‘Stop Filing Technical Appeals’: Supreme Court Pulls Up Insurers for Delaying Workmen’s Compensation

The Supreme Court has deprecated the practice of insurance companies unnecessarily filing appeals by raising technical pleas, especially when they do not deny their ultimate liability under the contract of insurance.

The bench of Justices Manoj Kumar Mishra and N Kotiswar Singh, dealing with a matter arising out of the Employee’s Compensation Act, 1923, also held that by virtue of the power to determine liability under Section 19 of the Act, the Commissioner has the authority to make the insurer jointly and severally liable with the employer to pay compensation, provided the claim falls within the scope of the insurance contract.

''Notwithstanding absence of a provision such as Section 149 of the 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,'' the bench said.

The court was dealing with an appeal from an order of the Calcutta High Court dated April 09, 2015.

The high court allowed the appeal of the insurance company in part, by modifying the order of the Commissioner, Workmen’s Compensation (1st Court), West Bengal of March 04, 2011, to the extent that direction to the insurer to pay the compensation to the workman was substituted with a direction to the appellant (insured - employer) to pay the compensation and seek reimbursement from the insurer.

The Commissioner's order awarding compensation of Rs 2,58,336 with statutory interest of 12% per annum to the workman was affirmed. The workman, employed as a driver, suffered a disabling injury by accident arising out of and in the course of employment.

Challenging the high court's order, the appellant (employer) contended that there was absolutely no justification for the high court to modify the award, noting there was no challenge to the amount of compensation awarded and that the claim was covered by the contract of insurance.

Conversely, the insurance company argued that the 1923 Act imposed liability on the employer and contained no provision for compulsory insurance or for fastening liability directly on the insurer to satisfy judgments and awards against insured persons, unlike Section 149 of the Motor Vehicles Act, 1988. Thus, the insurer claimed the rights of the insured and insurer are governed solely by the contract of insurance, which is to indemnify the insured, meaning the claimant would have no right to directly claim compensation from the insurer.

The Supreme Court examined the issue of whether, in a proceeding initiated under the 1923 Act for compensation, an insurer could be made a party respondent and, if so, whether compensation could be awarded against it if otherwise admissible under the contract of insurance.

The bench noted that this issue was already settled in Gottumukkala Appala Narasimha Raju and others v. National Insurance Co. Ltd (2007). The court also clarified that Section 19 of the 1923 Act is clear as it enables the Commissioner to determine who would be liable to pay the compensation, thereby confirming the Commissioner's power to determine the liability of an insurer.

The bench pointed out that the object of the Act 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 an accident arising out of and in the course of employment.

The bench stated, "No doubt, Section 3 of the 1923 Act fixes liability to pay compensation on an employer but where the liability of an employer is covered by a contract of insurance, exclusion of the insurer from being jointly and severally liable for payment of the compensation awarded would have deleterious effect on the very purpose which the legislation seeks to achieve and would render the remedy illusory."

The bench further reasoned, "This we say so, because 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."

In the instant case, the court confirmed there was no dispute that the insurer had undertaken the liability to indemnify the insured (employer) and had not contracted out of his liability.

The Supreme Court held that there was no justification for the high court to modify the Commissioner's order and shift liability onto the employer (the appellant) alone. Instead, the appropriate course would have been to make the employer and the insurer jointly and severally liable.

Having noted that the amount awarded by the Commissioner had already been deposited by the insurance company in terms of the award, the court did not deem it necessary to modify the award passed by the Commissioner. The Supreme Court finally allowed the appeal and restored the award of the Commissioner.

In its decision, the bench said, "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." Court also observed that the high court "also adopted a hyper technical approach and overlooked the provisions of Section 19 of the 1923 Act while modifying the award passed by the Commissioner to the disadvantage of the employee (i.e., the claimant) when there was no dispute regarding the liability of the insurance company under the contract of insurance."

As the insurer unnecessarily filed an appeal before the high court, resulting in the compensation not being timely released to the second respondent, the court compensated the workman with costs of Rs 50,000 to be paid by the first respondent.

Case Title: Alok Kumar Ghosh Vs The New India Insurance Company Limited & Anr

Judgment Date: October 9, 2025

Bench: Justices Manoj Kumar Mishra and N Kotiswar Singh