The apex court yesterday while hearing an appeal set aside the high court order as it granted payment of compensation to a doctor who met with a fatal accident in 1997, hence upholding the order of The Motor Accident Claims Tribunal in the case of Sushilaben Gandhi v. New India Assurance.
The Bench comprising of Rohinton Nariman and Ravindra Bhat held that the contract of employment in the present case was a ‘contract for service’ as opposed to a ‘contract of service.’
Highlighting the difference between ‘contract for service’ and ‘contract of service’, the Supreme Court noted,
“Ultimately, the Court can only perform a balancing act weighing all relevant factors which point in one direction as against those which point in the opposite direction to arrive at the correct conclusion on the facts of each case. Given the fact that this balancing process may often not yield a clear result in hybrid situations, the context in which a finding is to be made assumes great importance. Thus, if the context is one of a beneficial legislation being applied to weaker sections of society, the balance tilts in favour of declaring the contract to be one of service…”
The appellants in the present case included the wife of one Dr. Alpesh Gandhi, an Honorary Ophthalmic Surgeon with Rotary Eye Institute, Navsari, who met with a fatal accident on June 9, 1997 while travelling in a bus owned by the medical institute.
As Dr Gandhi had entered into a contract with the institute on May 4, 1996, the appellants had filed a petition for compensation equivalent to Rs. 1 crore for the death of Dr. Gandhi under Section 166 of the Motor Vehicles Act, 1988. The same had been filed against the driver, the institute, and New India Assurance.
New India Assurance Company limited stated that as the deceased was an employee of the hospital and any death or injury arising out of or in the course of his employment could not be included in the insurance the company was not liable in the present case.
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Making the insurance company and the institute jointly liable The Motor Accident Claims Tribunal ordered that a total of Rs. 37,63,000 had to be paid to the family of the deceased. It was further stated that the contract between the Rotary Eye Institute and Dr. Gandhi was a contract for service.
However, the tribunal’s order was challenged before the Gujarat High Court, which ruled in 2018 that the contract was a “contract of service” and hence the insurance company could not be held liable, except to the extent of Rs 50,000.
Finally, the appellants approached the Supreme Court regarding two questions. Firstly, whether the deceased doctor was employed by the medical institute or had only entered into a contract for services as an independent professional. Secondly, whether a limitation of liability provision in favour of the insurance company could kick in.
The court went on to answer the first question by “balancing act” of the factors surrounding the case.
The Bench ruled that the factors which would lead to the present contract being contract for service included:
- The heading of the contract itself states that it is a contract for service,
- Rs 4,000 per month was declared to be honorarium as opposed to salary,
- The arbitration clause which speaks of disputes arising in the course of the tenure of this contract will be referred to the Managing Committee of the Institute, the decision of the Managing Committee being final, is also a clause which is unusual in a pure master-servant relationship
- The appointment was contractual – for 3 years – and extendable only by mutual consent, is another pointer to the fact that the contract is for service, which is tenure based.
Against these, the Court compared these to the factors of “contract of service” and finally ruled that former outweigh the latter which pointed in the opposite direction.
As regards the
second question on liability of the insurance company, the Court noted that the exemption clauses in insurance contracts were to be construed in the case of ambiguity contra proferentum (against the party which proposed or drafted the contract or clause).
The Bench went on to hold,
“The question that arises before us is as to whether the expression “employment” is to be construed widely or narrowly – if widely construed, a person may be said to “employed” by an employer even if he is not a regular employee of the employer. However, the wider meaning that has been canvassed for by the insurance company cannot possibly be given, given the language immediately before, namely, “in the course of”, thereby indicating that the “employment” can only be that of a person regularly employed by the employer.”
