Judgment on Board

1. This Miscellaneous Appeal has been preferred under Section 30 of the Employees’ Compensation Act, 1923 (hereinafter referred to as “the Act”), calling in question the legality and correctness of the award dated 21/02/2024 passed by the learned Commissioner for Employees’ Compensation, Labour Court, Raigarh, in Case No. E.C. Act/20/2021 (Fata) Claim, whereby compensation of ₹11,91,574.80/- along with interest @ 12% per annum from the date of accident, as well as a penalty of 25% of the compensation amount, has been imposed upon the appellant/Insurance Company.

2. This appeal has been admitted on 03/02/2026 on the following substantial questions of law:

“1. Whether the learned Commissioner justified in imposing penalty upon the insurance company though the insurance company is not the employer and the provisions of Section 4A of the Employee's Compensation Act, 1923 providing penalty upon the employer only.

2. Whether while imposing penalty upon the insurance company, the provisions of clause (b) of sub-section (3) of Section 4A of the Employers' Compensation Act, 1923, has been followed or not.”

3. At the very outset, learned counsel for the appellant/Insurance Company, placing reliance upon the judgment of the Hon’ble Supreme Court in New India Assurance Co. Ltd. v. Rekha Chaudhar & Ors. (Civil Appeal No. 174 of 2026, decided on 23/02/2026), would submit that the issue with regard to the substantial questions framed by this Court has already been dealt with in the said case, wherein the Apex Court has held that the insurer is liable to indemnify the owner only to the extent of the compensation amount along with interest thereon and not the penalty imposed upon the employer for default in payment.

4. Though the said submission is not opposed by the learned counsel for respondent No.2/employer, he submits that, insofar as the imposition of penalty is concerned, he may be afforded an opportunity to present his case.

5. I have heard learned counsel for the parties and perused the judgment cited by the counsel for the appellant/Insurance Company.

6. A perusal of the judgment of the Hon’ble Supreme Court in New India Assurance Co. Ltd. (supra) makes it clear that the insurer is liable to indemnify the owner only in respect of the compensation along with interest thereon and not the penalty. For the sake of convenience, paragraphs 24 and 25 of the said judgment are extracted hereinbelow:

“24. This court in Sheela Devi and Anr. v. Oriental Insurance Co. Limited & Anr. MANU/SC/0518/202 wherein one of us was part of the bench (Justice Aravind Kumar) while dealing with a supplementary question of reduction of penalty amount had reiterated the view taken by this court in Ved Prakash Garg (supra) and observed that:

10. It is settled law that statutory penalty which is imposed upon the employer Under Section 4-A(3)(b) of the Act is not to be indemnified by the Insured. In Ved Prakash Garg (supra), this court has held that the Insurance company shall compensate the Insured-Employer for the principal amount of compensation as well as interest thereon, however, in case of any additional amount of compensation is awarded by the commissioner by way of penalty, the same would be the liability of the Insured-employer alone and not of the Insurance Company. The decision in Ved Prakash Garg (Supra) has been followed in L.R. Ferro Alloys Ltd. v. Mahavir Mahto MANU/SC/2475/2000: (2002) 9 SCC 450 holding that the Insurer is liable to indemnify the owner only for the compensation along with Interest thereon and not the penalty imposed on the employer for default in payment of amount within one month from the date of incident. In view of the above, the direction of the High Court, fixing the liability to pay statutory penalty on the Employer only, requires no interference from this court.

“25. Hence, in the light of aforesaid discussion, we are of the considered view that the pr