ruled that the rights and obligations of the insurer and the insured would depend upon the terms of the insurance contract.

The ruling was made while allowing the appeal of M/s New India Assurance Company Ltd, against a Gujarat High Court judgement dated May 10, last year.

The HC had ruled the Insurance company was liable to pay the interest on the workman's compensation award.

Sanjay Amrutbhai Modhiya, a salesman with a company met with an accident on August 24, 1996 and died. Worksman's compensation court, Godhra, in the order dated June 1, 2004, awarded compensation of Rs 225220 with nine per cent interest thereon from the date of filing an application till realisation in favour of claimants.

The apex court concluded '' a policy of insurance has, therefore, to be construed like any other contract. On a construction of the contract in question, it is clear that the Insurance company had not undertaken the liability for interest and penalty but to indemnify the employer only to reimburse the compensation the employer was liable to pay among other things under the Act.


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