| HEADING | DETAILS |
|---|---|
| Case Title | Shanti & Ors. vs. National Insurance Company |
| Introduction | The case concerns the liability of an insurance company to pay interest under the Employee’s Compensation Act, 1923, when the employer defaults in making provisional payments to the claimants. |
| Factual Background | The deceased was employed as a cleaner on his father’s truck. Following his death, his mother and siblings claimed compensation. The Insurance Company argued that it was not liable for the employer’s failure to comply with statutory requirements for provisional payments. The claim was initially dismissed but later upheld by the High Court. |
| Legal Issues |
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| Applicable Law |
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| Analysis | The Court held that the statutory provision mandates interest at 12% in case of default, and the discretion only applies to higher interest rates. Since the Insurance Company had been directed to pay compensation, interest, and penalty, it could not now contest liability or seek recovery from the insured. |
| Conclusion | The Supreme Court modified the award to apply 12% interest per annum from the date of the accident, allowing the appeal in favor of the claimants. |
| Current Scenario | The ruling reinforces the statutory obligation of insurers under the Employee’s Compensation Act. Insurers must comply with compensation awards, including interest, and cannot evade liability due to the employer’s failure. |
CASE SUMMARY– In this case, the Supreme Court addressed the issue of interest payable under the Employee’s Compensation Act, 1923. The Insurance Company argued that it was not liable for the employer’s default in making provisional payments. The Court held that a 12% statutory interest must be applied in case of default. The Insurance Company, having been impleaded, could not avoid liability. The judgment reaffirmed that the insurer must comply with the award, including interest, and cannot seek recovery from the insured. The appeal was allowed, modifying the award to grant 12% interest per annum from the date of the accident.
“Statutory interest at 12% per annum must be applied in case of default under the Employee’s Compensation Act, and insurers cannot evade liability once directed to pay.”
SOURCE – SUPREME COURT OF INDIA
