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New India Assurance Co. Ltd. v. Rekha Chaudhary and Others

Civil Appeal · 2026 INSC 177Decided 23 Feb 2026
C.A. No.-000174-000174 - 2026
Justice Aravind Kumar · Justice Prasanna B. Varale

Background

A commercial driver collapsed and died while on duty, and his legal heirs sought compensation under the Employees' Compensation Act from his employer. The Labour Commissioner awarded roughly Rs. 7.36 lakh in compensation plus 12% interest, and separately imposed a further 35% penalty on the employer for failing to pay within the required one-month window. On appeal, the Delhi High Court shifted this entire burden (compensation, interest, and penalty) onto the employer's insurance company, New India Assurance.

Decision Breakdown

The Supreme Court agreed the insurer must pay the compensation and interest (which it had never disputed), but held that the additional 35% penalty is fundamentally different. It punishes the employer's own personal fault in delaying payment without justification, and following its earlier ruling in Ved Prakash Garg v. Premi Devi, such a penalty cannot be passed on to the insurance company. The appeal was allowed to that limited extent, and liability for the penalty amount was restored to the employer alone.

Lesson Learnt

Insurance covers an employer's underlying liability to compensate an injured or deceased worker, but it does not shield the employer from penalties imposed for their own default or delay: those consequences remain personal to the wrongdoer.

Official source (sci.gov.in)View Judgment (PDF)

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