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Judicial Proceedings In Awarding Compensation Under Employees Compensation Act 1947

Every employee dreams of a secured job. Therefore, there is a necessity for the company or industry to ensure their employees with sufficient protection. The act of 1923 was the first legislative measure for social security undertaken in India. The act employees compensation act, 1923 protects the employees whose monthly income is Rs. 500.

Employees compensation act aims to protect employees from:

  1. Disabilities
  2. Loss of income
  3. Provide injured staff with sufficient medical treatment
  4. To reduce work-related mishaps
  5. To reduce lawsuits pending in court
The employees who are not eligible to claim employees' state insurance act, 1948 are entitled to be compensated under the employees compensation act, 1923.

In a recent case named S. Palanivel v. Deputy Commissioner of Labour, 31 July 2020, the Madras high court held that employees with wages exceeding the ceiling limit as per employees' state insurance act, 1948 are not eligible to the Employees state insurance act, 194, such employees are entitled to claim compensation under Employees compensation act, 1923.

In a case where an injured employee and has filed a civil suit, he is not entitled to confer any rights to compensation. The Employees compensation act consists of 36 sections and four schedules.

History Of Employees Compensation Act, 1923:

In the late nineteenth century, a Prussian chancellor named Otto von Bismarck enacted the sickness and accident laws.

Acts and provisions are:
The Employer's liability act, 1871, gave protection to workers in certain factories, quarries, railroads, and mines.

Worker's accident insurance, 1884, created a modern workers compensation system. Public insurance is provided for a non-work related illness.

The act was originally amended as Workmen's compensation act, 1923. Workmen's compensation (amendment) act, 2009 was enacted on 18th of January, 2010. The amendment of 2009 brought the replacement of word Workmen's to Employees, in order to protect dignity.

Originally, the act passed was of limited scope so necessary amendments were made. The major amendment was made when the report was submitted by the Royal Commission of Labour in the year 1931 in chapter sixteen of the Royal commission problems in compensation were stated. Mahatma Gandhi and others stated that the cause of the poverty in India was due to social and industrial problems. Due to the recommendations made by the Royal Commission of Labour, the act was amended in the year 1933, leading to the modification of the amount of compensation, scope of act and dependants entitled to claim compensation on employees death.


The meaning of compensation in the Black law dictionary is the reparation[1] of loss caused to another. In general terms, it is a reward given to a person by making up for his loss or injury suffered by an employee by providing him an appropriate benefit. Compensation is the money that is paid to a person with an intention to replace or exchange something that has been lost or damaged or for a problem.

Law elucidates compensation in the employees compensation act, 1923. The short title of the act states as the provision of the payment by certain classes of the employers to their employees for a compensation of injury by accident.

To Whom Is Compensation Provided?

Every employee, including the contract, i.e., the employee employed through a contractor, who is engaged in the works of the employer's company or the business suffers an injury or an accident in the course of employment or arising out of employment, shall be entitled to receive compensation.


An employee is defined under section 2 sub-clause n of the Employees compensation act, 1923 as:
Any person (other than a person who is employed casually and has been employed for the purpose of the employers business):
  1. A railway employee defined in section 2 clause 34 of the Railways Act, 1989, and not employed in capacity as specified under Schedule 2 of the act:
    1. A master, a seaman, the other members of the crew of a ship
    2. A captain or other members of the crew of an aircraft,
    3. A person recruited as driver, helper, Cleaner, any other position connected with a vehicle,
    4. A person recruited to work abroad by a company and who is employed outside India or in any capacity as specified under schedule 2 of the act,
    5. According to the capacity as under schedule 2 of the act and whether the contract was made before the enactment of the act and the contract was expressed or implied, also it does not include any employee working in the capacity of armed forces.
The provisions have been extended to the cooks employed in hotels, restaurants which used liquefied petroleum gas in the process of cooking.

On behalf of the deceased who are entitled to receive compensation?
As provided in the act, the compensation in case of injury or death of an employee is to be given either to the employee or their dependents.

Following is the list of dependents entitled to receive compensation:
  • A widow
  • A minor who is the legitimate son or an unmarried daughter, widowed mother,
  • In a case where the family is wholly dependent on the deceased, then compensation is given to the child who has attained 18 years of age,
  • A parent other than widowed mother,
  • A widower,
  • A widowed daughter in law,
  • A minor child of a pre-deceased son,
  • A paternal grandparent, in case if no parent of the employee is alive,
  • A minor child of a pre-deceased daughter is entitled, who does not have any of the parents.

Liability To Pay Compensation:

In the Employees compensation act, 1923, section 3 deals with the liability on the part of the employer. In the case of a contract employee, the owner is liable to pay compensation. The employee is protected from both the sides as he can also recover the compensation from principal employer.

The act of 1923 states that an employee is entitled to be compensated by an employer when there is a personal injury to the employee or an accident arising out of and in the course of employment.

That may result in to:
  • Death
  • Permanent total disablement
  • Permanent partial disablement within
Disablement is the loss of capacity to work.

In the above sentence, in the course of employment means that when an employee:
  • Is within the period of employment i.e., at the working hours
  • Is at a place where he has been sent by the employer as a part of work
  • Is fulfilling his duties
In course of employment suggests the points out of place and the circumstances under which the accident occurred.
Out of a course of employment means an injury caused by employment-related risk. It suggests the cause of accident.
For example: if a person works in an asbestos industry, he is more likely to suffer from asbestosis, not only occupational disease but also any other harm which establishes a causal connection between the employment and the injury or accident so caused.
  • In State of Rajasthan v. Ram Prasad and Another (2001) 1 LLJ 177 (SC)[2]
    The employee died due to natural lightning while working at the site, the Supreme Court held that there must be a causal connection with the employment, in this case the injury may be due to natural lightning but the employee was working out of course of employment. So, the employer was held liable to pay the compensation.
  • In Divisional Manager, United India Insurance Co. Ltd. v. Shanmuga Mudliar T. and others (2003) 1 LLJ. 776 (Mad.)[3]
    A person employed as a bus driver died due to heart failure where he stopped out to have refreshment. His wife claimed for compensation and was awarded by the commissioner and not by the insurance company. The court held that both insurance company along the employer are liable to pay compensation.
Occupational diseases: section 3 sub-clause 2
Employees who work in specific industries and are exposed to harmful conditions may suffer occupational diseases.
Occupational diseases may include asbestosis, silicosis, Black lung disease, skin infections, hearing impairment.

Personal injury:
  1. Accident:
    the act provides compensation to only those accidents, which includes occupational diseases. A railway servant is entitled to be compensated under schedule 2 of the act. Similarly, an employee employed in a factory, mines, who deals with hazardous work is entitled to compensation under schedule 2 of the act.
  2. Injury:
    injury may be discrimination on the basis of:
    1. Age
    2. Sex
    3. Colour
    4. Religion
    5. Disability
    6. Marriage
    7. Maternity leave

In the case of Metropolitan Transport corporation Vs. K. Ravichandran on 7 April 2005

The appellant was the employer of the respondent. The employee was removed from his duty to drive heavy vehicles due to disablement because of a spinal problem. At the time of proceedings, the learned counsel submitted that the injury did not incur in the course of the employment and argued that the injury suffered by the respondent does not come under the definition of section 3 of the employee's compensation act, 1923. Rather it is well defined by section 47 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995.

The case was dismissed.

In the case of Richmond adult college Vs. Mc Dougall, 2008
The respondent i.e., Mc Dougall, was selected as a database assistant by the employer of adult college. Later, the employer learned the medical history of the employee that he had suffered from mental injuries and also psychological disorders and withdrew the offer. The respondent then filed a suit against the college on the ground of disability discrimination.

The court held that the disability discrimination was not faced by her as this does not come within the meaning of section 1 of the disability discrimination act, 1995.
  • The employer is bound to pay the compensation as soon as it falls due. If he does not accept the liability for compensation to the extent claimed, he is bound, under pain of penalty, to make provisional payment to the extent of the liability which he accepts, without prejudice to the right of the workman to make any further claim against him. All claims relating to compensation payable under the Act are to be decided by a commissioner appointed under the Act of 1923.
  • The employer is bound to pay the compensation as soon as the accident is certified. as held by the court in case of Superintending Engineer KEB Hubli v. Kadapa MaYappa (1984) 1 LLJ 179 (Kara.)[4].
  • The employer is liable to pay an interest as soon as the injury is caused to the workman as held by the court in case of Madan Mohan Verma v. Mohan Lai (1983) Π LLJ 322 (All)[5]
  • If the commissioner finds an employer with unjustified delay can impose a penality of 50 % not exceeding the amount of compensation.

Doctrine of added peril:
When an employee performs a work which is not required to be done by him and is found to be hazardous then the employer is not liable to pay compensation. The particular doctrine was held by the court in the case of Lancashire and Yorkshire Railway Co. v. Highley (1917) AC 352.

Amount Of Compensation:

According to section 4 of the employee's compensation act, 1923, the amount of compensation awarded to an employee in different situations.
  • In a case where employee dies:
    The compensation amount is 50 percent of the monthly wage of the deceased employee. The maximum ceiling limit of the monthly wage is eight thousand i.e., 8000 multiplied by a relevant factor or a sum of rupees 1,40,000 whichever is higher.
  • In case of permanent total disablement caused to an employee in work place:
    The compensation in permanent total disablement caused by an injury is 60 percent of the monthly wages multiplied by the relevant factor of the employee or a sum of 1,20,000 whichever is higher.
  • In case of permanent partial disablement:
    The compensation awarded in this case is based on pro-rata[6]. Some cases are also on the basis of assessment qualified by the medical practitioner.
  • In case of temporary disablement:
    The compensation awarded in both the cases where it is partial or permanent temporary is half monthly payment i.e., 25 percent of the monthly wages on the 16 th day of the disablement.

National insurance company Vs. Dheeraj Singh And Another on 7 August, 2020, the High court of Jammu and Kashmir held that an employee can claim compensation under section 4(1) (b) of the employee compensation act, 1923 even if the cause of the disablement incurred is not in scheduled injury, but the injury resulted comes into the definition of total disablement.

How Are The Wages Calculated?

The calculation of wages is based upon a monthly wage system. Monthly wages are the wages payable on the amount of work done by the employee as mentioned under section 5 of the employees compensation act, 1923.

Medical Examination:

According to section 11 of the employees compensation act, 1923 a medical examination is mandatory in a case of accident in work place. When the employee provides a notice of accident, he shall offer himself for medical examination within 3 days from the date of notice.

The right to claim compensation will be suspended legally when:
  1. If the employee refuses to submit himself for medical examination
  2. If the employee obstructs to examine
  3. If an employee voluntarily leaves the place of medical examination
If the employee whose, right to claim compensation has been suspended dies, then the commissioner of the employees compensation if he thinks fit can direct the payment of the compensation to the dependants of the deceased employee.

In New India Assurance Co. Ltd. vs Sreedharan on 12 January, 1995
The court issued new guidelines to the commissioner in case of the assessment by the medical practitioner. The court held that the employee injured is reported to be in a condition where he cannot work assessed by a qualified medical practitioner cannot be rejected by the commissioner. It means that the loss of earning capacity certified by a qualified medical practitioner cannot be rejected by the commissioner.

According to the section 18 A of the act[7], a person is punishable with fine which may extend to Rupees 5000, whoever:
  1. Fails to maintain a notebook as required to Maintain
  2. Fails to inform commissioner
  3. Fails to send a report to commissioner
  4. Fails to make a return when asked to do so.
It is also mentioned that no court can take cognizance in any offence mentioned under section 18 A of the act. An exception to this statement is that if the complaint is made within 6 months of the commission of offence.

The act provides social security to the employees and also the dependants of the employee. It also aims that the injured employee to have a sustainable life. The act provides advantage to employer as well as an employee working in hazardous conditions. It statutorily recognizes injured employees. The act states duties and obligations of a commissioner also the liabilities on part of employer and employee.

Various tests and doctrines used to interpret a case in court are necessary to learn about.

The act leads to reduction of cases filed in court and also the number of accidents occurring.

  1. Labour and industrial law by Avatar Singh
  2. Labour laws e book
Bare Acts
  1. Employees compensation act, 1923
  2. Railways Act, 1989
  3. Equal Opportunities, Protection of Rights and Full Participation) Act, 1995
  1. The action of making amends for a wrong one has done, by providing payment or other assistance to those who have been wronged
  2. Supreme court case
  3. Madras
  4. Karnataka
  5. Allahabad
  6. Proportional
  7. Employees Compensation Act, 1923

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