Following the death of Krishnan, a labourer who fell from the fourth floor on January 12, 2014, his legal heirs had claimed compensation as per Workmen Compensation Act. But as the company had availed an insurance policy after fixing a sum of Rs 9,000 as annual salary for 20 labourers, which worked out to a meagre salary of Rs 37.50 per month per labourer, the Deputy Commissioner of Labour fixed the liability on the insurance company based on the premium paid while directing the employer to pay the balance amount.
This award was challenged on the ground that they would not be in a position to recover the compensation from the employer, as they were in a disadvantageous position. It was further contended that the liability was to be fixed on the insurance company in entirety as per the workmen compensation policy.
But the insurance company contended that it was a contractual obligation between them and the employer. Hence it was liable to pay to the extent assured and not more than that.
However, Justice SM Subramaniam observed that it was a classic case where the employer has not cared for the rights of the workmen and the insurance company too was attempting to limit its liability.
“Any such terms and conditions in the insurance policy agreed between the employer and the insurance company, which fails to fulfil the requirements of the Workmen Compensation Act, are to be held as invalid,” the court said.
The judge also pointed out that insurance companies were aware that Rs 37.50 per month was not an acceptable salary and it was not a minimum wage as per the statute.
“Therefore, minimum wages must be the benchmark for the purpose of calculating the premium and it cannot be done at the whims and fancies of the insurance company. After accepting the premium and entering into a policy, they cannot shift their liability by stating that they are bound only by the terms and conditions of the contract,” the judge added, directing the company to pay the compensation and recover the portion of the award from the employer.