Karnataka High Court
United India Fire And General Insurance ... vs Machinery Manufacturers Corporation ... on 6 February, 1986
Equivalent citations: [1989]65COMPCAS596(KAR)
Author: N. Venkatachala
Bench: N. Venkatachala
JUDGMENT Venkatachala, J.
1. Common questions of law which arise for our decision in these appeals under section 30(1) of the Workmen's Compensation Act, 1923 (for short "the Act) are two. While one of them relates to the ambit of power of the Commissioner under sub-section (1) of section 19 of the Act, the other relates to the scope and applicability of sub-section (1) of section 14 of the Act.
2. Material facts which have given rise to the said questions are briefly these: The appellant in all these appeals in the United India Fire and General Insurance Co. Ltd., (for short "the insurance company"). One or the other of the resondents in each of these appeals is an "employer" for purposes of the Act. The insurance company (insurer) issued an insurance policy called "workmen's compensation policy" to each employer. The operative portion of such policy read:
"NOW THIS POLICY WITNESSETH THAT if, at any time during the period of insurance, any employee in the insured's immediate service shall sustain personal injury by accident or disease arising out of and in the course of his employment by the insured in the business and if the insured shall be liable to pay compensation for such injury either under the law (s) set out in the Schedule or at Common Law, then subject to the terms, exceptions and conditions contained herein or endorsed hereon, the company will indemnify the insured against all sums for which the insured shall be so liable and will in addition be responsible for all costs and expenses incurred with its consent in defending any claim for such compensation.
PROVIDED ALWAYS that in the event of any change in the law(s) or the substitution of other legislation therefor, this policy shall remain in force but the liability of the company shall be limited to such sum as the company would have been liable to pay if the law(s) had remained unaltered."
3. Each policy so issued, it was agreed before us, was a special policy which was intended to cover the liability of the employer to pay compensation under the Act for personal injury sustained by his workman by accident or disease arising out of and in the course of his employment for his business during the period of subsistence of that policy. It was also agreed that the appellant (insurance company) has been made, under each order under appeal, liable to make good to the person concerned, the compensation which the employer was liable to pay under the Act respecting personal injury suffered by the workman by accident or disease arising out of and in the course of his employment. But, the ambit of power of the Commissioner under sub-section (1) of section 19 of the Act of direct the insurance Company (appellant) to pay the compensation liable to be paid by the employer under the Act, to the person entitled to it, and the liability to pay such compensation by the insurance company under the insurance policy issued by it, unless a contigency covered under sub-section (1) of section 14 had arisen, were disputed. This is how two questions adverted to at outset, have arisen for our decision and we shall now proceed to deal with them.
4. Re: Power of the Commissioner under sub-section (1) of section 19 of the Act-
Sub-section (1) of section 19 of the Act reads thus:
"(1) If any question arises in any proceedings under this Act as to the liability of any person to pay compensation (including any question as to whether a person injured is or is not a workman) or as to the amount of duration of compensation (including any question as to the nature or extent of disablement) the question shall, in default of agreement be settled by a Commissioner."
5. From a perusal of the above provision, it becomes obvious that the power of the Commissioner thereunder extends to the settlement of any question arising in any proceedings under the Act as to the liability of any person to pay compensation. But, it was contended for the appellant (insurance company) by its learned counsel, R. V. Vasantha Kumar, that the expression "any person" used in the sub-section cannot take within its ambit the insurance company liable to make good the compensation under the workmen'S compensation policy issued covering the liability of the employer under the Act, to pay compensation for a personal injury sustained by his workman. This contention, in our view, cannot be sustained for the reasons which we shall presently state.
6. The employer's liability to pay compensation, in case of personal injury caused to a workman by accident arising out of and in the course of his employment, arises under section 3 of the Act. As to what amount of compensation is payable respecting a particular injury sustained by a workman has since been provided for under section 4 of the Act read with Schedule IV thereto, and no room is left for doubt in the matter. That there should not be any delay in payment of such amount compensation is made explicit by the provision in section 4A of the Act. Thus, it becomes clear that expeditious payment of amount of compensation liable to be paid by the employer under the Act, for personal injury suffered by a workman, is a purpose sought to be achieved by section 4 and 4A of the Act in the interest of social security of the workman or his dependants. It the employer is entitled to recover the amount of compensation no payable to a workman or his dependants, as the case may be, from his insurer (insurance company) under an insurance policy taken by him, the question is whether such insurance company cannot be regarded as one falling within the expression "any person" under sub-section (1) of section 19 of the Act on whom liability for payment of compensation could also be fastened by the Commissioner holding proceedings thereunder. If due regard is given to the purpose sought to be achieved by the aforesaid provisions of the Act, a beneficial legislation, we cannot but think that the expression "any person" used in the sub-section takes within its ambit the insurance company as well. Moreover, that the expression "any person" used in sub- section (1) of section 19 of the Act, is intended by the Legislature to take within its ambit the insurance company as well, becomes clear from the clue available in section 24 of the Act. That section reads:
"Any appearance, application or act required to be made or done by any person before or to a Commissioner (other than an appearance of a party which is required for the purpose of his examination as a witness) may be made or done on behalf of such person by a legal practitioner or by an official of an insurance company or a Registered Trade Union or by an Inspector appointed under sub-section (1) of section 8 of the Factories Act, 1948, or under sub-section (1) of section 5 of the Mines Act, 1952, or by any other officer specified by the State Government in this behalf, authorised in writing by such person, or, with the permission of the Commissioner, by any other person so authorised." (underling* is ours).
7. The expressions in the above section to which we have supplied emphasis make us think that wherever the expression "any person" is used in the Act, the Legislature has intended that the expression should take within its ambit an insurance company as well, if the context so permits.
8. We may here state that a Division Bench of this court in Shri Ram Mining Co. v. Assistant Commissioner and Commissioner for Workmen's Compensation, ILR [1981] 1 Kar 208, on a reading of sub-section (1) of section 19 of the Act, has interpreted it thus:
"Thus, on reading section 19(1), it becomes clear that the jurisdiction of the Commissioner under the Act is not confined only to the employer. It clearly contemplates the liability of any person to pay compensations."
9. Hence, we are clearly of the view that the power of the Commissioner, under sub-section (1) of section 19 of the Act to settle or adjudicate upon the liability of any person to pay compensation thereunder, extends to the settlement or adjudication of insurance company's liability under a workmen's compensation policy issued by it, to pay compensation for the person injury sustained by a workman liable to be made good by his employer-insured.
10. Re: Scope and applicability of sub-section (1) of section 14 of the Act-
Sub-section (1) of section 14 of the Act reads thus:
"(1) Where any employer has entered into a contract with any insurer in respect of any liability under this Act to any workman, then in the event of the employer becoming insolvent or making a composition or scheme of arrangement with his creditors or, if the employer is a company, in the event of the company having commenced to be wound up, the rights of the employer against the insurers as respects that liability shall, notwithstanding anything in any law for the time being in force relating to insolvency or the winding up of companies, be transferred to and vest in the workman, and upon any such transfer, the insurers shall have the same rights and remedies and be subject tot he same liabilities as if they were the employer, so, however, that the insurers shall not be under any greater liability to the workman than they would have been under the employer."
11. Learned counsel for the appellant (insurance company) wanted us to construe the above sub-section as one which makes the insurance company liable for the compensation payable by the employer under the Act, for the personal injury sustained by a workman, out of and in the course of his employment, in the event of the employer becoming insolvent or making a composition or a scheme of arrangement or the employer, if a company, on the commencement of its winding up, and not otherwise. We find it rather difficult to accede to this contention.
12. From a reading of the above sub-section, on e could see that it provides for transferring and vesting in the workman the rights and remedies which an employer may have against the insurer under a contract of insurance for the benefit of such workman, in the event of such employer becoming insolvent or making composition or scheme of arrangement with his creditors or, if the employer is a company, in the event of the company having commenced to be wound up, notwithstanding anything in any law for the time being in force relating to insolvency or the winding up of companies. It has to be remembered that under the law relating to insolvency or the winding up of a company, when a person becomes insolent or the winding up of a company has commenced, all the rights and remedies of such person or company enforceable against a third party under a contract, stand transferred to and vest in the official receiver or official assignee in the one case and the official liquidator in the other. It is only to overcome such untoward consequence which may prove detrimental to the interest of the workman, that a provision, as found in section 14 of the Act, is made and nothing else. To construe such a provision as one which takes away the right of the insured-employer to obtain indemnity under a contract of insurance unless he becomes insolvent or makes a composition or a scheme of arrangement with his creditors or if the employer-insured is a company, unless its winding-up commences, is to read something into the provision which is not there. We, therefore, hold that the provision in section 14 does not enable the insurance company (appellant) to avoid its liability under a contract of insurance issued specially for covering the employer's liability on the ground that the insured employer has not become insolvent, or made a composition or a scheme of arrangement with his creditors or being a company, the proceeding relating to its winding up has not commenced. Thus, both the contentions urged on behalf of the appellant fail.
13. In the result, we dismiss these appeals, however, without costs.