Lesson 9 Employees’ Compensation Act, 1923 129

Lesson 9
Employees’ Compensation Act, 1923

LESSON OUTLINE
LEARNING OBJECTIVES
– Learning Objectives The passing of the Workmen’s Compensation Act
renamed as Employees’ Compensation Act, 1923
– Object and Scope
was the first step towards social security of
– Disablement workmen. It aims at providing financial protection
– Employer's Liability for Compensation in to workmen and their dependants in case of
accidental injury by means of payment of
cases of occupational disease
compensation by the employers.
– Employer's Liability for Compensation In
The Employees’ Compensation Act, 1923
cases of personal injuries
provides for payment of compensation to the
– Employer's liability when Contractor is employees’ and their dependents in the case of
engaged injury by industrial accidents including certain
occupational diseases arising out of and in the
– Compensation
course of employment resulting in death or
– Obligations and Responsibility of Employer disablement.
– Notice and Claim This Act applies to certain railway servants and
– Medical Examination persons employed in hazardous employments
such as factories, mines, plantations
– Procedure in the proceedings before the mechanically propelled vehicles, construction
Commissioner work etc,. The W orkmen's Compensation
– Appeals Act,1923 has been renamed as the Employees’
Compensation Act, 1923. For the words
– Penalties
“workman” and “employee” and “employees”
– Special provisions relating to Masters and have been substituted respectively for making the
Seamen Act gender neutral. The amendment has been
brought about by the Workmen's Compensation
– Special provisions relating to captains and
(Amendment) Act, 2009 came into force on
crew of aircrafts
January 18, 2010.
– Special provisions relating to workmen Therefore, it is essential for the students to be
abroad of companies and motor vehicles familiar with the general principles of employee’s
– Compliances under the Act compensation stipulated under the Act.

– Schedules

Employees’ Compensation Act, 1923 provides for the payment by certain classes of employers to
their employees of compensation for injury by accident.

129
130 EP-IL&GL

OBJECT AND SCOPE

The Employees’ Compensation Act is social security legislation. It imposes statutory liability upon an employer
to discharge his moral obligation towards his employees when they suffer from physical disabilities and diseases
during the course of employment in hazardous working conditions. The Act also seeks to help the dependents
of the employee rendered destitute by the ‘accidents’ and from the hardship arising out from such accidents.
The Act provides for cheaper and quicker mode of disposal of disputes relating to compensation through special
proceedings than possible under the civil law. The Act extends to the whole of India.

DEFINITIONS
Some important definitions are given below:

(i) Dependant
Section 2(1)(d) of the Act defines “dependant” as to mean any of the following relatives of a deceased employee,
namely:
(i) a widow, a minor legitimate or adopted son, an unmarried legitimate or adopted daughter, or a widowed
mother, and
(ii) if wholly dependent on the earnings of the employee at the time of his death, a son or a daughter who
has attained the age of 18 years and who is infirm; and
(iii) if wholly or in part dependent on the earnings of the employee at the time of his death:
(a) a widower,
(b) a parent other than a widowed mother,
(c) a minor illegitimate son, an unmarried illegitimate daughter or a daughter legitimate or illegitimate or
adopted if married and a minor, or if widowed and a minor,
(d) a minor brother or an unmarried sister, or a widowed sister if a minor,
(e) a widowed daughter-in-law,
(f) a minor child of a pre-deceased son,
(g) a minor child of a pre-deceased daughter where no parent of the child is alive or
(h) a paternal grandparent, if no parent of the employee is alive.
Explanation – For the purpose of sub-clause (ii) and items (f) and (g) of sub-clause (iii) references to a son,
daughter or child include an adopted son, daughter or child respectively.

(ii) Employee
The definition of workmen has been replaced by the definition of employee. The term “employee” has been
inserted by the Workmen’s Compensation (Amendment) Act, 2009 under a new clause (dd) in Section 2 of the
Act. Clause (n) defining “workman” has been omitted.
Under Section 2(dd) “employee” has been defined as follows:
“Employee” means a person, who is –
(i) a railway servant as defined in clause (34) of section 2 of the Railways Act, 1989 (24 of 1989), not
permanently employed in any administrative district or sub-divisional office of a railway and not employed
in any such capacity as is specified in Schedule II; or
 Lesson 9 Employees’ Compensation Act, 1923 131

(ii) (a) a master, seaman or other members of the crew of a ship,

(b) a captain or other member of the crew of an aircraft,
(c) a person recruited as driver, helper, mechanic, cleaner or in any other capacity in connection with a
motor vehicle.
(d) a person recruited for work abroad by a company,
and who is employed outside India in any such capacity as is specified in Schedule II and the ship,
aircraft or motor vehicle, or company, as the case may be, is registered in India; or
(iii) employed in any such capacity as is specified in Schedule II, whether the contract of employment was
made before or after the passing of this Act and whether such contract is expressed or implied, oral or
in writing; but does not include any person working in the capacity of a member of the Armed Forces of
the Union; and any reference to any employee who has been” injured shall, where the employee is
dead, include a reference to his dependants or any of them;

(ii) Employer
The following persons are included in the definition of “employer”:

(a) any body of persons incorporated or not;

(b) any managing agent of the employer;

(c) legal representative of a deceased employer. Thus, one who inherits the estate of the deceased, is
made liable for the payment of compensation under the Act. However, he is liable only upto the value of
the estate inherited by him;

(d) any person to whom the services of a employee are temporarily lent or let on hire by a person with
whom the employee has entered into a contract of service or apprenticeship. [Section 2(1)(e)]

A contractor falls within the above definition of the employer. Similarly, a General Manager of a Railway is an
employer (Baijnath Singh v. O.T. Railway, A.I.R. 1960 All 362).

(iii) Seaman
“Seaman” under Section 2(1)(k) means any person forming part of the crew of any ship but does not include the
master of the ship.

(iv) Wages
According to Section 2(1)(m), the term “wages” include any privilege or benefit which is capable of being estimated
in money, other than a travelling allowance or the value of any travelling concession or a contribution paid by the
employer to an employee towards any pension or provident fund or a sum paid to employee to cover any special
expenses entailed on him by the nature of his employment.

Wages include dearness allowance, free accommodation, overtime pay, etc. (Godawari Sugar Mills Ltd. v.
Shakuntala; Chitru Tanti v. TISCO; and Badri Prasad v. Trijugi Sitaram).

The driver of a bus died in an accident. On a claim for compensation made by widow it was held that line
allowance and night out allowance came under the privilege or benefit which is capable of being estimated in
money and can be taken into consideration in computing compensation as part of wages (KSRTC Bangalore v.
Smt. Sundari, 1982 Lab. I.C. 230). The claim of bonus being a right of the workman is a benefit forming part of
wages and the same can be included in wages (LLJ-II 536 Ker.).
132 EP-IL&GL

DISABLEMENT
The Act does not define the word Disablement. It only defines the partial and total disablement. After reading the
partial or total disablement as defined under the Act one may presume that disablement is loss of earning
capacity by an injury which depending upon the nature of injury and percentage of loss of earning capacity will
be partial or total. The Act has classified disablement into two categories, viz. (i) Partial disablement, and (ii)
Total disablement.
(i) Partial disablement
Partial disablement can be classified as temporary partial disablement and permanent partial disablement.
(a) Where the disablement is of a temporary nature: Such disablement as reduces the earning capacity of
an employee in the employment in which he was engaged at the time of the accident resulting in the
disablement; and
(b) Where the disablement is of a permanent nature: Such disablement as reduces for all time his earning
capacity in every employment which he was capable of undertaking at the time. [Section 2(1)(g)] But
every injury specified in Part II of Schedule I shall be deemed to result in permanent partial disablement.
Schedule I contains list of injuries deemed to result in Permanent Total/Partial disablement.
In case of temporary partial disablement, the disablement results in reduction of earning capacity in respect of
only that employment in which he was engaged at the time of accident. This means the employee’s earning
capacity in relation to other employment is not affected. But in case of permanent partial disablement, the
disablement results in reduction in his earning capacity in not only the employment in which he was engaged at
the time of accident but in all other employments.
Whether the disablement is temporary or permanent and whether it results in reduction of earning capacity, the
answer will depend upon the fact of each case, except when the injury is clearly included in Part II of Schedule I.

In the case of Sukhai v. Hukam Chand Jute Mills Ltd., A.I.R. 1957 Cal. 601, it
was observed:
“If a workman suffers as a result of an injury from a physical defect which
does not in fact reduce his capacity to work but at the same time makes his
labour unsaleable in any market reasonably accessible to him, there will be
either total incapacity for work when no work is available to him at all or there
will be a partial incapacity when such defect makes his labour saleable for less than it would otherwise
fetch. The capacity of a workman may remain quite unimpaired, but at the same time his eligibility as
an employee may be diminished or lost if such a result ensure by the reason of the results of an
accident, although the accident has not really reduced the capacity of the workman to work. He can
establish a right to compensation, provided he proves by satisfactory evidence that he has applied to
a reasonable number of likely employers for employment, but had been turned away on account of
the results of the accident visible on his person.”

If after the accident a worker has become disabled, and cannot do a particular job but the employer offers him
another kind of job, the worker is entitled to compensation for partial disablement (General Manager, G.I.P. Rly.
v. Shankar, A.I.R. 1950 Nag. 307).
Deemed to be permanent partial disablement: Part II of Schedule I contains the list of injuries which shall be
deemed to result in permanent partial disablement.
Complete and permanent loss of the use of any limb or member referred to in this Schedule shall be deemed to
be the equivalent to the loss of that limb or member.
 Lesson 9 Employees’ Compensation Act, 1923 133

Note to Schedule I – On the question whether eye is a member or limb as used in the note to Schedule I it was
held that considering the meaning as stated in the Oxford Dictionary as also in the Medical Dictionary, it could be
said that the words limb or member include any organ of a person and in any case it includes the eye (Lipton
(India) Ltd. v. Gokul Chandran Mandal; 1981 Lab. I.C. 1300).
(ii) Total disablement
Total disablement can also be classified as temporary total disablement and permanent total disablement.
“Total disablement” means, such disablement whether of a temporary or permanent nature, which incapacitates
an employee for all work which he was capable of performing at the time of accident resulting in such disablement.
Provided further that permanent total disablement shall be deemed to result from every injury specified in Part I
of Schedule I or similarly total disablement shall result from any combination of injuries specified in Part II of
Schedule I, where the aggregate percentage of loss of earning capacity, as specified in the said Part II against
these injuries amount to one hundred per cent or more. [Section 2(1)(l)]
Some judicial interpretations on the subject are as follows:

The expression incapacitates a workman for all work does not mean capacity
to work or physical incapacity. If due to any physical defect, a workman is
unable to get any work which a workman of his class ordinarily performs, and
has thus lost the power to earn he is entitled to compensation for total
disablement (Ball v. William Hunt & Sons Ltd., 1912 A.C. 496). It is immaterial
that the workman is physically fit to perform some work. Thus, where a
workman, though physically capable of doing the work cannot get employment
in spite of his best efforts, he becomes incapacitated for all work and hence entitled to compensation
for total disablement.
Loss of physical capacity is co-extensive with loss of earning capacity but loss of earning is not so
co-extensive with loss of physical capacity as he may be getting the same wages even though there
may be loss of physical capacity. In a case permanent partial disability caused to a workman in
accident while working on ship, e.g. getting pain in his left hand and experiencing difficulty in lifting
weights, it was held that workman can be said to have lost his earning capacity even though getting
same amount of wages as before Mangru Palji v. Robinsons, 1978 Lab. I.C. 1567 (Bom.). Where it is
not a scheduled injury the loss of earning capacity must be proved by evidence.

Where the worker lost his vision of one eye permanently in an accident in course of his employment in colliery,
the compensation should be assessed in accordance with item 26 Part II in Schedule I(Katras Jherriah Coal Co.
Ltd. v. Kamakhya Paul, 1976 Lab.I.C.751).
In an injury the workman, had amputated his left arm from elbow, who was a carpenter. It was held by the
Supreme Court in Pratap Narain Singh Deo v. Sriniwas Sabata,1976 ILab.L.J.235, that it is a total disablement
as the carpenter cannot carry his work with one hand and not a partial permanent disablement.

Where the workman, a driver of bus belonging to the employer was involved
in an accident which resulted in an impairment of the free movement of his left
hand disabling him from driving vehicles, it was held that this is not one of the
injuries mentioned in the 1st Schedule which are accepted to result in
permanent total disablement. In the present case the workman was also capable
of performing duties and executing works other than driving vehicles. Nature
of injury to be determined not on the basis of the work he was doing at the
time of accident (Divisional Manager KSRTC v. Bhimaiah, 1977 II L.L.J. 521).
134 EP-IL&GL

Test your knowledge

Which of the following types of injuries are listed in Part II of Schedule I?
(a) Permanent total disablement
(b) Temporary disablement
(c) Permanent partial disablement
(d) Temporary partial disablement
Correct answer: (a) and (c)

EMPLOYER’S LIABILITY FOR COMPENSATION

Section 3 of the Act provides for employers liability for compensation in case of occupational disease or personal
injuries and prescribes the manner in which his liability can be ascertained.
(a) In cases of occupational disease
(i) Where an employee employed in any employment specified in Part A of Schedule III contracts any
disease specified therein, as an occupational disease, peculiar to that employment, the contracting of
disease shall be deemed to be an injury by accident arising out of and in the course of employment.
(ii) Where the employee employed in any employment specified in Part B of Schedule III, for a continuous
period of not less than six months under the same employer, and whilst in the service contracts any
disease specified in the Part B of Schedule III, the contracting of disease shall be deemed to be an
injury by accident arising out of and in the course of employment. The employer shall be liable even
when the disease was contracted after the employee ceased to be in the service of the employer, if such
disease arose out of the employment.
(iii) If an employee whilst in service of one or more employers (not necessarily the same employer) in any
employment specified in Part C of Schedule III for such continuous period as the Central Government
may specify, contracts any disease, even after he ceased to be in the service of any employer and
disease arose out of such employment, specified in the Schedule, the contracting of disease shall be
deemed to be an injury by accident arising out of and in the course of employment.
However, where the employment was under more than one employer, all such employers shall be liable
for the payment of the compensation in such proportion as the Commissioner may in circumstances
deem just. [Section 3(2A)]
(iv) If it is proved:
(a) that the employee whilst in the service of one or more employers in any employment specified in
Part C of Schedule III has contracted a disease specified therein as an occupational disease peculiar
to that employment during a continuous period which is less than the period specified under this
sub-section for that employment, and
(b) that the disease has arisen out of and in the course of the employment;
the contracting of such disease shall be deemed to be an injury by accident within the meaning of this
section.
(v) The Central Government or the State Government after giving, by notification in the Official Gazette, not
less than three months notice of its intention so to do, may, by a like notification, add any description of
employment to the employments specified in Schedule III, and shall specify in the case of employments
 Lesson 9 Employees’ Compensation Act, 1923 135

so added the diseases which shall be deemed for the purposes of this section to be occupational
diseases peculiar to those employments respectively, and thereupon the provisions of Sub-section (2)
shall apply in the case of a notification by the Central Government, within the territories to which this Act
extends or, in case of a notification by the State Government, within the State as if such diseases had
been declared by this Act to be occupational diseases peculiar to those employments.
(vi) Except as mentioned above no compensation shall be payable to an employee in respect of any disease
unless the disease is directly attributable to a specific injury by accident arising out of and in the course
of his employment.
(b) In case of personal injury
As regards personal injury, the employer becomes liable if the injury is caused to an employee by accident
arising out of and in the course of his employment.
(i) Personal injury
There must be personal injury caused to an employee.
Normally, Injury implies physical or bodily injury caused by an accident. However, such personal injury will also
include nervous shock or break-down or mental strain. In the case of Indian News Chronicle v. Mrs. Lazarus,
A.I.R. 1961, Punj. 102, an electrician who had to go frequently to a heating room from a cooling plant, contracted
pneumonia which resulted in his death. It was held that the injury caused by an accident is not confined to
physical injury and the injury in the instant case was due to his working and going from a heating room to a
cooling plant as it was his indispensable duty.
(ii) Accident
The personal injury must be caused by an “accident”.
The term “accident” has not been defined in the Act but its meaning has been sufficiently explained in number of
decided cases.
The expression accident must be construed to its popular sense. It has been defined as a mishap or an untoward
event which is not expected or designed. What the Act intends to cover is what might be expressed as an
accidental injury.

In the case of Smt. Sunderbai v. The General Manager, Ordinance Factory

Khamaria, Jabalpur, 1976 Lac. I.C. 1163 (MP), the Madhya Pradesh High Court
has clarified the difference between accident and injury. Accident means an
untoward mishap which is not expected or designed by workman, ‘Injury’ means
physiological injury. Accident and injury are distinct in cases where accident is
an event happening externally to a man, e.g., where a workman falls from the
ladder and suffers injuries. But accident may be an event happening internally
to a man and in such cases accident and injury coincide. Such cases are illustrated by failure of heart
and the like, while the workman is doing his normal work. Physiological injury suffered by a workman
mainly due to the progress of disease unconnected with employment may amount to an injury arising
out of and in the course of employment if the work, that the workman was doing at the time of the
occurrence of the injury contributed to its occurrence. The connection between employment must be
furnished by ordinary strain of ordinary work if the strain did in fact contribute to accelerate or hasten
the injury. The burden of proof is on applicant to prove the connection of employment and injury.
136 EP-IL&GL

(iii) Arising out of employment and in the course of employment

To make the employer liable, it is necessary that the injury is caused by an accident which must be raised out of
and in the course of employment.
Arising out of employment
The expression “arising out of employment” suggests some causal connection between the employment and
the accidental injury. The cause contemplated is the proximate cause and not any remote cause. Thus, where a
workman suffers from heart disease and dies on account of strain of work by keeping continuously standing or
working, held that the accident arose out of employment (Laxmibai Atma Ram v. Bombay Port Trust, AIR 1954
Bom.180). Generally if an employee is suffering from a particular disease and as a result of wear and tear of his
employment he dies of that disease, employer is not liable. But if the employment is contributory cause or has
accelerated the death that the death was due to disease coupled with the employment, then the employer would
be liable as arising out of the employment.

In the case of Mackenzie v. I.M. Issak, it was observed that the words arising
out of employment means that injury has resulted from risk incidental to the
duties of the service which unless engaged in the duty owing to the master, it
is reasonable to believe that the workman would not otherwise have suffered.
There must be a casual relationship between the accident and the employment.
If the accident had occurred on account of a risk which is an incident of the
employment, the claim for compensation must succeed unless of course the workman has exposed
himself to do an added peril by his own imprudence.
The Supreme Court in Mackinnon Mackenzie and Co. (P.) Ltd. v. Ibrahim Mohammed Issak, AIR 1970
S.C. 1906 approving the observation of Lord Summer made in Lancashire and Yorkshire Railway Co.
v. Highley, 1917 A.C. 352, observed that the test is: was it part of the injured persons employment to
hazard, to suffer or to do that which caused his injury? If yes, the accident arose out of his employment,
if not it did not.

Test your knowledge

Which of the following injuries come under the definition of the term ‘personal
injury’?
(a) Nervous shock
(b) Mental strain
(c) Loss of money
(d) Breakdown
Correct answer: (a), (b) and (d)

Arising in the course of employment

The expression “in the course of employment” suggests the period of employment and the place of work. In
other words, the workman, at the time of accident must have been employed in the performance of his duties
and the accident took place at or about the place where he was performing his duties.
The expression “employment” is wider than the actual work or duty which the employee has to do. It is enough
if at the time of the accident the employee was in actual employment although he may not be actually turning out
 Lesson 9 Employees’ Compensation Act, 1923 137

the work. Even when the employee is resting, or having food, or taking his tea or coffee, proceeding from the
place of employment to his residence, and accident occurs, the accident is regarded as arising out of and in the
course of employment.
Employment – The word “employment” has a wider meaning than work. A man may be in course of his employment
not only when he is actually engaged in doing something in the discharge of his duty but also when he is
engaged in acts belonging to and arising out of it (Union of India v. Mrs. Noorjahan, 1979 Lab. I.C. 652).
For the expression “accident arising out of and in the course of employment” the basic and undispensable
ingredient is unexpectedness. The second ingredient is that the injury must be traceable within reasonable
limits, to a definite time, place or occasion or cause. The Act should be broadly and liberally constructed in order
to effectuate the real intention and purpose of the Act.
(iv) Theory of notional extension of employment
To make the employer liable it is necessary that the injury caused by an accident must have arisen in the course of
employment. It means that the accident must take place at a time and place when he was doing his master’s job.
It is well settled that the concept of “duty” is not limited to the period of time the workman actually commenced
his work and the time he downs his tools. It extends further in point of time as well as place. But there must be
nexus between the time and place of the accident and the employment. If the presence of the workman concerned
at the particular point was so related to the employment as to lead to the conclusion that he was acting within the
scope of employment that would be sufficient to deem the accident as having occurred in the course of employment
(Weaver v. Tradegar Iron and Coal Co. Ltd., (1940) 3 All, ER 15).
It is known as doctrine of notional extension of employment; whether employment extends to the extent of
accident depends upon each individual case.
A workman while returning home after duty was murdered within the premises of the employer. It was held that
there was casual and proximate connection between the accident and the employment. Since the workman was
on spot only for his employment and his wife is entitled for compensation (Naima Bibi v. Lodhne Colliery (1920)
Ltd., 1977 Lab. I.C. NOC 14). If an employee in the course of his employment has to be in a particular place by
reason where he has to face a peril which causes the accident then the casual connection is established
between the accident and the employment (TNCS Corporation v. Poonamalai, 1994 II LLN 950).
(v) When employer is not liable
In the following cases, the employer shall not be liable:
(i) When the injury does not result in disablement for a period exceeding 3 days.
(ii) When the injury not resulting in death or permanent total disability is due to any of the following reasons:
(a) the employee was at the time of accident, under the influence of drink or drugs, or
(b) the employee wilfully disobeyed an order expressly given or a rule expressly framed for the purpose
of securing safety of workers, or
(c) the employee, wilfully disregards or removes any safety guards or safety devices which he knew to
have been provided for the safety of the employee.
Thus, where a employee dies due to an accident arising out of and in the course of employment, it cannot be
pleaded that death was due to any of the reasons stated from (a) to (c)(R.B. Moondra & Co. v. Mst. Bhanwari,
AIR, 1970 Raj. 111).
(c) Suit for damages in a Court barred
Under Section 3(5), an employee is not entitled to any compensation under the Workmen’s Compensation Act,
138 EP-IL&GL

1923, if he has instituted, in a Civil Court, a suit for damages against the employer or any other person.
Similarly, an employee is prohibited from instituting a suit for damages in any court of law, (a) if he has instituted
a claim to compensation in respect of the injury before a Commissioner; or (b) if the employee and the employer
have entered into an agreement for the payment of compensation in accordance with the provisions of this Act.

EMPLOYER’S LIABILITY WHEN CONTRACTOR IS ENGAGED

Section 12 of the Act envisages the employer’s liability to pay compensation to a contractor.
(i) Sometimes, employer may engage a contractor instead of employing his own employee for the purpose of doing
any work in respect of his trade or business. Such a contractor then executes the work with the help of the employee
engaged by him. If any injury is caused by an accident to any of these employees, the employer cannot be held liable
because they are not employed by him and hence are not his employees. But now Section 12(1) makes the employer
liable for compensation to such employees hired by the contractor under following circumstances:
(a) The contractor is engaged to do a work which is part of the trade or business of the employer (called
principal).
(b) The employee were engaged in the course of or for the purpose of his trade or business.
(c) The accident occurred in or about the premises on which the principal employer has undertaken or
undertakes to execute the work concerned.
The amount of compensation shall be calculated with reference to the wages of the employee under the employer
by whom he is immediately employed.
(ii) According to Section 12(2), where the principal is liable to pay compensation under this section, he shall be
entitled to be indemnified by the contractor or any other person from whom the employee could have recovered
compensation and where a contractor who is himself a principal is liable to pay compensation or to indemnify a
principal under this section, he shall be entitled to be indemnified by any person standing to him in relation of a
contractor from whom the employee could have recovered compensation and all questions as the right to and
the amount of any such indemnity shall, in default of agreement, be settled by the Commissioner.
(iii) The above provision, however, does not prevent an employee from recovering compensation from the
contractor instead of the employer, i.e., the Principal. [Section 12(3)]
(iv) This section shall not apply in any case where the accident occurred elsewhere than on, in or about the
premises on which the principal has undertaken, or usually undertakes, as the case may be to execute the work
or which are otherwise under his control or management. [Section 12(4)]
Following illustrative cases will further clarify the law did laid down in Section 12:
(a) A Municipal Board entrusted the electrification work of the town to State employees. A employee received
injuries while performing his work. Held, it is the State and not the Board, liable to pay compensation
because execution of electrical project is not the ordinary business of the Municipal Board (A.I.R. 1960
All 408).
(b) A contractor was entrusted with the repairs of a defective chimney. A employee engaged by him was
injured while carrying out repairs. Held, mill was not liable for compensation as the repairing of chimney
is not the part of companys trade or business, whether ordinarily or extraordinarily.
(c) A cartman was engaged by a Rice Mill to carry rice bags from mill to railway station. The cartman met
with an accident on a public road while returning back from railway station and this resulted in his death.
There was no evidence to show that employee was engaged through a contractor. In a suit for
compensation against the mill owner, it was observed that Section 12 is not applicable where the accident
arise out of and in the course of employment. Even assuming that the deceased was in the employment
 Lesson 9 Employees’ Compensation Act, 1923 139

of contractor engaged by the employer, the liability of the owner was clear from Section 12(1) and it had
not been excluded by reason of Section 12(4).

COMPENSATION
(i) Meaning of compensation
“Compensation” has been defined under Section 2(1)(c) of the Act to mean compensation as provided for by
this Act. The meaning of the term will be more clear in the following paragraphs.
(ii) Amount of compensation
Amount of compensation is payable in the event of an employee meeting with an accident resulting into temporary
or permanent disability or disease as stated in Schedule II and III in terms of Section 4 of the Act, read with
Schedule IV.
Schedule II contains a list of persons engaged in different employments/ operations specified therein who are
covered by the definition of employee and entitled to compensation e.g. a person employed for loading/unloading
of materials in a factory or ship, persons employed in work incidental or connected with manufacturing process.
Schedule III contains a list of occupational diseases which if contracted while in employment entitles a employee
to compensation such as disease caused by lead, mercury, etc. Schedule IV lays down the relevant factor (a
certain figure) related to the age of the employee at the time of death, injury or accident by which wages are
multiplied to arrive at compensation.
(iii) Compensation to be paid when due and penalty for default
Time of payment of compensation: Section 4A of the Act provides that compensation under Section 4 shall be
paid as soon as it falls due. Compensation becomes due on the date of death of employee and not when
Commissioner decides it (Smt. Jayamma v. Executive Engineer, P.W.D. Madhugiri Division, 1982 Lab. I.C.
Noc 61).
The employer is required to deposit or to make provisional payment based on the extent of liability which he
accepts with the Commissioner or hand over to the employee as the case may be even if the employer does not
admit the liability for compensation to the extent claimed.
Where an employer is in default in paying compensation, he would be liable to pay interest thereon and also a
further sum not exceeding fifty percent of such amount of compensation as penalty. The interest and the penalty
stated above is to be paid to the employee or his dependent as the case may be.
(iv) Method of calculating wages
Monthly wages mean the amount of wages deemed to be payable for a months service and calculated as follows:
(a) Where the employee has, during a continuous period of not less than 12 months immediately preceding
the accident, been in the service of the employer who is liable to pay compensation, the monthly wages
of the employee shall be 1/12th of the total wages which have fallen due for payment to him by the
employer in the last 12 months of that period.
(b) Where the whole of the continuous period of service was less than one month, the monthly wages of the
employee shall be the average monthly amount which during the 12 months immediately preceding the
accident was being earned by an employee employed on the same work by the same employer, or, if
there was no employee so employed, by an employee employed on similar work in the same locality.
(c) In other cases, including cases in which it is not possible to calculate the monthly wages under clause
(b), the monthly wages shall be 30 times the total wages earned in respect of the last continuous period
of service, immediately preceding the accident from the employer who is liable to pay compensation,
divided by the number of days comprising such period. (Section 5)
140 EP-IL&GL

A period of service shall be deemed to be continuous which has not been interrupted by a period of absence
from work exceeding 14 days.
(v) Review of half-monthly payment
Section 6 of the Act provides that any half-monthly payment payable under this Act, either under an agreement
between the parties or under the order of a Commissioner may be reviewed by the Commissioner on the
application either of the employer or of the employee accompanied by the certificate of a qualified medical
practitioner that there has been a change in the condition of the employee or subject to rules made under this
Act, an application made without such certificate.
Any half monthly payment, may on review, under the above provisions be continued, increased, decreased or
ended, or if the accident is found to have resulted in permanent disablement, be converted to the lump sum to
which the employee is entitled less any amount which he has already received by way of half-monthly payments.
(vi) Commutation of half monthly payments
Section 7 of the Act provides that any right to receive half-monthly payments may, by agreement between the
parties or if the parties cannot agree and the payments have been continued for not less than 6 months on the
application of either party to the Commissioner, be redeemed by the payment of a lump sum of such amount as
may be agreed to by the parties or determined by the Commissioner as the case may be.
(vii) Distribution of compensation
No compensation has to be paid in respect of an employee whose injury has resulted in death and no payment of
lump sum compensation to a woman or a person under a legal disability except by deposit with the Commissioner.
The employer cannot make payment of compensation directly to the deceased legal heirs. It is the Commissioner
who decides on the distribution of compensation to the legal heirs of the deceased employee. (Section 8)
Right to claim compensation passes to heirs of dependant as there is no provision under the Act to this effect
(AIR 1937 Cal. 496). Payment of ex-gratia or employment on compassionate grounds will not be employers’
liability (LAB IC 1998 JK 767).
(viii) Compensation not to be assigned etc.
Save as provided by this Act, no lump sum or half-monthly payment payable under this Act can be assigned, or
charged or attached or passed to any person other than the employee by operation of law nor can any claim be
set-off against the same. (Section 9)
(ix) Compensation to be first charge
The compensation money shall bear the first charge on the assets transferred by the employer. It says that
where an employer transfers his assets before any amount due in respect of any compensation, the liability
whereof accrued before the date of transfer has been paid, such amount shall, notwithstanding any thing contained
in any other law for the time being in force, be a first charge on that part of the assets so transferred as consists
of immovable property. (Section 14A)
(x) Insolvency of employer and the compensation
Following provisions under Section 14 of the Act have been made in this respect:
(i) Where any employer has entered into a contract with any insurers in respect of any liability under this
Act to any employee, then in the event of the employer becoming insolvent or making a composition or
scheme of arrangement with his creditors or, if the employer is a company, in the event of the company
having commenced to be wound up, the rights of the employer against the insurers as respects that
liability shall, notwithstanding anything in any law for the time being in force relating to insolvency or the
winding up of companies, be transferred to and vest in the employee, and upon any such transfer the
insurers shall have the same rights and remedies and be subject to the same liabilities as if they were
 Lesson 9 Employees’ Compensation Act, 1923 141

the employer, so, however, that the insurers shall not be under any greater liability to the employee than
they would have been under the employer.
(ii) If the liability of the insures to the employee is less than the liability of the employer to the employee, the
employee may prove for the balance in the insolvency proceedings or liquidation.
(iii) Where in any case such as is referred to in sub-section (1) the contract of the employer with the insurers
is void or voidable by reason of non-compliance on the part of the employer with any terms or conditions
of the contract (other than a stipulation for the payment of premia), the provisions of that sub-section
shall apply as if the contract were not void or voidable, and the insurers shall be entitled to prove in the
insolvency proceedings or liquidation for the amount paid to the employee.
But the employee is required to give notice of accident and resulting disablement therefrom to the
insurers as soon as possible after he becomes aware of the insolvency or liquidation proceedings
otherwise the above provisions shall not be applied.
(iv) There shall be deemed to be included among the debts which under Section 49 of the Presidency
Towns Insolvency Act, 1909, or under Section 61 of the Provincial Insolvency Act, 1920 or under Section
530 of the Companies Act, 1956, are in the distribution of property of an insolvent or in the distribution of
the assets of a company being wound up to be paid in priority to all other debts, the amount due in
respect of any compensation the liability wherefor accrued before the date of the order of adjudication of
the insolvent or the date of the commencement of the winding up, as the case may be, and those Acts
shall have effect accordingly.
(v) Where the compensation is half-monthly payment, the amount due in respect thereof shall, for the
purposes of this Section, be taken to be the amount of the lump sum for which the half-monthly, payment
could, if redeemable be redeemed if application were made for that purpose under Section 7, and a
certificate of the Commissioner as to the amount of such sum shall be conclusive proof thereof.
(vi) The provisions of sub-section (iv) shall apply in the case of any amount for which an insurer is entitled to
prove under sub-section (iii) but otherwise those provisions shall not apply where the insolvent or the
company being wound up has entered into such a contract with insurers as if referred to in sub-section (i).
(vii) This Section shall not apply where a company is wound up voluntarily merely for purpose of reconstruction
or of amalgamation with another company.
(xi) Contracting out of compensation
Section 17 provides that any contract or agreement whereby an employee relinquishes any right of
compensation from the employer for personal injury arising out of or in the course of the employment shall be
null and void in so far as it purports to remove or reduce the liability of any person to pay compensation under
this Act. (Section 17)

Duty of employer to inform employee of his rights

Every employer shall immediately at the time of employment of an employee, inform the employee of his rights
to compensation under this Act, in writing as well as through electronic means, in English or Hindi or in the
official language of the area of employment, as may be understood by the employee.

OBLIGATIONS AND RESPONSIBILITY OF AN EMPLOYER

(i) Power of Commissioner to require from employers statements regarding fatal accidents
(a) Where a Commissioner receives information from any source that an employee has died as a result of an
accident arising out of and in the course of his employment, he may send by registered post a notice to the
employee’s employer requiring him to submit, within thirty days of the service of the notice, a statement, in the
prescribed form giving the circumstances attending the death of the employee, and indicating whether, in the
142 EP-IL&GL

opinion of the employer, he is or is not liable to deposit compensation on account of the death.
(b) If the employer is of opinion that he is liable to deposit compensation, he shall make the deposit within thirty
days of the service of the notice.
(c) If the employer is of opinion that he is not liable to deposit compensation, he shall in his statement indicate
the grounds on which he disclaims liability.
(d) Where the employer has so disclaimed liability, the Commissioner, after such inquiry as he may think fit, may
inform any of the dependents of the deceased employee, that it is open to the dependents to prefer a claim for
compensation and may give them such other further information as he may think fit. (Section 10A)
(ii) To submit reports of fatal accidents and serious bodily injuries
(i) Where by any law for the time being in force, notice is required to be given to any authority, by or on behalf of
an employer, of any accident occurring in his premises which results in death or serious bodily injury, the person
required to give the notice shall, within seven days of the death or serious bodily injury, send a report to the
Commissioner giving the circumstances attending the death or serious bodily injury in the prescribed form
(Form EE of the Workmen’s Compensation Rules: Rule 17).
“Serious bodily injury” means an injury which involves, or in all probability will involve, the permanent loss of the
use of, or permanent injury to, any limb, or the permanent loss of or injury to the sight or hearing, or the fracture
of any limb, or the enforced absence of the injured person from work for a period exceeding twenty days. [Expl.
to Section 10B(1)]
(ii) The State Government may, by notification in the Official Gazette, extend the provisions of sub-section (i) to
any class of premises other than those coming within the scope of that sub-section, and may, by such notification,
specify the persons who shall send the report to the Commissioner.
(iii) Nothing in this section shall apply to the factories to which the Employees’ State Insurance Act, 1948,
applies. (Section 10B)

NOTICE AND CLAIM

(a) No claim for compensation shall be entertained by a Commissioner unless the notice of the accident has
been given in the manner hereinafter provided as soon as practicable after the happening thereof and unless
the claim is preferred before him within two years of the occurrence of the accident or, in case of death, within
two years from the date of death. (Section 10)
Provided that:
(i) where the accident is the contracting of a disease the accident shall be deemed to have occurred on the
first of the days during which the employee was continuously absent from work in consequence of the
disablement caused by the disease;
(ii) in case of partial disablement due to the contracting of any such disease and which does not force the
employee to absent himself from work, the period of two years shall be counted from the day the
employee gives notice of the disablement to his employer;
(iii) if an employee who, having been employed in an employment for a continuous period specified under
sub-section 3(2) in respect of that employment ceases to be so employed and develops symptoms of
an occupational disease peculiar to that employment within two years of the cessation of employment,
the accident shall be deemed to have occurred on the day on which the symptoms were first detected.
(iv) The want of or any defect or irregularity in a notice shall not be a bar to the entertainment of a claim:
(a) if the claim is preferred in respect of the death of an employee resulting from an accident which
 Lesson 9 Employees’ Compensation Act, 1923 143

occurred in the premises of the employer, or at any place where the employee at the time of the
accident was working under the control of the employer or of any person employed by him, and the
employee died on such premises, or at such place, or on any premises belonging to the employer,
or died without having left the vicinity of the premises or place where the accident occurred, or
(b) if the employer or any one of several employers or any persons responsible to the employer for the
management of any branch of the trade or business in which the injured employee was employed
had knowledge of the accident from any other source at or about the time when it occurred.
(v) The Commissioner may entertain and decide any claim to compensation in any case notwithstanding
that the notice has not been given, or the claim has not been preferred, in due time as provided in this
sub-section, if he is satisfied that the failure to give the notice or prefer the claim, as the case may be,
was due to sufficient cause.
(b) Every such notice shall give the name and address of the person injured and shall state in ordinary language
the cause of the injury and the date on which the accident happened, and shall be served on the employer or
upon any one of several employers, or upon any person responsible to the employer for the management of any
branch of the trade or business in which the injured employee was employed.
(c) The State Government may require that any prescribed class of employers shall maintain at their premises at
which employees are employed a notice-book, in the prescribed form, which shall be readily accessible at all
reasonable times to any injured employee employed on the premises and to any person acting bona fide on his
behalf.
(d) A notice under this section may be served by delivering it at, or sending it by registered post addressed to the
residence or any office or place of business of the person on whom it is to be served or, where a notice-book is
maintained, by entry in the notice-book.
The Commissioner can initiate suo motu proceedings and can waive the period of limitation under this Section
(1997-II-LLJ 292 All.).

Test your knowledge

Choose the correct answer:
What is the period within which an employer must make a deposit with the
Commissioner if he is liable to pay compensation?
(a) Within 10 days of being served the notice
(b) Within 20 days of being served the notice
(c) Within 30 days of being served the notice
(d) Within 40 days of being served the notice
Correct answer: (c)

MEDICAL EXAMINATION
According to Section 11 of the Act:
(i) Where an employee has given notice of an accident, he shall, if the employer, before the expiry of 3 days from
the time at which service of the notice has been effected, offers to have him examined free of charge by a
qualified medical practitioner, submit himself for such examination, and any employee who is in receipt of half-
monthly payment under this Act shall, if so required, submit himself for such examination from time to time as
per the rules under the Act.
144 EP-IL&GL

(ii) If an employee refuses to submit himself for examination by a qualified medical practitioner or in any way
obstructs the same, his right to compensation shall be suspended during the continuance of such refusal, or
obstruction unless, in the case of refusal, he was prevented by any sufficient cause from so submitting himself.
(iii) If an employee, voluntarily leaves without having been so examined the vicinity of the place in which he was
employed, his right to compensation shall be suspended until he returns and officers himself for such examination.
(iv) Where an employee, whose right to compensation has been suspended under sub-section (ii) or sub-
section (iii), dies without having submitted himself for medical examination as required by either of those sub-
sections, the Commissioner may, if he thinks fit, direct the payment of compensation to the dependants of the
deceased employee.
(v) Where under sub-section (ii) or sub-section (iii) a right to compensation is suspended, no compensation shall
be payable in respect of the period of suspension, and, if the period of suspension commences before the expiry
of the waiting period referred to in clause (d) of sub-section (i) of Section 4, the waiting period shall be increased
by the period during which the suspension continues.
(vi) Where an injured employee has refused to be attended by a qualified medical practitioner whose services
have been offered to him by the employer free of charge or having accepted such offer has deliberately disregarded
the instructions of such medical practitioner, then, if it is proved that the employee has not thereafter been
regularly attended by a qualified medical practitioner or having been so attended had deliberately failed to follow
his instructions and that such refusal, disregard or failure was unreasonable in the circumstances of the case
and that the injury has been aggravated thereby, the injury and resulting disablement shall be deemed to be of
the same nature and duration as they might reasonably have been expected to be if the employee had been
regularly attended by a qualified medical practitioner, whose instructions he had followed, and compensation, if
any, shall be payable accordingly.
The Allahabad High Court in Burhwal Sugar Mills Ltd. v. Ramjan, observed that Section 11 confers a right and
not an obligation on employer to have workmen medically examined. If he does not do so it will not debar
employer from challenging medical certificate produced by employee. The court held that where the award of
compensation was passed on basis of medical certificate without examination of doctor on oath, the award was
liable to be quashed since there was no evidence on oath on which compensation could be awarded.

PROCEDURE IN THE PROCEEDINGS BEFORE THE COMMISSIONER

(i) Appointment of Commissioners
Section 20 as amended by the Workmen’s Compensation (Amendment) Act, 2009 provides that the State
Government may, by notification in the Official Gazette, appoint any person who is or has been a member of a
State Judicial Service for a period of not less than five years or is or has been for not less than five years an
advocate or a pleader or is or has been a Gazetted Officer for not less than five years having educational
qualifications and experience in personal management, human resource development and industrial relations
to be a Commissioner for Employee’s Compensation for such area as may be specified in the notification.
Where more than one Commissioner has been appointed for any area, the Government may by general or
special order regulate the distribution of business between them.
Every Commissioner shall be deemed to be a public servant within the meaning of the Indian Penal Code.
Section 20(3) empowers the Commissioner to appoint or choose any person, possessing special knowledge of
any matter relevant to the matter under inquiry, to assist him in holding the inquiry.
(ii) Reference to Commissioner and his jurisdiction
Section 19(1) lays down jurisdiction of a Commissioner to entertain a claim in respect of payment of compensation
to an employee. The Commissioner is empowered in default of an agreement to settle any question which may
arise in any proceeding under this Act as to the liability of any person to pay compensation, and in particular, the
 Lesson 9 Employees’ Compensation Act, 1923 145

Commissioner has jurisdiction over following matters:

(a) Liability of any person to pay compensation.
(b) Whether a person injured is or is not an employee?
(c) The nature and extent of disablement.
(d) The amount or duration of compensation.
If an application is made under the Employee’s Compensation Act to the Commissioner, he has, by virtue of
Section 19(1) of the Act, jurisdiction to decide any question as to the liability of any person including an insurer
to pay compensation. Section 19(2) further provides that the enforcement of that liability can only be made by
him. The Commissioner’s jurisdiction is wide enough to decide the tenability of the objections; the consequential
direction of the Commissioner to the insurer to pay is also covered under Section 19(1). In any event in execution
of the order against the insured, namely, the employer, the Commissioner can enforce his liability against the
insurer under Section 31. In the light of Section 19 read along with Section 31, the order of the Commissioner
can never be challenged as being without jurisdiction (United India Fire & General Insurance Co. Ltd. v. Kamalalshi,
(1980) 2 LLJ 408).
(iii) Jurisdiction of Civil Court barred
No Civil Court shall have jurisdiction to settle, decide or deal with any question which is by or under this Act
required to be settled, decided or dealt with by a Commissioner or to enforce any liability incurred under this Act.
[Section 19(2)] However, where the Commissioner has no jurisdiction to decide any matter and even fails to
decide when raised, thereby leaving a party without any defence the Civil Court will have jurisdiction to entertain
such suits (Madina Saheb v. Province of Madras, AIR1946 Mad. 113).
(iv) Venue of proceedings and transfer
Section 21 dealing with venue of proceedings and transfer of cases under the Act provides that:
(1) Where any matter under this Act is to be done by or before a Commissioner, the same shall, subject to the
provisions of this Act and to any rules made hereunder, be done by or before the Commissioner for the area in
which:
(a) the accident took place which resulted in the injury; or
(b) the employee or in case of his death, the dependent claiming the compensation ordinarily resides; or
(c) the employer has his registered office:
Provided that no matter shall be processed before or by a Commissioner, other than the Commissioner having
jurisdiction over the area in which the accident took place, without his giving notice in the manner prescribed by
the Central Government to the Commissioner having jurisdiction over the area and the State Government
concerned:
Provided further that, where the employee, being the master of a ship or a seaman or the captain or a member
of the crew of an aircraft or an employee in a motor vehicle or a company, meets with the accident outside India
any such matter may be done by or before a Commissioner for the area in which the owner of agent of the ship,
aircraft or motor vehicle resides or carries on business or the registered office of the company is situate, as the
case may be.
(1A) If a Commissioner, other than the Commissioner with whom any money has been deposited under
Section 8, proceeds with a matter under this Act, the former may for the proper disposal of the matter call for
transfer of any records or money remaining with the latter and on receipt of such a request, he shall comply
with the same.
146 EP-IL&GL

(2) If a Commissioner is satisfied that any matter arising out of any proceedings pending before him can be more
conveniently dealt with by any other Commissioner, whether in the same State or not, he may, subject to rules
made under this Act, order such matter to be transferred to such other Commissioner either for report or for
disposal, and, if he does so, shall forthwith transmit to such other Commissioner all documents relevant for the
decision of such matter and, where the matter is transferred for disposal, shall also transmit in the prescribed
manner any money remaining in his hands or invested by him for the benefit of any party to the proceedings:
Provided that the Commissioner shall not, where any party to the proceedings has appeared before him, make
any order of transfer relating to the distribution among dependants of a lump sum without giving such party an
opportunity of being heard.
(3) The Commissioner to whom any matter is so transferred shall, subject to rules made under this Act, inquire
thereto and, if the matter was transferred for report, return his report thereon or, if the matter was transferred for
disposal, continue the proceedings as if they had originally commenced before him.
(4) On receipt of a report from a Commissioner to whom any matter has been transferred for report under Sub-
section (2), the Commissioner by whom it was referred shall decide the matter referred in conformity with such
report.
(5) The State Government may transfer any matter from any Commissioner appointed by it to any other
Commissioner appointed by it.
The section deals with territorial jurisdiction of Commissioner under the Act. Further, for the first time the procedure
for deciding case under the Act regarding accident having place outside India [second proviso to Sub-section (1)
of Section 21] has been provided for. This is further clear from the fact that a Commissioner can transfer the
matter to another Commissioner under Section 21(2) of the Act under specified circumstances.

Test your knowledge

Which of the following matters are under the jurisdiction of the Commissioner?
(a) Liability of any person to pay compensation
(b) Appointment of a substitute employee
(c) The nature and extent of disablement
(d) The amount or duration of compensation
Correct answer: (a), (c) and (d)

(v) Form of application

All claims for compensation subject to the provision of the Act shall be made to the Commissioner. But such
applications other than the applications made by dependant or dependants can only be submitted when the
parties have failed to settle the matter by agreement.

An Application to a Commissioner may be made in such form and shall be accompanied by such fee, if any, as
may be prescribed and shall contain, in addition to any particulars which may be prescribed, the following
particulars namely:

(a) a concise statement of the circumstances in which the application is made and the relief of order which
the applicant claims;

(b) in the case of a claim for compensation against an employer, date of service of notice of the accident on
the employer and, if such notice has not been served or has not been served in due time, the reason for
such omission;
 Lesson 9 Employees’ Compensation Act, 1923 147

(c) the names and addresses of the parties; and

(d) except in the case of an application by dependents for compensation, a concise statement of the matters
on which agreement has and of those on which agreement has not been come to.

If the applicant is illiterate or for any other reason is unable to furnish the required information in writing,
the application shall, if the applicant so desires, be prepared under the direction of the Commissioner. (Section
22)

However, any defect in the application, e.g., when it is not in the prescribed form cannot be fatal to the claim. Any
such irregularity can be rectified with the permission of the Commissioner at any stage (M.B. & G. Engineering
Factory v. Bahadur Singh, AIR 1955 All 182).

(vi) Power of the Commissioner to require further deposit in case of fatal accident

Where the Commissioner is of the opinion that any sum deposited by the employer as compensation payable on
the death of an employee, is insufficient, he is empowered to call upon, by a notice in writing stating his reasons,
the employer to show cause why he should not make a further deposit within a stipulated period. If the employer
fails to show cause to the satisfaction of the Commissioner, the Commissioner may make an award determining
the total amount payable and requiring him to deposit the deficiency. (Section 22A)

(vii) Powers and procedure of Commissioners

The Commissioner shall have for the following purposes, all the powers of a Civil Court under the Code of Civil
Procedure, 1908 for the purpose of:

(a) taking evidence on oath;

(b) enforcing the attendance of witnesses; and

(c) compelling the production of documents and material objects.
Further, for all the purposes of Section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973, he shall
be deemed to be a Civil Court. (Section 23)
(viii) Appearance of parties
Any appearance, application or act required to be made or done by any person before or to a Commissioner
other than an appearance of a party which is required for the purpose of his examination as a witness, may be
made or done on behalf of such person, by a legal practitioner or by an official of an Insurance Company or
registered Trade Union or by an Inspector appointed under Section 8(1) of the Factories Act, 1948, or under
Section 5(1) of the Mines Act, 1952 or by any other officer specified by the State Government in this behalf,
authorised in writing by such person, or, with the permission of the Commissioner by any other person so
authorised. (Section 24)
(ix) Method of recording evidence
The Commissioner shall make a brief memorandum of the substance of the evidence of every witness as the
examination of the witness proceeds, and such memorandum shall be written and signed by the Commissioner
with his own hand and shall form a part of the record.
Provided that:
If the Commissioner is prevented from making such memorandum, he shall record the reason of his inability to
do so and shall cause such memorandum to be made in writing from his dictation and shall sign the same and
such memorandum shall form a part of the record.
Further, the evidence of any medical witness shall be taken down as nearby as may be word for word. (Section 25)
148 EP-IL&GL

In the case of M.S.N. Co. Ltd. v. Mohd. Kunju, AIR 1956 Trav. Co. 935, it was held that the Commissioner
should not make a medical certificate the basis of his award unless he has examined the concerned medical
officer.
Time Limit for disposal of cases relating to compensation
A new Section 25A has been inserted by the Workmen’s Compensation (Amendment) Act, 2009 providing for
the time Limit for disposal of cases relating to compensation. As per Section 25A, the Commissioner shall
dispose of the matter relating to compensation within a period of three months from the date of reference and
intimate the decision in respect thereof within the said period to the employee.
(x) Costs
All costs, incidental to any proceedings before a Commissioner, shall subject to rules made under this Act, be in
the discretion of the Commissioner. (Section 26)
However, the Commissioner must use his discretion judiciously.
(xi) Power to submit cases
A Commissioner may, if he thinks fit, submit any question of law for the decision of the High Court and, if he does
so, shall decide the question in conformity with such decision. (Section 27)
(xii) Registration of agreements
Section 28 makes it obligatory for the employer to send a memorandum to the Commissioner where amount of
any lump sum payable as compensation has been settled by agreement:
(a) whether by way of redemption of a half-monthly payment or otherwise, or
(b) where an compensation has been settled as being payable to a woman or a person under a legal
disability.
The Commissioner shall record the memorandum in a register in the prescribed manner, after he has satisfied
himself as to its genuineness provided that the Commissioner has given at least 7 days notice to the parties
concerned before recording such memorandum. The Commissioner may at any time rectify the register.
The Commissioner may refuse to register the memorandum on the following grounds:
(a) Inadequacy of the sum or amount settled; or
(b) Agreement obtained by fraud or undue influence or other improper means.
The Commissioner may in such a situation make such order including an order as to any sum already paid
under the agreement, as he thinks just in the circumstances.
An agreement which has been registered as aforesaid shall be enforceable under this Act notwithstanding
anything contained in the Indian Contract Act, 1872, or in any other law for the time being in force.
(xiii) Effect of failure to register agreement
Where a memorandum of any agreement, the registration of which is required by Section 28 is not sent to the
Commissioner as required by that Section, the employer shall be liable to pay the full amount of compensation
which he is liable to pay under the provisions of this Act, and notwithstanding anything contained in the proviso
to sub-section (1) of Section 4, shall not unless the Commissioner otherwise directs, be entitled to deduct more
than half of any amount paid to the employees by way of compensation whether under the agreement or otherwise.
(Section 29)
 Lesson 9 Employees’ Compensation Act, 1923 149

APPEALS

An appeal shall lie to the High Court from the following orders of a Commissioner, namely:
(a) an order awarding as compensation a lump sum whether by way of redemption of a half-monthly payment
or otherwise or disallowing a claim in full or in part for a lump sum;
(aa) an order awarding interest or penalty under Section 4A;
(b) an order refusing to allow redemption of a half-monthly payment;
(c) an order providing for the distribution of compensation among the dependants of a deceased employee
or disallowing any claim of a person alleging himself to be such dependant;
(d) an order allowing or disallowing any claim for the amount of an indemnity under the provisions of Sub-
section (2) of Section 12; or
(e) an order refusing to register a memorandum of agreement or registering the same or providing for the
registration of the same subject to conditions. (Section 30)
Such appeal should be filed within 60 days of order. The section empowers appellate Court to infer with findings
recorded by commissioner only in case of substantial error of law (LLJ II 1998 Kar. 764). The provisions of
Section 5 of Limitation Act, 1963 shall be applicable to appeals under the Section.
No appeal shall lie unless the following requirements are fulfilled:
(i) A substantial question of law is involved in the appeal.
(ii) In case of order, other than order refusing to allow redemption of a half-monthly payment, unless the
amount in dispute in the appeal is not less than ten thousand rupees or such higher amount asthe
Central Government may, by notification in the Official Gazette, specify.
(iii) The memorandum of appeal should be accompanied by a certificate by the Commissioner to the effect
that the applicant has deposited with him the amount payable under the order appealed against. Deposit
of compensation amount is alone contemplated: deposit of penalty or interest is not condition precedent
for filing appeal (LLJ I 1999 Kar. 60).
(iv) The appeal does not relate to any case in which the parties have agreed to abide by the decision of the
Commissioner, or in which the order of the Commissioner gives effect to an agreement come to by the
parties.
Jurisdiction conferred on High Court being special any further appeal against the judgement is barred. No. leave
petition was therefore held maintainable (LLJ I 1998 1122 Pat.). Finding whether the claimant was a employee
arrived by commissioner on material on record is a fact hence no further appeal is allowed (LAB IC 1998 Ori.
3254).
Recovery
The Commissioner may recover, as an arrear of land revenue, any amount payable by any person under
this Act, whether under an agreement for the payment of compensation or otherwise, and the Commissioner
shall be deemed to be a public officer within the meaning of Section 5 of the Revenue Recovery Act, 1890.
(Section 31)
150 EP-IL&GL

PENALTIES
Section 18A of the Act prescribes penalties for the contravention of the provisions of the Act which include fine
up to Rs. 5,000. The following omissions attract this punishment under the Act:
(a) Whosoever fails to maintain a notice book which he is required to maintain under Section 10(3); or
(b) Whosoever fails to send to the Commissioner a statement of fatal accidents which he is required to
send under Section 10A(1); or
(c) Whosoever fails to send a report of fatal accidents and serious bodily injuries which he is required to
send under Section 10B; or
(d) Whosoever fails to make a return of injuries and compensation which he is required to make under
Section 16.
No prosecution under Section 18A shall be instituted except by or with the previous sanction of the Commissioner
and no court shall take cognizance of any offence under this section unless complaint is made within 6 months
of the date on which the alleged commission of offence comes to the knowledge of the Commissioner.

Test your knowledge

Choose the correct answer:
Within how many days should an appeal be filed to the High Court as per the
Employee’s Compensation Act, 1923?
(a) Within 15 days of order being passed
(b) Within 20 days of order being passed
(c) Within 45 days of order being passed
(d) Within 60 days of order being passed
Correct answer: (d)

SPECIAL PROVISIONS RELATING TO MASTERS AND SEAMEN

According to Section 15, the Act shall apply in the case of employees who are masters of ships or seamen
subject to the following modifications, namely:
(a) The notice of the accident and the claim for compensation may, except where the person injured is the
master of the ship, be served on the master of the ship as if he were the employer, but where the
accident happened and the disablement commenced on board the ship, it shall not be necessary for
any seaman to give any notice of the accident.
(b) In the case of the death of a master or seaman, the claim for compensation shall be made within one
year after the news of the death has been received by the claimant or, where the ship has been or is
deemed to have been lost with all hands, within eighteen months of the date on which the ship was, or
is deemed to have been, so lost:
Provided that the Commissioner may entertain any claim to compensation in any case notwithstanding
that the claim has not been preferred in due time as provided in this sub-section, if he is satisfied that the
failure so to prefer the claim was due to sufficient cause.
(c) Where an injured seaman or master is discharged or left behind in any part of India or in any other
foreign country, any depositions taken by any Judge or Magistrate in that part or by any Consular Officer
 Lesson 9 Employees’ Compensation Act, 1923 151

in the foreign country and transmitted by the person by whom they are taken to the Central Government
or any State Government shall, in any proceedings for enforcing the claim, be admissible in evidence:
(i) if the deposition is authenticated by the signature of the Judge, Magistrate or Consular Officer
before whom it is made;
(ii) if the defendant or the person accused, as the case may be, had an opportunity by himself or his
agent to cross-examine the witness; and
(iii) if the deposition was made in the course of a criminal proceedings, on proof that the deposition was
made in the presence of the person accused;
and it shall not be necessary in any case to prove the signature or official character of the person
appearing to have signed any such deposition and a certificate by such person that the defendant or the
person accused had an opportunity of cross-examining the witness and that the deposition if made in a
criminal proceedings was made in the presence of the person accused shall, unless the contrary is
proved, be sufficient evidence that he had that opportunity and that it was so made.
(d) No half-monthly payment shall be payable in respect of the period during which the owner of the ship is,
under any law in force for the time being relating to merchant shipping liable to defray the expenses of
maintenance of the injured master or seaman.
(e) No compensation shall be payable under this Act in respect of any injury in respect of which provisions
are made for payment of a gratuity, allowance or pension under the War Pensions and Detention
Allowances (Mercantile Marine, etc.) Scheme, 1939, or the War Pensions and Detention (Navy, Army,
Air Force and Mercantile Marine) Act, 1939, or under War Pensions and Detention Allowances (Indian
Seamen) Scheme, 1942, made by the Central Government.
(f) Failure to give a notice to make a claim or commence proceedings within the time required by this Act
shall not be a bar to the maintenance of proceedings under this Act in respect of any personal injury, if:
(i) an application has been made for payment in respect of that injury under any of the schemes
referred to in the preceding clause, and
(ii) the State Government certifies that the said application was made in the reasonable belief that the
injury was one in respect of which the scheme under which the application was made makes
provisions for payments, and that the application was rejected or that payments made in pursuance
of the application were discontinued on the ground that the injury was not such an injury, and
(iii) the proceedings under this Act are commenced within one month from the date on which the said
certificate of the State Government was furnished to the person commencing the proceedings.

SPECIAL PROVISIONS RELATING TO CAPTAINS AND OTHER MEMBERS OF CREW OF

AIRCRAFTS
These provisions have been stipulated under Section 15A of the Act. As per Section 15A, this Act shall apply in
the case of employees who are captains or other members of the crew of aircrafts subject to the following
modifications, namely:
(1) The notice of the accident and the claim for compensation may, except where the person injured is the
captain of the aircraft, be served on the captain of the aircraft as if he were the employer, but where the
accident happened and the disablement commenced on board the aircraft it shall not be necessary for
any member of the crew to give notice of the accident.
(2) In the case of the death of the captain or other member of the crew, the claim for compensation shall be
made within one year after the news of the death has been received by the claimant or, where the
152 EP-IL&GL

aircraft has been or is deemed to have been lost with all hands, within eighteen months of the date on
which the aircraft was, or is deemed to have been so lost:
Provided that the Commissioner may entertain any claim for compensation in any case notwithstanding
that the claim has not been preferred in due time as provided in this sub-section, if he is satisfied that the
failure so to prefer the claim was due to sufficient cause.
(3) Where an injured captain or other member of the crew of the aircraft is discharged or left behind in any
part of India or in any other country, any depositions taken by any Judge or Magistrate in that part or by
any Consular Officer in the foreign country and transmitted by the person by whom they are taken to the
Central Government or any State Government shall, in any proceedings for enforcing the claims, be
admissible in evidence:
(a) if the deposition is authenticated by the signature of the Judge, Magistrate or Consular Officer
before whom it is made;
(b) if the defendant or the person accused, as the case may be, had an opportunity by himself or his
agent to cross-examine the witness;
(c) if the deposition was made in the course of a criminal proceeding, on proof that the deposition was
made in the presence of the person accused,
and it shall not be necessary in any case to prove the signature or official character of the person appearing to
have signed any such deposition and a certificate by such person that the defendant or the person accused had
an opportunity of cross-examining the witness and that the deposition if made in a criminal proceeding was
made in the presence of the person accused shall, unless the contrary is proved, be sufficient evidence that he
had that opportunity and that it was so made.

SPECIAL PROVISIONS RELATING TO EMPLOYEES ABOARD OF COMPANIES AND MOTOR

VEHICLES
This Act according to Section 15B shall apply:
(i) in the case of employee who are persons recruited by companies registered in India and working as
such abroad, and
(ii) persons sent for work abroad along with motor vehicles registered under the Motor Vehicles Act, 1988
(59 of 1988) as drivers, helpers, mechanics, cleaners or other employees:
(1) The notice of the accident and the claim for compensation may be served on the local agent of the
company, or the local agent of the owner of the motor vehicle, in the country of accident, as the case
may be.
(2) In the case of death of the employee in respect of whom the provisions of this section shall apply,
the claim for compensation shall be made within one year after the news of the death has been
received by the claimant:
Provided that the Commissioner may entertain any claim for compensation in any case
notwithstanding that the claim has not been preferred in due time as provided in this sub-section, if
he is satisfied that the failure so to prefer the claim was due to sufficient cause.
(3) Where an injured employee is discharged or left behind in any part of India or in any other country
any depositions taken by any Judge or Magistrate in that part or by any Consular Officer in the
foreign country and transmitted by the person by whom they are taken to the Central Government
or any State Government shall, in any proceedings for enforcing the claims, be admissible in
evidence:
 Lesson 9 Employees’ Compensation Act, 1923 153

(a) if the deposition is authenticated by the signature of the Judge, Magistrate or Consular Officer
before whom it is made;
(b) if the defendant or the person accused, as the case may be, had an opportunity by himself or
his agent to cross-examine the witness;
(c) if the deposition was made in the course of a criminal proceeding, or proof that the deposition
was made in the presence of the person accused,
and it shall not be necessary in any case to prove the signature or official character of the person
appearing to have signed any such deposition and a certificate by such person that the defendant or the
person accused had an opportunity of cross-examining the witness and that the deposition if made in a
criminal proceeding was made in the presence of the person accused shall, unless the contrary is
proved, be sufficient evidence that he had that opportunity and that it was so made.

COMPLIANCES UNDER THE ACT

The establishment must ensure following compliances under the Act. These compliances are not exhaustive but
illustrative.
1. There are ……. workers and contractors, employed by the establishment who are covered under the
provisions of this Act.
2. The factory/establishment has submitted to the ESI Corporation returns in the prescribed form containing
the particulars relating to the persons employed as per the provisions of the Act, regulation and rules
made in this behalf.
3. The establishment has paid compensation to the employee for the personal injury caused to him by an
accident arising out of and in the course of his employment as per the provisions contained in the Act
during the financial year.
4. During the year under review, there was no dispute in respect of any bonafide claims of the employees.
5. During the year under review, every bonafide claim was duly settled by the establishment.
6. There was no prosecution initiated against or show cause notices received by the Company and no
fines or penalties or any other punishment was imposed on the Company during the financial year, for
offences under the Act
SCHEDULE I
[See Section 2(1) and (4)]
PART I
List of Injuries Deemed to Result in Permanent Total Disablement
Sl. No. Description of injury Percentage of
loss of earning
capacity
(1) (2) (3)
1. Loss of both hands or amputation at higher sites 100
2. Loss of a hand and foot 100
3. Double amputation through leg or thigh, or amputation through
leg or thigh on one side and loss of other foot 100
154 EP-IL&GL

4. Loss of sight to such an extent as to render the claimant

unable to perform any work for which eye sight is essential 100
5. Very severe facial disfigurement 100
6. Absolute deafness 100
PART II
List of Injuries Deemed to Result in Permanent Partial Disablement
Amputation Cases – Upper limbs – Either arm
1. Amputation through shoulder joint 90
2. Amputation below shoulder with stump less than 20.32 cms. from tip of 80
acromion
3. Amputation from 20.32 cms. from tip of acromion to less than 4" below tip 70
of olecranon
4. Loss of a hand or of the thumb and four fingers of one hand or amputation 60
from 11.43 cms. below tip of olecranon
5. Loss of thumb 30
6. Loss of thumb and its metacarpal bone 40
7. Loss of four fingers of one hand 50
8. Loss of three fingers of one hand 30
9. Loss of two fingers of one hand 20
10. Loss of terminal phalanx of thumb 20
10A. Guillotine amputation of tip of thump without loss of bone 10
Amputation Cases—Lower limbs
11. Amputation of both feet resulting in end-bearing stu 90
12. Amputation through both feet proximal to the metatarso – phalangeal joint 80
13. Loss of all toes of both feet through the metatarso – phalangeal joint 40
14. Loss of all toes of both feet proximal to the proximal inter phalangeal joint 30
15. Loss of all toes of both feet distal to the proximal inter – phalangeal joint 20
16. Amputation at hip 90
17. Amputation below hip with stump not exceeding 12.70 cms. in length measured 80
from tip of great trenchanter
18. Amputation below hip with stump exceeding 12.70 cms. from tip of great 70
trenchanter but not beyond middle thigh in length measured
19. Amputation below middle thigh to 8.89 cms. below knee 60
20. Amputation below knee with stump exceeding 8.89 cms. but not exceeding 50
12.70 cms.
21. Amputation below knee with stump exceeding 12.70 cms. 50
 Lesson 9 Employees’ Compensation Act, 1923 155

22. Amputation of one foot resulting in end-bearing 50

23. Amputation through one foot proximal to the metatarso-phalangeal joint 50
24. Loss of all toes of one foot through the metatarso- phalangeal joint 20
Other injuries
25. Loss of one eye, without complications, the other being normal 40
26. Loss of vision of one eye without complications or disfigurement of eye-ball, 30
the other being normal
26A. Loss of partial vision of one eye 10
Loss of – A. Fingers of right or left hand Index finger
27. Whole 14
28. Two phalanges 11
29. One phalanx 9
30. Guillotine amputation of tip without loss of bone 5
Middle finger
31. Whole 12
32. Two phalanges 9
33. One phalanx 7
34. Guillotine amputation of tip without loss of bone 4
Ring or little finger
35. Whole 7
36. Two phalanges 6
37. One phalanx 5
38. Guillotine amputation of tip without loss of bone 2
B. Toes of right or left foot great toe
39. Through metatarso-phalangeal joint 14
40. Part, with some loss of bone 3
Any other toe
41. Through metatarso-phalangeal joint 3
42. Part, with some loss of bone 1
Two toes of one foot, excluding great toe
43. Through metatarso-phalangeal joint 5
44. Part, with some loss of bone 2
Three toes of one foot, excluding great toe
45. Through metatarso-phalangeal joint 6
156 EP-IL&GL

46. Part, with some loss of bone 6

Four toes of one foot, excluding great toe
47. Through metatarso-phalangeal joint 9
48. Part, with some loss of bone 3
Note: Complete and permanent loss of the use of any limb or member referred to in this Schedule shall be
deemed to be equivalent to the loss of that limb or member.

LESSON ROUND UP
– The Employee’s Compensation Act, 1923 is one of the important social security legislations. It imposes
statutory liability upon an employer to discharge his moral obligation towards his employees when
they suffer from physical disabilities and diseases during the course of employment in hazardous
working conditions.
– The Act provides for cheaper and quicker mode of disposal of disputes relating to compensation
through special proceedings than possible under the civil law.
– The Act provides for employers liability for compensation in case of occupational disease or personal
injuries and prescribes the manner in which his liability can be ascertained.
– Amount of compensation is payable in the event of an employee meeting with an accident resulting
into temporary or permanent disability or disease as stated in Schedule II and III in terms of Section 4
of the Act, read with Schedule IV. Compensation shall be paid as soon as it falls due.
– Where an employer is in default in paying compensation, he would be liable to pay interest thereon
and also a further sum not exceeding fifty percent of such amount of compensation as penalty. The
interest and the penalty stated above is to be paid to the employee or his dependent as the case may
be.
– Under the Act, the State Governments are empowered to appoint Commissioners for Employee’s
Compensation for (i) settlement of disputed claims, (ii) disposal of cases of injuries involving death,
and (iii) revision of periodical payments.
– The Act prescribes penalties for the contravention of the provisions of the Act which include fine up to
Rs. 5,000.

SELF TEST QUESTIONS

1. Explain the following terms under the Employees’ Compensation Act, 1923: (i) Employer; (ii) Dependent;
(iii) Disablement and (iv) Wages.
2. Explain employers liability to pay compensation to an employee.
3. Define an ‘accident’. When it is said to arise out of and in the course of an employment?
4. Explain the theory of notional extension of employment.
5. State the special provisions relating to employee abroad of companies under the Act.