The Chairman Vs. M/s.encee Rail Linkers - Court Judgment

-1- MFA No.3147 of 2011 C/W MFA No.5919 of 2011 ® IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE12H DAY OF APRIL, 2023 BEFORE THE HON'BLE MR JUSTICE HANCHATE SANJEEVKUMAR MISCELLANEOUS FIRST APPEAL No.3147 OF2011C/W MISCELLANEOUS FIRST APPEAL No.5919 OF2011IN MFA No.3147/2011 BETWEEN: THE CHAIRMAN, NEW MANGALORE PORT TRUST, PANAMBUR, MANGALORE - 10. …APPELLANT (BY SRI. RAYAPPA Y. HADAGALI, ADVOCATE) AND:

1. M/S. ENCEE RAIL LINKERS, ENGINEERS AND GOVERNMENT, APPROVED CONTRACTOR, OFFICE AT: D/1 NUTAN KALPANA BUILDING, GROUND FLOOR, S.M.ROAD, MULAND (WEST), MUMBAI - 400 080.

2. UNITED INDIA INSURANCE, CO.LTD., DOOR NO.7, CANADA BUILDING, 1ST FLOOR, 226, DR.D.N.ROAD, FORT MUMBAI - 400 001.

3. SMT. SHIVANI. R. RAI, W/O LATE. RATHAN KUMAR, AGED ABOUT50YEARS.-.2- MFA No.3147 of 2011 C/W MFA No.5919 of 2011 4. DIVYA RAI, D/O LATE. RATHAN KUMAR, AGED ABOUT22YEARS.

5. RISHITH RAI, S/O LATE. RATHAN KUMAR, AGED ABOUT17YEARS, MINOR REPRESENTED BY MOTHER AND NATURAL GUARDIAN, RESPONDENT NO.3. RESPONDENTS3TO5ARE RESIDING AT NAGRIGUTHU HOUSE, SAJIPA MUDA VILLAGE, BANTWAL TALUK, D.K., 6. SMT. LALITHA RATHAN, W/O LATE. RATHAN KUMAR, RAO @ RATHAN KUMAR, AGED ABOUT45YEARS.

7. KUMARI DIVYA RAO, D/O LATE. RATHAN KUMAR, RAO @ RATHAN KUMAR, AGED ABOUT24YEARS. RESPONDENTS6AND7ARE RESIDING AT SEETHA HOUSE, ACHADA POST, YANEGUDDE VILLAGE, KATPADY, UDUPI DISTRICT. …RESPONDENTS (BY SRI. B. PRADEEP, ADVOCATE FOR R2; NOTICE TO R3, R4 AND R7 ARE SERVED AND UNREPRESENTED; V/O DATED274/2018 SERVICE OF NOTICE TO R6 IS HELD SUFFICIENT) THIS MFA IS FILED U/S301) OF W.C. ACT AGAINST THE JUDGMENT

DATED:14.01.2011 PASSED IN WCA/SR-21/2007(F) ON THE FILE OF THE LABOUR OFFICER AND COMMISSIONER FOR WORKMEN COMPENSATION, D.K., SUB DIVISION-2, MANGALORE, AWARDING A COMPENSATION OF Rs.3,06,180/- WITH INTEREST AND ETC., -3- MFA No.3147 of 2011 C/W MFA No.5919 of 2011 IN MFA No.5919/2011 BETWEEN: M/S. ENCEE RAIL LINKERS, ENGINEERS AND GOVERNMENT, RECOGNIZED CONTRACTORS, OFFICE NO.D/1, NOOTHAN KALPANA, GROUND FLOOR, S.N.ROAD, MULUND (WEST), MUMBAI - 400 080. REPRESENTED BY ITS PROPRIETOR, SRI. NARENDRA R. SHAH. …APPELLANT (BY SRI. PUNDIKAI ISHWARA BHAT, ADVOCATE) AND:

1. SMT. SHIVANI R. RAI, W/O LATE. RATHAN KUMAR, AGED ABOUT50YEARS.

2. KUM. DIVYA RAI, D/O LATE. RATHAN KUMAR, AGED ABOUT22YEARS.

3. MR. RISHITH RAI, S/O LATE. RATHAN KUMAR, AGED ABOUT17YEARS, MINOR, REPRESENTED BY HIS MOTHER AND NATURAL GUARDIAN, SMT. SHIVANI. R. RAI, (1ST RESPONDENT). RESPONDENTS NO.1 TO3ARE RESIDING AT NAGRI GUTHU HOUSE, SAJIPA MOODA VILLAGE, BANTWAL TALUK, D.K.-.4- MFA No.3147 of 2011 C/W MFA No.5919 of 2011 4. SMT. LALITHA RATHAN, W/O LATE. RATHAN KUMAR RAO, AGED ABOUT45YEARS, ALIAS RATHAN KUMAR.

5. KUM. DIVYA RAO, D/O LATE. RATHAN KUMAR RAO, AGED ABOUT24YEARS, ALIAS RATHAN KUMAR. RESPONDENTS NO.4 AND5ARE RESIDING AT 'SEETHA HOUSE', AACHAADA POST, YENEGUDDA VILLAGE, KATAPADI, UDUPI DISTRICT.

6. THE CHAIRMAN, N.M.P.T., PANAMBURU, MANGALORE - 575 010.

7. UNITED INDIA INSURANCE COMPANY LTD., DOOR NO.7, CANADA BUILDING, 1ST FLOOR, 226, DA:D.N.ROAD, FORT, MUMBAI - 400 001. REPRESENTED BY ITS MANAGER. …RESPONDENTS (BY SRI. G. RAVISHANKAR SHASTRI, ADVOCATE FOR R2; SRI. RAYAPPA Y. HADAGALLI, ADVOCATE FOR R6; SRI. S. V. HEGDE MULKHAND, ADVOCATE FOR R7; NOTICE TO R1 IS SERVED AND UNREPRESENTED; SERVICE OF NOTICE TO R4 AND R5 ARE HELD SUFFICIENT) THIS MFA IS FILED U/S301) OF W.C. ACT AGAINST THE JUDGMENT

DATED:14.01.2011 PASSED IN WCA/SR-21/2007(F) ON THE FILE OF THE LABOUR OFFICER AND COMMISSIONER FOR WORKMEN COMPENSATION, D.K., SUB DIVISION-2, MANGALORE, AWARDING A COMPENSATION OF Rs.3,06,180/- WITH INTEREST AND ETC., THESE APPEALS, COMING ON FOR FURTHER ARGUMENTS, THIS DAY, THE COURT DELIVERED THE FOLLOWING: -5- MFA No.3147 of 2011 C/W MFA No.5919 of 2011 JUDGMENT

MFA31472011 is filed by the Principal Employer, New Mangalore Port Trust, Panambur, Mangalore (hereinafter referred to as Principal-NMPT for brevity) and MFA No.5919/2011 is filed by the Contractor - M/s.Encee Rail Linkers Engineers and Government Approved Contractors (hereinafter referred to as Contractor-NCRL for brevity) challenging the impugned judgment and award referred to supra, passed by the Learned Commissioner, D.K. Sub- Division, Mangalore.

2. Both the appeals are filed by the Principal Employer and Contractor being aggrieved by the payment of interest on lump-sum amount determined. Therefore, being aggrieved by the order to pay the interest, the appeals are filed by the Principal Employer and the Contractor.

3. Brief facts: On 04.10.2005, the deceased Ratan Kumar, the employee of the Contractor met with an accident out of and in the course of employment near NMPT Godown and was -6- MFA No.3147 of 2011 C/W MFA No.5919 of 2011 shifted to A.J.Hospital at Mangalore and later on he died on 08.10.2005.

4. Heard arguments of the learned counsel for the parties and perused the materials on record.

5. The learned counsel for the Principal employer- NMPT submitted that the appellant is not liable to pay interest but insurance company is liable to pay interest on the lump-sum amount determined or the contractor is liable to pay the entire compensation along with interest. Therefore, submitted the Principal-NMPT is not liable to pay any compensation along with interest for the reason that the hiring contractor is not relating to trade or business of the Principal employer-NMPT.

6. Further, it is contended by the learned counsel for Principal employer-NMPT that the deceased was the General Power of Attorney Holder (GPA Holder for brevity) of the contractor-NCRL and in the said GPA there is no mention that the deceased was a Project Supervisor/ workman. Therefore, submitted that the deceased was not -7- MFA No.3147 of 2011 C/W MFA No.5919 of 2011 a Supervisor/workman. Therefore, the Principal employer- NMPT is not liable to pay the compensation.

7. The learned counsel for the Contractor-NCRL submitted that the Contractor is not liable to pay either the compensation or the interest thereon for the reason that the claimant has worked for and on behalf of Principal employer-NMPT. Further, submitted that the insurance company is liable to pay both lump-sum amount quantified and the accrued interest thereon, but not by the contractor.

8. Further, in support of his contention the learned counsel for the Contractor-NCRL places reliance on the judgment of the Hon'ble Apex Court in the case of NEW INDIA ASSURANCE COMPANY LIMITED VS. HARSHABHAI AMRUTHBHAI MODHIYA AND ANOTHER1 (hereinafter referred to as Harshabhai Amruthbhai's case for brevity) and in the case of UNITED INDIA INSURANCE CO. LTD. VS. SRI ALLABAX NAHNA SAB2 (hereinafter referred to as Allabax Nahna Sab's case for brevity) 1 2006(5) SCC1922 ILR1998KAR1500-8- MFA No.3147 of 2011 C/W MFA No.5919 of 2011 9. In the present case, the facts are not disputed. The Principal employer-NMPT had engaged Contractor-NCRL for execution of strengthening the railway track to the Principal–NMBT. Contractor-NCRL had taken the said contract work for doing work of strengthening railway track. In the said process, the accident took place on 04.10.2005. At the time of the accident, the deceased was working as Project Supervisor/workman and the deceased out of and in the course of the employment was coming to the place of work and met with an accident and died. Therefore, a claim petition is filed for seeking compensation under the Employees’ Compensation Act, 1923.

10. Exhibit-R10 is the GPA given by the Contractor- NCRL to the deceased to transact and deal with Principal- NMPT for execution of work of correction of railway track. There may not be mentioning the designation of the deceased, but the deceased was engaged by the Contractor-NCRL. Therefore, when it is proved that the deceased was working at the instruction of the Contractor- NCRL for and on behalf of the Principal Employer-NMPT, it is -9- MFA No.3147 of 2011 C/W MFA No.5919 of 2011 proved that the deceased was workman as per Section- 2(dd) of Employees Compensation Act, 1923 (hereinafter referred to as EC Act for brevity).

11. While determining, whether the deceased was workman or not, the nature of work and for whose work he was carrying out and at whose instructions the deceased was working is to be considered. Nomenclature of post is not criteria. It is not disputed fact that the deceased was working as Supervisor at the instructions of the Contractor- NCRL for and on behalf of Principal employer-NMPT. Just because GPA is executed that cannot be a ground to say that the deceased was not workman.

12. The purpose of execution of GPA in favour of the deceased is to transact with the Principal-NMPT for execution of correction of railway track. Therefore, the correction of railway track was given to the deceased as there was a contract between the Principal-NMPT and Contractor-NCRL. The deceased was working for correction of railway track at the instruction of the Contractor-NCRL for and on behalf of Principal-NMPT. Therefore, on -10- MFA No.3147 of 2011 C/W MFA No.5919 of 2011 appreciation of evidence on record, it is proved that the deceased is a workman coming within the definition of Section-2(dd) of EC Act.

13. The learned Commissioner has awarded compensation of Rs.3,06,180/- along with interest. It is directed that the insurance company shall pay the lump- sum amount of Rs.3,06,180/- to the claimant and put the burden of payment of interest on the Principal-NMPT and Contractor-NCRL jointly and severally. The appellants have filed the present appeals by being aggrieved by directing them to pay the interest.

14. The following substantial question of law arises for consideration:

"Whether, under the facts and circumstances of the case, as per contract of insurance and as per section-4(A)(3)(a) of EC Act, the insurance company is liable to pay interest on the lump sum amount determined by the learned Commissioner?." -11- MFA No.3147 of 2011 C/W MFA No.5919 of 2011 15. The insurance policy between the insurance company and Principal-NMPT is not disputed. The insurance policy is a purely contract of insurance between the insurance company and the Principal employer-NMPT. The nature of insurance policy is Employers Liability (Employees Compensation). In the insurance policy, it is stated that the insured is M/s. New Mangalore Port Trust. The address given is M/s.Encee Rail Linkers Engineers and Government Approved Contractor. The work details is 'strengthening the railway tracks' in marshalling yard area at NMPT, Panambur, Mangalore.

16. These contentions are found in the insurance policy, which are not disputed by the appellants. The insurance coverage of the employees is for 28 workers, for a total sum of Rs.6,05,000/- and for supervisor Two in numbers. The total wage declared is Rs.65,000/-. Therefore, the work of the Supervisor is also covered in the said insurance policy.

17. As discussed above, as per GPA the deceased was entrusted with the supervising the work of correction of -12- MFA No.3147 of 2011 C/W MFA No.5919 of 2011 railway tracks. Therefore, the Supervisors are also covered, hence the risk of deceased is also covered under the said insurance policy. The said insurance policy is pure contract of insurance and not statutorily compulsory coverage insurance.

18. In the case of issuance of insurance policy under the Motor Vehicles Act, is different which is mandatorily to be purchased by the owner covering the risk, atleast so far as third party is concerned. Therefore, so far as the third party under the MV Act is concerned, the contractual insurance is mandatory but in the present case it is not a mandatory insurance coverage as per the provisions of MV Act. In the present case, the insurance policy is purely contractual between Principal and the Contractor on one hand and the insurance company on the other hand.

19. Therefore, there is a contract that the insurance company shall indemnify the insured so far as the wage declared by the insured in case of injury or death caused in respect of the employees covered in the insurance policy and not more than that. There is no clause in the said -13- MFA No.3147 of 2011 C/W MFA No.5919 of 2011 contract of insurance obligating on the insurance company to pay the interest on the determined lump sum quantum amount. The payment of interest always is on the employer as per Section-4(A)(3)(a) of E.C.Act, which stipulates as follows: “4A: Compensation to be paid when due and penalty for default. Xxxxxxxxx xxxxxxxxx "4A(3)(a) direct that the employer shall, in addition to the amount of the arrears, pay simple interest thereon at the rate of twelve per cent. per annum or at such higher, rate not exceeding the maximum of the lending rates of any scheduled bank as may be specified by the Central Government by notification in the Official Gazette, on the amount due; and

20. Therefore, under Employee’s Compensation Act, 1923, it is obligation on the part of the insured/employer to pay the quantum of amount determined, interest and penalty thereon. But by virtue of the insurance policy, the -14- MFA No.3147 of 2011 C/W MFA No.5919 of 2011 Insurance Company is liable to indemnify the insured/owner. Primarily, the employer / insured is liable to satisfy the claim but by virtue of contract of insurance, the Insurance Company is liable to indemnify the owner for the injury or death caused to the employee according to the wage declared by the employer to the number of employees stated in the insurance. The employers’ insurance is a purely contract of insurance. It is not mandatory as per the provisions of the Motor Vehicles Act. The role of the Insurance Company comes into picture by virtue of contract of insurance entered into between the employer/insured and Insurance Company. Therefore, both the parties are to stick on to the terms and conditions of that contract and not more or less than that. Under insurance policy, if there is any specific stipulation that the Insurance company to pay interest then the insurance company shall pay the interest. If there is no stipulation then the insurance company is not liable to pay interest. The contractual policy cannot be interpreted like statute. What are express terms and conditions stipulated in the contractual policy, the parties to the contract are under obligation to perform their part of -15- MFA No.3147 of 2011 C/W MFA No.5919 of 2011 contract subject to be governed by the statute if there is any. For example, under the provisions of the Motor Vehicles Act, 1988, the insurance coverage to third parties is compulsory. Then the insurance company shall pay compensation as well as interest thereon to the third party subject to limitation prescribed in the insurance policy. But under the Employee’s Compensation Act, there is no stipulation compulsorily covering the risk of the employees. Therefore, it is option on part of the employer to enter into contract with the insurance company to make cover risk of employees according to the number of employees and wage declared by the employer. For this only, the insurance company is under obligation to satisfy the claim whenever the claim arises. Therefore, in the present case, considering the insurance policy as above discussed as produced before the learned Commissioner, the insurance company is liable to satisfy the claim only so far as number of employees and the wage declared by the insured is concerned. There is no express stipulation making compulsion on part of the insurance company to pay interest or penalty. Therefore, the learned Commissioner is correct in making insurance -16- MFA No.3147 of 2011 C/W MFA No.5919 of 2011 company liable for lump-sum amount determined and putting liability on the appellants herein to pay interest thereon to the claimant. There is no need to make interference on it.

21. The facts in Sri Allabax Nahna Sab's case stated supra are different from the present case. It is not clearly stated regarding the insurance policy and what is the nature of insurance policy. Whether is it a motor vehicle insurance policy or employer's insurance policy. Therefore, having different factual matrix between the present case and in the above cited case, the above cited case is not helpful in favour of the appellants.

22. In Harshadbhai Amrutbhai Modhiya's case stated supra, the fact is that there is express stipulation in the insurance policy that the insurance granted is not extended to include any interest or penalty imposed on the insured. Therefore, in the above Harshadbhai Amrutbhai Modhiya's case, because of express stipulation in the insurance policy, it was held that the insurance company is not liable to pay interest. Therefore, where every contract is -17- MFA No.3147 of 2011 C/W MFA No.5919 of 2011 governed where such contract is purely in collusion between the parties in the contract they are bound by it. There is no scope for making any addition or subtraction or interpreting beyond the meaning of the contract where the insurance policy is a pure contractual policy. If there is no explicit or implied conditions that cannot make a ground to make any addition or subtraction. What is explicitly stated or if there is any implied meaning arises there from, for that purpose, the terms and conditions are applicable. Therefore, in the present case, there is no express stipulation making insurance company liable to pay the interest on the lump- sum amount determined as stated above. In the present case, the insurance policy is a pure contractual policy. How many number of employees covered and what is the wage declared is expressly stated then the insurance company is bound by that and not beyond the terms and conditions thereon. Hence, in absence of payment of interest by the insurance company in the insurance policy then the insurance company is not liable to pay interest thereon. Imposing interest on the lump-sum amount is statutorily provided as per Sections -18- MFA No.3147 of 2011 C/W MFA No.5919 of 2011 4-A(3)(a) of the Act and that is payable by the employer/owner. In case if there is any stipulation in the insurance policy to pay interest by the insurance company, then insurance company is liable, otherwise not. Therefore, in this regard learned Commissioner is correct in imposing the liability on the appellants to pay interest.

23. As per the insurance policy as above stated, the insured is New Mangalore Port Trust. The address given is that M/s. Encee Rail Linkers and Government Approved Contractors, Mumbai. Therefore, Encee Rail Linkers and Government Approved Contractors also be considered as insured in terms of insurance policy in the present case. Therefore, both the appellants are jointly and severely liable to pay interest on the amount determined by the learned Commissioner.

24. As per Section 12 of the EC Act, the principal employer is also liable to pay compensation in case any of the employee engaged by the contractor, had sustained injury or death caused in case where principal employer entered into agreement with the contractor. As per Section -19- MFA No.3147 of 2011 C/W MFA No.5919 of 2011 12(2) of the E.C Act, liberty is reserved to the principal employer to get indemnification by the contractor and that liberty is given to New Mangalore Port Trust in case the M/s. Encee Rail Linkers and Government Approved Contractors is proved to be a contractor. Furthermore, the wordings used in section 12 of the E.C Act for the purpose of his trade or business, contracts shall not be narrowly construed that the contractor has directly involved in relation of trade and business concerned of the principal employer then only the contractor is liable. The wordings used for the purpose of his trade and business contracts are in relation to the employer. It does not mean that the contractor was also hiring the same trade or business of the principal employer. The plain meaning of Section 12(1) of the E.C.Act is that the principal employer; in the course of or for the purpose his trade or business contracts means trade or business of principal employer and for this purpose making contract with the contractor and such contractor engages any employee for and on behalf of the principal employer, then the principal employer is also liable as that of the contractor. The object behind is the claimant’s right cannot -20- MFA No.3147 of 2011 C/W MFA No.5919 of 2011 be deprived of in getting compensation either from the principal employer or from the contractor just because of inter se dispute between them. As per Section 12(3), an option is given to the employee recovering compensation either from the contractor or from the principal employer. Therefore, the NCRL is a contracting party with the principal employer-NMPT, necessarily does not have trade or business with principal employer but for correction of rail track and that does not mean that since the contractor was not having trade or business in the nature what the principal employer is doing then the principal employer is not liable, cannot be accepted. The word ‘trade or business’ is used in respect of the principal employer, i.e., for his trade or business with principal employer to enter into contract with the contractor and contractor may do any work ancillary to the trade or business of the principal employer and in case of any employee/contractor sustained injury or death occurred, then both are liable as per Section 12 of the EC Act. Therefore, the principal employer cannot escape from his liability.-.21- MFA No.3147 of 2011 C/W MFA No.5919 of 2011 25. Therefore, as discussed above, the principal employer/NMPT is entitled to get indemnification by the Insurance Company as per stipulations of the insurance policy only in respect of the lump-sum amount determined as discussed above. But the principal employer and the contractor both are jointly and severely liable to pay the interest on the said determined amount to the claimant. Therefore, the learned Commissioner is correct in observing and giving a finding and imposing liability to pay interest on both the appellants. Hence, substantial question of law is answered in negative. Therefore, the appeals filed by both the appellants are liable to be dismissed.

26. Accordingly, I pass the following: ORDER

i. The appeal is Dismissed. ii. The impugned Judgment and Award dated 14.01.2011 passed in WCA/SR-21/2007(F) on the file of the Labour Officer and Commissioner -22- MFA No.3147 of 2011 C/W MFA No.5919 of 2011 for Workmen’s Compensation, D.K. Sub-Division-2, Mangalore, is affirmed. iii. Registry is directed to return the Trial Court Records to the Tribunal, along with certified copy of the order passed by this Court forthwith without any delay. iv. No order as to costs. Sd/- JUDGE JJ para 1 to 19/KA para 20 to 26/bnv CT: ABS