Third-party insurance liability stays within the statutory limit absent enhanced cover, and penal default interest cannot be imposed.

An insurer's third-party liability remains confined to the statutory limit unless the policy contains a specific agreement for enhanced cover supported by additional premium; a comprehensive policy alone does not enlarge that liability. The insurer therefore cannot be fastened with the entire compensation beyond the statutory ceiling in the absence of proof of greater contractual undertaking. The governing provision on interest allows interest on compensation at the awarded rate, but does not permit retrospective enhancement or a penal default rate for non-payment within time. A stipulated higher rate on default is therefore impermissible.

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Issues: (i) Whether the insurer's liability for third-party compensation was confined to the statutory limit of Rs. 50,000 in the absence of any specific agreement or additional premium for enhanced risk. (ii) Whether the Tribunal or the High Court could impose a higher default or penal rate of interest for non-payment within the time fixed.

Issue (i): Whether the insurer's liability for third-party compensation was confined to the statutory limit of Rs. 50,000 in the absence of any specific agreement or additional premium for enhanced risk.

Analysis: The liability of an insurer for third-party risk is governed by the statutory limit unless the policy contains a specific agreement for higher cover supported by payment of additional premium. A comprehensive policy does not, by itself, enlarge third-party liability beyond the statutory ceiling. In the absence of proof of any such enlarged contractual undertaking, the insurer cannot be made liable for the entire compensation awarded.

Conclusion: The insurer's liability was limited to Rs. 50,000, and the award could not fasten the entire compensation on the insurer.

Issue (ii): Whether the Tribunal or the High Court could impose a higher default or penal rate of interest for non-payment within the time fixed.

Analysis: The power to award interest under the governing provision is discretionary and is meant to operate as interest on compensation, not as a penal sanction for delayed compliance. Once interest has been awarded at a particular rate from a particular date, the statute does not authorise retrospective enhancement of that rate upon default. A default stipulation that effectively increases interest for non-payment amounts to an unprovided penalty and cannot be sustained.

Conclusion: The stipulation for higher penal interest on default was impermissible, and only the interest rate already awarded could operate till payment.

Final Conclusion: The insurer succeeded on the question of limited liability and also on the challenge to the penal interest clause, resulting in modification of the compensation liability and deletion of the enhanced default interest condition.

Ratio Decidendi: In the absence of a specific contractual undertaking and additional premium for enhanced third-party cover, an insurer's liability remains confined to the statutory limit, and a tribunal cannot impose a penal enhancement of interest for delayed payment beyond the interest otherwise awarded under the statute.

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