Employee’s Compensation Act|Commissioner Empowered To Make Insurer Jointly Liable With Employer To Pay Compensation: Supreme Court
The Apex Court held that even in the absence of a provision akin to Section 149 of the Motor Vehicles Act, 1988, the Commissioner has the authority to make the insurer jointly liable with the employer to pay compensation if such liability falls within the scope of the insurance contract.
The Supreme Court has ruled that the Commissioner for Employees’ Compensation is empowered to fasten joint and several liability on both the employer and the insurer while awarding compensation to an employee or their dependents, provided the liability arises under the contract of insurance.
The Apex Court was hearing an appeal filed by the employer challenging a Calcutta High Court order that had modified an award passed by the Commissioner under the Employees' Compensation Act, 1923.
A Bench comprising Justice Manoj Misra and Justice Nongmeikapam Kotiswar Singh, while adjudicating the matter held that “notwithstanding absence of a provision such as Section 149 of Motor Vehicles Act, 1988 in the 1923 Act, by virtue of power to determine liability under Section 19, the Commissioner would have power to make the insurer jointly and severally liable with the employer to pay compensation if the same falls within the scope of the contract of insurance.”
Advocate Abhijit Sengupta, AOR, represented the appellants, while Advocate Sakshi Mittal, AOR, represented the respondents.
Background
The matter arose from a claim filed by an employee who had suffered a disabling injury while working as a driver under the appellant-employer. The Commissioner for Workmen’s Compensation had awarded compensation of ₹2,58,336 with 12% annual interest, holding both the employer and the insurer jointly liable.
The insurance company, however, challenged this order before the Calcutta High Court, contending that since there was no statutory provision under the 1923 Act corresponding to Section 149 of the Motor Vehicles Act, 1988, it could not be held directly liable to the workman.
The High Court accepted this argument and modified the award, directing the employer to pay the compensation first and then seek reimbursement from the insurer.
Aggrieved, the employer approached the Supreme Court, arguing that the High Court erred in ignoring the binding precedent of Mahendra Rai v. United India Insurance Company Ltd. (2014), where the same argument by the insurer had been rejected.
Court’s Observation
The Supreme Court, upon hearing the matter, examined Section 19 of the Employees Compensation Act, 1923, which authorises the Commissioner to determine questions relating to liability to pay compensation.
Referring to Gottumukkala Appala Narasimha Raju v. National Insurance Co. Ltd. (2007), the Court reiterated that Section 19 empowers the Commissioner to decide all questions concerning indemnity, including those involving insurers.
Explaining the scope of the Employees Compensation Act, 1923, the Bench held that the objective of the Act, as a social welfare legislation, “is not merely to provide compensation but also to provide a speedy and efficacious remedy to a workman/ employee, or his or her dependent, to realize compensation for injury, or death, suffered by accident arising out of and in the course of his or her employment.”
While concluding that restricting the insurer’s liability only to reimbursement, “would have deleterious effect on the very purpose which the legislation seeks to achieve and would render the remedy illusory”, the Bench explained that “if we hold that the insurer would be liable only to reimburse the employer, in the event employer fails to make payment for any reason whatsoever, including financial incapacity, question of reimbursement would not arise and the workman /employee, for whose benefit legislation has been made, would be left high and dry.”
Conclusion
Allowing the appeal, the Supreme Court set aside the High Court’s order and restored the award passed by the Commissioner, holding the insurer and the employer jointly and severally liable to pay compensation.
Accordingly, the Bench directed that the compensation already deposited by the insurer be released to the workman.
Cause Title: Alok Kumar Ghosh v. The New India Assurance Company Ltd. & Anr. (Neutral Citation: 2025 INSC 1239)
Appearances
Appellant: Advocates Anand, Abhijit Sengupta, Muddam Thirupathi Reddy, Paras Chauhan, N. Maylsamy, and Deepak Bahl
Respondent: Advocates Sakshi Mittal, S.L. Gupta, Asutosh Sharma, Swathana Bhaarath, Gunjan Sharma, Neeta, Sanjeev Kumar, Rajeshri Nivuratirao Reddy, Shivani Jain