The main objective behind implementation of the ‘Employee’s Compensation Act,
1923’ was to provide payment by employers to employees in the form of
compensation for any loss or injuries suffered by employees in an accident. At
the time of enactment this act was referred to as Workmen Compensation Act
but later on it was renamed as Employee’s Compensation Act, 1923
January,2010 the reason behind this is that now employees in clerical
capacity are also entitled for compensation.
For any organization or company employees are considered to be the most asset
and a valuable resource. They play an integral role in success of a company.
Their major or key function is to achieve the desired goals in a company. In
return they do expect certain kind of security from the employers in the form of
security of their jobs and compensation for any sort of expenses incurred by
them for the success of the organization. An employee ensures the success for an
organization by meeting deadlines for work on time and ensuring customer
Now when it comes to employer it is very important to understand it’s meaning
well for that lets refer to section 2(e) of the Employee’s Compensation Act
- Anybody of person whether incorporated or not.
- Managing agent of employer.
- Legal representative of a deceased employer.
All these factors contribute for compensation to be paid to employees. But as
every side has two aspects similarly there are certain conditions where
employers are not liable to pay any sort of compensation to employee. The entire
concept of employers non liability is very well illustrated in Employee’s
Compensation Act, 1923.
Dependent – According to section 2(d) of the Employee’s Compensation Act 1923,
the word dependent includes the following relatives of a deceased person, such
- a widow of the deceased person, minor legitimate child, unmarried
legitimate daughter or a widowed mother;
- a son or daughter who has attained the age of 18 years and is infirm
or a person who is completely dependent on the earnings of the employee at
the time of his death;
- a person who is partially or completely dependent on the earnings of
deceased employee, this may include:
- a widower
- a parent apart from widower mother
- in case no parent of the workman is alive a paternal grandparent
- a widowed daughter in law.
Dependant also includes some other relations in respect to person partially
dependent. But for an insight we can say that dependent is someone whose source
of livelihood was earning of that deceased workman.
The term workman includes any person (except those whose employment is
of casual nature or a person who is employed for the sake of employer’s business
or trade) who is:
- One who is not permanently employed in administrative, district or
sub-divisional office of a railway but is a railway servant as defined in
section 3 of the Indian Railway Act, 1890.
- Employed as per specified in schedule II.
The Act is applicable to all such people who are employed as cook in hotel,
liquified petroleum gas, restaurants using power etc.
According to section 2(1)(g) of Employee’s Compensation
Act, 1923 it can be classified into categories i.e.:
Temporary partial disablement: It is a situation in which earning capacity of an employee decreases due to
temporary disablement to perform his duty in the course of employment.
Permanent partial disablement: In such a situation the earning capacity of employee deemed to be reduce
permanently in every course of employment that he was capable of taking at
that point of time.
Total disablement – According to section (2)(l) of Employee’s Compensation Act,
1923 it can be classified into two categories i.e.:
Temporary total disablementIn this case the injury is such that it
causes disablement of a nature which leads to incapacity of performing any
duty as he could at the time of accident.
- Permanent total disablement- It includes any such injury as specified in
part I of Schedule I. Further total disablement includes those injuries as
specified in part II.
Employer’s liability for compensation:
The whole purpose of the Act is to provide compensation to employees who suffer
any injury due to accident cause in course of employment. As per section 3(1) of
the Act an employer is liable to pay compensation to an employee under the
- In case any sort of mental, physical or bodily injury is injury caused
to employees i.e., personal injury takes place.
- The accident that occurred out of or in the course o9f employment.
- The injury caused is such that it leads to death, permanent or temporary
disablement or say partial or total disablement of employees.
- The injury is cause out of employee- employer relationship.
Scope of arising out of employment:
The term ‘arising out of employment’ includes conditions, nature, incident and
obligation of employment as well. If during work a worker gets injured due to
any of the above listed factors than it would be termed as injury arising out of
In Oriental Fire and General Insurance CO. Limited vs. Sunderbai Ramji
the scope of term ‘arising out of employment’ was determined by Gujarat High
Court. In this case the labourer was performing hard labour which involved
physical exertion. One day labourer after performing his duty for 3 hours felt a
pain in chest and fainted on spot. Later on, when taken to hospital he was
Then on observing the case keenly the commissioner found out that it was his
duty which caused him physical discomfort and pain due to which he died and
hence he declared that labourer died due to nature of his job.
Furthermore. The High Court of Gujarat upheld the decision of commissioner that
the injury was caused under the subhead of arising out of employment as
specified in section 3(1) of the Act. It is a personal injury that led to his
death and has direct nexus with employment.
Scope of arising in course of employment:
The term ‘arising in course of employment’ implies accident that took place in
course of employment. It involves injury arising out of the risk incident to
employment. A very important factor to make employer liable is that the work
performed by employee was at the time and place which is similar with
In National Iron and Steel Company Ltd. vs. Manorama
 case, the deceased was a
boy working at a tea stall outside the factory, his duty was to serve tea to the
employees of the factory. One day after serving tea while he was on his way back
from the factory, he crossed a violent mob of workers, police in order to
protect themselves shot at the mob accidently bullet hit the boy and he was
killed. The court held that since accident took place during the working hours
and at place of employment hence deceased boy will be paid compensation.
Doctrine of Notional Extension:
The ‘Doctrine of Notional Existence’ comes into force when there is any sort of
link between the time and place of work and accident, in such a compensation is
payable by employer to employee according to the provisions of Act. This
doctrine was laid down in following cases-
In Moondra and Co. vs. Mst. Bhawani
 case, a truck driver after taking due
permission of the employer went inside the tank of truck to check the source of
petrol leak, he lighted a matchstick inside the tank due to which accident took
place and driver sustained huge burn injuries and eventually died. The court
held that since accident took place at the time and place of work hence
dependents of employee were entitled to compensation.
Conditions under which employer is not liable for payment of compensation:
According to section 3(1) of Employee’s Compensation Act 1923, an employer is
not liable for payment of compensation in following cases or circumstances-
- In case the injury caused is such that it does not cause the entire or
partial disablement of an employee for a period exceeding three days.
- If the injury, not leading to the death or permanent total disablement
of employee, is caused by an accident which is directly attributable to:
- If the employee at the time when accident took place is under the
influence of any sort of drugs or drinks due to which he is not in senses or
say right frame of mind.
- If he or she willfully disagrees or disobeys an order mentioned to them
or framed for their safety purpose.
- The willful denial or non-usage of any kind of safety equipment duly
provided to them for the purpose of securing their safety while working.
Under all the above-mentioned circumstances an employer is not liable to pay any
sort of compensation to employee because he or she is themselves responsible for
the injuries sustained by them as is clear from the conditions mentioned in
section 3(1) of Employee’s Compensation Act.
Next ground is that the workman died due to heart attack and, therefore, it is a
natural death and it is not due to an accident arising out of his employment.
The term Accident has no clear meaning in the Workmen's Compensation Act, 1923.
It is a natural death and not accident.
Doctrine of Added Peril.
According to this doctrine whenever an employee outperforms his duty that is, he
does something which is not the part of his duty as well as it involves some
sort of extra danger, the employer cannot be held responsible to pay
compensation for the injury arising out of any such act of employee. This
further disentitles the employee from claiming any sort of compensation on the
basis that such danger was taken by employee at his own risk and same was not
required by the employer in course of employment.
Hence assuming that such injury caused is not arising out of employment employee
will not be entitled to any profit or compensation.
In case of Devidayal Ralyaram vs. Secretary of State
, a person
appointed at a job of fitter went under the operating machine to collect scrap
in order to make out some nuts and studs out of it. The machine when set in
motion caused permanent injury to the employ. On analysing the case it was drawn
that fitter was prohibited from doing so and it was not part of his duty to go
under the machine and search for scrap. Hence all the damage or injuries caused
to fitter were due to his voluntary actions and there was no duty imposed on him
to do so. Further court held that employer can use doctrine of added peril as
defence for pleading non- liability in case of compensation.
In case of Lancashire and Yorkshire Railway Co. v. Highley
employee appointed a railway company while going to the messroom took the path
through metal lines being well aware of the goods train standing by side.
Suddenly the train started and employee was killed. On observing through clearly
it was held that the accident that took place arose out of the employee’s
negligence and risk taken by him it was not out of the employment of employee.
As a result of this observance court laid down the doctrine of added peril as an
imperative of injury arising out of employment.
If an injury caused to employee is self-inflicted that is, they are themselves
responsible for the cause of the injury whether it may be intentional or
accidental in such a case employer may not be held responsible for payment of
compensation. Jobs like Law enforcement, medical employees, farmers, teachers,
salesperson involves a very high risk of self- inflicted injuries.
Self- inflicted injuries and suicides cannot be termed as accident in course of
It is held that employees also have duty towards employers to perform their task
with utmost care and attention so as to avoid any sort of injury or accident.
Although employers are deemed to be vicariously liable for their employee’s
negligence but are entitled to claim a contribution or indemnity from their
negligent employee in appropriate circumstances. However, in case there is
negligence on the part of both employer and employee then the employer is only
liable to pay compensation to the extent of his own negligence but not the
Therefore, the only benefit is that the compensation amount may reduce because
the employer will not be liable to for any sort of negligence committed on the
part of employer.
Employer’s liability when contractor is engaged:
Sometimes an employer instead of directly employing an employee for the sake of
doing work or trade may hire the same but through contractor. Now in such a case
what if an injury is caused to employee due to some accident whom is to be held
responsible? Section 12 of the Act defines the employer’s liability in case
contractor is involved.
Section 12(1) of the Act defines employer’s liability when contractor is
engaged in certain circumstances:
- When the contractor is involved in any sort of work which is part of the
employer’s (principal) work.
- The employees are involved in the course of employment of work.
- The accident has occurred at the place where the principal i.e.,
employer has undertaken to manage and execute the concerned work.
Amount of Compensation:
Section- 4 of the Employee’s Compensation Act, 1923 defines amount of
compensation when Death results from injury- If the employee dies due to any
such reason then amount payable is equal to rupees eighty thousand or fifty
percent of the monthly wages multiplied by a factor as per mentioned in the
Schedule 4 of the Act whichever is more.
When permanent total disablement is caused by injury- If by any chance the
employee faces permanent total disablement due to injury then the amount payable
is ninety thousand rupees or sixty percent provided whichever is more.
When permanent partial disablement is caused by injury- In such a case the
amount payable is ninety thousand rupees or sixty percent of the disablement.
Liability of Insurer
Always remember that liability of insurer is determined on the basis of wages
paid to employees. The insurance policy covers the wages of employees and the
insurer is liable to pay only that part of amount as covered under wages. It is
on the part of the insurer to prove that injury caused is due to occupational
Distribution of Compensation:
Section-8 of the Act talks about rights of heirs of dependents in terms of
distribution of compensation
- The amount of compensation will be deposited to the commissioner because
no direct payment of compensation can be made by employer to employee who is
injured and is dead. Also, in in case of legal disability no lumpsum payment
can be made.
- Dependent receives the payment of compensation from employer in case the
employee is already dead. The amount of compensation shall be equal to three
months wage of the employee. In case the amount payable to dependent exceeds
it shall be deducted by commissioner and returned to employer.
- In case of amount not less than 10 rupees shall be paid by commissioner
on behalf of that person.
- In case when the amount of compensation is payable to a woman or any
other person who is legally not entitled then such amount deposited with
commissioner shall be paid by him to the person who is entitled to get it.
- In case of lumpsum amount deposited with commissioner which is payable
to a woman or other person who is legally disable, then such an amount can
be used for the benefit of any other disable person.
Procedure in the proceedings before commissioner:
Section - 20 of the Act talks about this. A commissioner shall be appointed by
the state of central government. A specific may regulate the business in case
state government appoints more than one commissioner for a particular area. A
commissioner can choose any person to assist him in inquiry provided he possess
a special knowledge.
Section-30 of the Act talks about appeals. An appeal can be made in front of
High court by orders of commissioner.
- A lumpsum amount is awarded as compensation by way of an order,
redemption of half of the monthly payment is away.
- Gain of a half monthly compensation shall be reduced by an order.
- Compensation shall be distributed to the family of deceased by an order,
similarly a claim can be disallowed by an order.
- Employee’s Compensation Act 1923, Taxman
- A woman whose spouse is dead and she has not married again.
- Something lawful.
- A person who is not physically or mentally strong
- Oriental Fire and General Insurance Co. Limited vs. Sunderbai Ramji,
(1999) IIILJ 265 Guj
- National Iron and Steel Company Ltd. vs. Manorama, AIR 1953Cal. 143
- Moondra and Co. vs. Mst. Bhawani AIR 1970 Raj 111
- Section 3(1) of Employee’s Compensation Act,1923
- Devidayal Ralyaram v. Secretary of State, (AIR) 1937 Sind 288
- Lancashire and Yorkshire Railway Co. v. Highley, (1917) A.C. 352