An insurer is not liable for interest payments when explicitly excluded in the insurance policy terms.

JUDGMENT

Appellant is the 2^nd opposite party in E.C.C No.18 of 2021 on the files of the Commissioner for Employee’s Compensation (Industrial Tribunal), Alappuzha. Respondents 1 to 3 herein were the applicants before the commission. The 4^th respondent was the

1^st opposite party in the E.C.C.

2. Respondents 1 to 3 sought compensation for the death of the husband of the 1^st respondent and the father of respondents 2 and 3. The learned Commissioner found that the respondents 1 to 3 were entitled for receiving compensation. The Commissioner fix Rs.5,87,300/- (Rupees Five Lakh Eighty Seven Thousand Three Hundred only) as compensation. The Commissioner also granted interest at the rate of 12% from the date of accident. The interest was quantified as Rs.1,87,083/-

(Rupees One Lakh Eighty Seven Thousand Eighty Three only).

3. The dispute in this appeal is regarding the liability to pay the interest granted by the Commissioner. The appellant insurer submits that the liability to pay interest was specifically excluded. The appellant relies on Exhibit D4. I have perused Exhibit D4. Interest and/or penalty imposed on the insured under any law or otherwise is specifically excluded as pointed out by the appellant.

4. The learned Counsel for the appellant relied on an order of this Court in M.F.A.(E.C.C) No.9 of 2012 ( Oriental Insurance Co.Ltd., Represented by the Authorised Signatory v. Noor Mohammed.S and Others [2026 SCC OnLine Ker 285]). He also placed reliance on a judgment of the Madras High Court in C.M.A. No.3256 of 2021 dated 20.06.2024. The learned Counsel submitted that when there is a specific exclusion in the terms of the policy, the same shall bind the parties. He pointed out that in the instant case liability to pay interest and compensation if any, was specifically excluded as discernible from Exhibit D4. Hence, he contended that the learned Commissioner was wrong in directing the appellant company to pay the interest awarded under the impugned order. Heard the learned Counsel or the respondents 1 to 3 also. Though notice was served, there is no appearance for the 4^th respondent, the employer/insurer.

5. It was held by this Court in the order in Oriental Insurance Company (supra) as follows:-

“Therefore, the legal position is clear. It is not mandatory for an employer under any provision of law to obtain a policy to cover liabilities that may arise under the Employees Compensation Act. The insurance policy is a contract. The insurer and the insured are bound by the terms and conditions of the policy. It is not for the Courts to rewrite/overwrite the terms and conditions of the insurance policies. In the case at hand, the endorsement noted above clearly excludes the liability to pay interest and penalty. The being so there is considerable merit in the contentions of the appellant in this regard.”

6. In the order of the Madras High Court relied on by the learned Counsel for the appellant an identical condition in a policy was considered. The learned Single Judge of the Madras High Court concluded that when there is a specific exclusion clause, the insurance company need not indemnify the employer for the liability to pay interest.

7. According to the settled position of law, when the insurer has not agreed to indemnify the insured for the liability to pay the interest and compensation, the insurer cannot be mulcted with the liability to pay the same. The appeal is hence allowed. The impugned order shall stand modified to the extent that the appellant shall not be liable to pay the interest. It is clarified that the liability to pay interest shall