Himachal Pradesh High Court
United India Insurance Company Ltd vs Jamna Devi & Others on 22 September, 2025
Author: Vivek Singh Thakur
Bench: Vivek Singh Thakur
( 2025:HHC:32948-DB ) IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA FAO No. 4030 of 2013 .
Reserved on: 20th May, 2025 Date of decision: 22nd September, 2025 United India Insurance Company Ltd. ...Appellant Versus Jamna Devi & others ...Respondents Coram The Hon'ble Mr. Justice Vivek Singh Thakur, Judge. Whether approved for reporting? Yes For the Appellant:
r Mr. Ashwani K. Sharma, Senior Advocate with Ms. Nisha Nalot, Advocate.
For the Respondents: Mr. Digvijay Singh, Advocate for respondents No.1 to 4.
Mr. Rahul Mahajan, Advocate for
respondent No.5.
Vivek Singh Thakur, Judge
The appellant-Insurance Company, by filing present appeal under Section 30 of the Employees Compensation Act, 1923 (in short referred to as 'the EC Act'), has assailed impugned order dated 20th April, 2013 passed by the Commissioner, Employees' Compensation, Court No.2, Mandi H.P. in case W.C.A. No. 15/2011/2010, preferred under the EC Act, whereby appellant-
Insurance Company being insurer of Principal Employer has been directed to deposit the amount awarded in favour of claimants amounting to Rs.3,14,880/- along with interest thereon at the rate of ::: Downloaded on - 22/09/2025 21:29:51 :::CIS 2 ( 2025:HHC:32948-DB ) 12% per annum w.e.f. 17th July, 2007 i.e. from one month after the date of accident till deposit/payment of the amount.
2 The parties shall be referred as per their status before the .
Commissioner, Employees' Compensation, for convenience.
3 I have heard learned counsel for parties and have gone through the record.
4 In present case, claimants had preferred claim petition against respondent No.1 United India Insurance Company Limited (appellant herein) and respondent No.2 M/s Fermenta Biotech Limited (the Principal Employer) (respondent No.5 herein) claiming compensation on account of death of employee of respondent No.2, deceased Kesar Singh, who was husband of claimant No.1, father of claimants No.2 and 3 and son of claimant No.4.
5 The undisputed facts in this case are that deceased Kesar Singh was working as a Helper in the factory of respondent No.2 since 1.4.2006 on monthly salary of Rs.2500/- plus other benefits to the tune of Rs.500/- per month. He had been working in the factory in night shift from 10 PM to 6 AM.
6 On 17.6.2007, when Kesar Singh was coming to attend his duty and reached near the factory gate, he was hit by some unknown vehicle resulting into his death on the spot in front of the factory gate due to head injury.
7 After service of respondents, pleadings were completed.
Evidence was led by parties and, thereafter, by appreciating the ::: Downloaded on - 22/09/2025 21:29:51 :::CIS 3 ( 2025:HHC:32948-DB ) evidence on record, the Commissioner awarded the compensation, referred supra, in favour of claimants directing the Insurance Company to pay the same to claimants by indemnifying the Principal .
Employer-respondent No.2.
8 It is apt to record that deceased was hired by respondent No.2, through a contractor Laxman Singh, for working in the factory of respondent No.2 for loading and unloading purpose and he was being paid salary to the tune of Rs.2500/- and other benefits through Laxman Singh contractor.
9 Respondent No.2, the Principal Employer, had purchased the Insurance Policy for the Workers Compensation (General) with respect to the employer's liability under the EC Act for 33 number of employees as evident from the Insurance Policy Schedule Ext.RW1/B placed on record along with list of 33 employees wherein deceased Kesar Singh was included at Sr. No. 25.
10 Workers Compensation (General) Policy has also been placed on record as Ext.RW1/A by the Insurance Company.
11 Present appeal was admitted on 22nd December, 2022 on the following substantial questions of law:-
1. Whether the liability to pay compensation under the Employees Compensation Act, can be fastened on the insurer for the death of the employee of the contractor of the insured when there is a specific exception clause in the policy which excludes such a liability?::: Downloaded on - 22/09/2025 21:29:51 :::CIS 4
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2. Whether the claim petition is not liable to be dismissed for non-joinder of the employer of the deceased workman as a party respondent?
.
3. Whether the interest on the amount of compensation awarded under the Employees Compensation Act can be fastened on the insurer unless such a liability is specifically undertaken in the contract of insurance?
4. Whether in the light of admission made by the widow of the deceased and the testimony of RW1 Savita Jaswal, working as Manager, HR in respondent No.2-Company whereby the monthly wages of deceased was proved to be Rs.2105/- only. The compensation assessed on the monthly wages @ 3000/- is sustainable in the eyes of law?
12 Learned counsel for the Insurance Company has contended that though 33 employees, enumerated in the list attached with the Policy Schedule, were insured vide Ext.RW1/A and Ext.RW1/B, however, there is 'Exception Clause' in the Policy providing that Company shall not be liable under this Policy in respect of insured's liability to employees of contractors to the insured.
Therefore, he has contended that liability to pay has wrongly been fastened on the insurer in present case.
13 Learned counsel for Insurance Company has submitted that the Insurance Company had not undertaken to pay interest on the compensation as evident from the stamp affixed on the Policy Schedule wherein it has been stated that insurer is not liable to ::: Downloaded on - 22/09/2025 21:29:51 :::CIS 5 ( 2025:HHC:32948-DB ) indemnify interest and penalty and liability under the Policy will be only of principal amount.
14 By referring judgment passed in Vikram Greentech .
India Limited and another vs. New India Assurance Company Limited reported in (2009)5 SCC 599, it has been contended on behalf of Insurance Company that for determining the extent of liability of insurer, terms of insurance contract have to be strictly construed without venturing into extra liberalism that might result in rewriting of the contract or substituting the terms which were not intended by the parties.
15 Policy Schedule, along with list of employees insured, unambiguously depicts that deceased Kesar Singh was amongst 33 employees insured through Policy Ext.RW1/A and Ext.RW1/B. In the Policy Schedule, the terms with respect to no liability to indemnify interest are not printed thereon, rather it appears to be incorporated later on by affixing stamp thereon which is also not clearly visible but can be read by making special efforts.
16 Inclusion of name of Kesar Singh in the Policy amongst 33 employees is not in dispute. The Exception Clause contained in main Policy document was not reflected in the Policy Schedule issued at the time of offering purchasing policy by respondent No.1 and respondent No.2 when Kesar Singh was insured as an employee by including him in 33 employees insured vide Insurance Policy Schedule Ext.RW1/B, that too without any Exception Clause of his exclusion in ::: Downloaded on - 22/09/2025 21:29:51 :::CIS 6 ( 2025:HHC:32948-DB ) Policy Schedule, it does not lie in the mouth of Insurance Company that it is not liable to pay compensation on account of death of Kesar Singh during the course of employment for specific Exception Clause .
in the Policy document. Similarly for hidden Clause, referred in Stamp, put on the Policy Schedule absolving the Insurance Company from making the payment of interest cannot be made basis to direct the insured to pay interest by exempting the Insurance Company from the said payment.
17 The Policies are purchased by insured in good faith and at the time of issuing the Policy Schedule for 33 employees, Exception Clause contained in Policy was not disclosed and, therefore, said condition contained in Main Policy cannot be made basis to relieve the Insurance Company from its liability. It was duty of the Insurance Company to disclose all Exception Clauses to the insured, who, in good faith and without notice of Exception Clause, had purchased the Insurance Policy. By applying the "Doctrine of Blue Pencil", the Court can render an unreasonable restraint reasonable by scratching out the offensive portions of the covenant and the Court should do so and then enforce the remainder.
18 In this regard, following paras of judgment in Texco Marketing (P) Ltd vs. Tata AIR General Insurance Co. Ltd.
reported in (2023)1 SCC 428 shall be relevant:-
"Exclusion clause 12 An exclusion clause in a contract of insurance has to be interpreted differently. Not only the onus but also ::: Downloaded on - 22/09/2025 21:29:51 :::CIS 7 ( 2025:HHC:32948-DB ) the burden lies with the insurer when reliance is made on such a clause. This is for the reason that insurance contracts are special contracts premised on the notion of .
good faith. It is not a leverage or a safeguard for the insurer, but is meant to be pressed into service on a contingency, being a contract of speculation. An insurance contract by its very nature mandates disclosure of all material facts by both parties.
13. An exclusion clause has to be understood on the touch-stone of the doctrine of reading down in the light of the underlining object and intendment of the contract. It can never be understood to mean to be in conflict with the main purpose for which the contract is entered. A party, who relies upon it, shall not be the one who committed an act of fraud, coercion or mis- representation, particularly when the contract along with the exclusion clause is introduced by it. Such a clause has to be understood on the prism of the main contract. The main contract once signed would eclipse the offending exclusion clause when it would otherwise be impossible to execute it. A clause or a term is a limb, which has got no existence outside, as such, it exists and vanishes along with the contract, having no independent life of its own. It has got no ability to destroy its own creator, i.e. the main contract. When it is destructive to the main contract, right at its inception, it has to be severed, being a conscious exclusion, though brought either inadvertently or consciously by the party who introduced it. The doctrine of waiver, acquiescence, approbate and reprobate, and estoppel would certainly come into operation as considered by this court in N. Murugesan v. Union of India (2022) 2 SCC 25.::: Downloaded on - 22/09/2025 21:29:51 :::CIS 8
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14. On the aforesaid principle of law, particularly with respect to the issues qua onus, burden and reading down, this Court in Shivram Chandra Jagarnath Cold Storage v.
.
New India Assurance Co. Ltd. (2022) 4 SCC 539 has held as follows:(SCC pp.546-47, paras 19-20)
"19. Another instance where exception clauses may be interpreted to the benefit of the insured is when the exception clauses are too wide and not consistent with the main purpose or object of the insurance policy. In B.V. Nagaraju v. Oriental Insurance Co. Ltd. (1996) 4 SCC 647, a two-Judge Bench of this Court read down an exception clause to serve the main purpose of the policy. However, this Court clarified that the breach of the exception clause was not so fundamental in nature that would have led to the repudiation of the insurance policy. In that case, the terms of the insurance policy allowed an insured vehicle to carry six workmen, excluding the driver. When the vehicle met with an accident, it was carrying nine persons apart from the driver. The insured had moved a claim for repair of the vehicle, which was rejected by the insurer.
20. Allowing the claim, this Court held thus : (B.V. Nagaraju case (1996) 4 SCC 647] , SCC pp. 650-51, para 7) '7. It is plain from the terms of the Insurance Policy that the insured vehicle was entitled to carry 6 workmen, excluding the driver. If those 6 workmen when travelling in the vehicle, are assumed not to have increased any risk from ::: Downloaded on - 22/09/2025 21:29:51 :::CIS 9 ( 2025:HHC:32948-DB ) the point of view of the Insurance Company on occurring of an accident, how could those added persons be said to have contributed to the causing .
of it is the poser, keeping apart the load it was carrying. Here, it is nobody's case that the driver of the insured vehicle was responsible for the accident. In fact, it was not disputed that the oncoming vehicle had collided head-on against the insured vehicle, which resulted in the damage. Merely by lifting a person or two, or even three, by the driver or the cleaner of the vehicle, without the knowledge of the owner, cannot be said to be such a fundamental breach that the owner should, in all events, be denied indemnification. The misuse of the vehicle was somewhat irregular though, but not so fundamental in nature so as to put an end to the contract, unless some factors existed which, by themselves, had gone to contribute to the causing of the accident. In the instant case, however, we find no such contributory factor. In Skandia Insurance Co. Ltd. v. Kokilaben Chandravadan, (1987) 2 SCC 654, this Court paved the way towards reading down the contractual clause by observing as follows : (SCC pp. 665-66, para 14) '14. ... When the option is between opting for a view which will relieve the distress and misery of the victims of accidents or their dependants on the one hand and the equally plausible view which will reduce the profitability of the insurer in regard to the occupational hazard undertaken by him by ::: Downloaded on - 22/09/2025 21:29:51 :::CIS 10 ( 2025:HHC:32948-DB ) way of business activity, there is hardly any choice. The Court cannot but opt for the former view. Even if one were to make a .
strictly doctrinaire approach, the very same conclusion would emerge in obeisance to the doctrine of "reading down" the exclusion clause in the light of the "main purpose" of the provision so that the "exclusion clause"
does not cross swords with the "main purpose" highlighted earlier. The effort must be to harmonise the two instead of allowing the exclusion clause to snipe successfully at the main purpose. The theory which needs no support is supported by Carter's "Breach of Contract" vide para 251. To quote:
'Notwithstanding the general ability of contracting parties to agree to exclusion clauses which operate to define obligations there exists a rule, usually referred to as the "main purpose rule", which may limit the application of wide exclusion clauses defining a promisor's contractual obligations. For example, in Glynn v. Margetson & Co. 1893 AC 351 (HL), AC at p. 357, Lord Halsbury, L.C. stated : (AC p. 357) "... It seems to me that in construing this document, which is a contract of carriage between the parties, one must in the first instance look at the whole instrument and not at one part of it only. Looking at the whole ::: Downloaded on - 22/09/2025 21:29:51 :::CIS 11 ( 2025:HHC:32948-DB ) instrument, and seeing what one must regard ... as its main purpose, one must reject words, indeed .
whole provisions, if they are inconsistent with what one assumes to be the main purpose of the contract."
Although this rule played a role in the development of the doctrine of fundamental breach, the continued validity of the rule was acknowledged when the doctrine was rejected by the House of Lords in Suisse Atlantique Societe d' Armement Maritime S.A. v. N.V. Rotterdamsche Kolen Centrale (1967) 1 AC 361 : (1966) 2 WLR 944 (HL) . Accordingly, wide exclusion clauses will be read down to the extent to which they are inconsistent with the main purpose, or object of the contract."
(emphasis in original and supplied)"
Duty of Disclosure, Good Faith and Notice
15. The principles governing disclosure, good faith and notice are founded on the common law principle of fairness. These principles are meant to be applied with more rigour in standard form contracts such as insurance contracts. Such an application is warranted much more when we deal with an exclusion clause. A very high standard of good faith, disclosure and due compliance of notice is required on the part of the insurer, keeping in view the unique nature of an insurance contract.::: Downloaded on - 22/09/2025 21:29:51 :::CIS 12
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16. An act of good faith on the part of the insurer starts from the time of its intention to execute the contract. A disclosure should be a norm and what .
constitutes a material fact requires a liberal interpretation. It is only when an insurer is not intending to act on an exclusion clause, the aforesaid principles may not require a strict compliance. The three elements which we have discussed are interconnected and overlapping. It is the foremost duty of the insurer to give effect to a due disclosure and notice in its true letter and spirit. When an exclusion clause is introduced making the contract unenforceable on the date on which it is executed, much to the knowledge of the insurer, non-disclosure and a failure to furnish a copy of the said contract by following the procedure required by statute, would make the said clause redundant and non-
existent..........
Doctrine of blue pencil
23. In such a situation, the doctrine of "blue pencil"
which strikes off the offending clause being void ab initio, has to be pressed into service. The said clause being repugnant to the main contract, and thus destroying it without even a need for adjudication, certainly has to be eschewed by the Court. The very existence of such a clause having found to be totally illegal and detrimental to the execution of the main contract along with its objective, requires an effacement in the form of declaration of its non-existence, warranting a decision by the Court accordingly."
::: Downloaded on - 22/09/2025 21:29:51 :::CIS 13( 2025:HHC:32948-DB ) 19 In aforesaid facts, I am of considered opinion that condition stamped later on on the Policy Schedule and undisclosed Exception Clause contained in main Policy are of no help to the .
Insurance Company and it deserves to be ignored for fastening the liability to pay the compensation as well as interest thereon upon the Insurance Company.
20 Though it is admitted fact that deceased Kesar Singh was hired by respondent No.2 through Laxman Singh Contractor but at the same time, it is also fact that respondent No.2 was Principal Employer and deceased was serving in the factory premises of respondent No.2 and he was included in 33 employees of the insured covered by Insurance Policy.
21 In these facts, it was Principal Employer who was also liable to pay the compensation and insurer was liable to indemnify the insured in terms of Section 12 of EC Act.
Section 12 of EC Act reads as under:-
"12. Contracting.-
(1)Where any person (hereinafter in this section referred to as the principal) in the course of or for the purposes of his trade or business contracts with any other person (hereinafter in this section referred to as the contractor) for the execution by or under the contractor of the whole or any part of any work which is ordinarily part of the trade or business of the principal, the principal shall be liable to pay to any employee employed in the execution of the work any compensation which he would have been liable to pay if that employee had been immediately ::: Downloaded on - 22/09/2025 21:29:51 :::CIS 14 ( 2025:HHC:32948-DB ) employed by him; and where compensation is claimed from the principal, this Act shall apply as if references to the principal were substituted for references to the .
employer except that the amount of compensation shall be calculated with reference to the wages of the employee under the employer by whom he is immediately employed.
(2)Where the principal is liable to pay compensation under this section, he shall be entitled to be indemnified by the contractor , or any other person from whom the employee could have recovered compensation and where a contractor who is himself a principal is liable to pay compensation or to indemnify a principal under this section he shall be entitled to be indemnified by any person standing to him in the relation of a contractor from whom the employee could have recovered compensation and all questions as to the right to and the amount of any such indemnity shall, in default of agreement, be settled by the Commissioner.
(3)Nothing in this section shall be construed as preventing a an employee from recovering compensation from the contractor instead of the principal.
(4)This section shall not apply in any case where the accident occurred elsewhere that on, in or about the premises on which the principal has undertaken or usually undertakes, as the case may be, to execute the work or which are otherwise under his control or management."
22 From the provision of Section 12 of the EC Act, it is apparent that workman or claimant can claim compensation either ::: Downloaded on - 22/09/2025 21:29:51 :::CIS 15 ( 2025:HHC:32948-DB ) from the Principal Employer or from the contractor or from both and Principal Employer shall be liable to pay to any employee, employed for the execution of work which is ordinarily part of trade or business .
of the principal, any compensation which he would have been liable to pay if that employee had been immediately employed by him and where compensation is claimed from the principal, the EC Act shall apply. As per provisions of this Section, where Principal Employer is liable to pay compensation he shall be entitled to be indemnified by the contractor or any other person from whom the employee could have recovered the compensation. Therefore, for adjudicating the claim petition finally and completely, contractor Laxman Singh was not necessary party and being insurer Insurance Company was liable to indemnify the insured to pay the amount of compensation.
23 It has come in evidence that deceased Kesar Singh was receiving the monthly wages/salary at the rate of Rs.2500/- plus other benefits to the tune of Rs.500/- such as uniform, subsidized food and bonus etc. and this fact has been asserted by claimant No.1 in her deposition in examination-in-chief and corroborated by RW1 Savita, Manager (HR and Administration) of respondent No.2-Company in her examination-in-chief. Though in cross-examination, claimant No.1 had admitted that Laxman Singh Contractor was paying Rs.2105/- per month to deceased Kesar Singh but nothing has been placed on record in support of this stray suggestion particularly when she has claimed that deceased was also getting other service benefits from ::: Downloaded on - 22/09/2025 21:29:51 :::CIS 16 ( 2025:HHC:32948-DB ) Principal Employer. In reply filed to application, receipt of monthly wages of deceased Kesar Singh of Rs.2500/- plus other benefits to the tune of Rs.500/- has not been disputed. RW1 Savita in her cross-
.
examination has also admitted that monthly wages of Kesar Singh were Rs.2105/- per month but with further clarification that he was also getting other benefits like overtime and food benefits. The suggestion put to witness without any material on record to substantiate the same, which has been duly clarified by RW2 Savita, cannot be used against the claimants and therefore, Commissioner Employees' Compensation has not committed any error by taking the monthly wages of Kesar Singh at the rate of Rs.3000/- per month.
24 Substantial questions of law, referred supra, are answered accordingly in aforesaid terms, against the Insurance Company and in favour of claimants.
In view of above, I do not find any merit in appeal and accordingly, appeal is dismissed. Pending application(s), if any, also stand disposed of.
(Vivek Singh Thakur), Judge.
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