The Employees’ Compensation Act, 1923 is an old but an important enactment, as it introduced a kind of social security scheme for the employees of this country. It enables an employee, and in case of death of an employee, his dependents, to get, at the cost of his employer compensation for employment injury.

Much later, in 1948, the Employees’ State Insurance Act, introduced a social insurance scheme for the employees of his country. Unlike the earlier scheme this scheme rests on joint contribution by Government, employers and employees. The two enactments together constituted what may be called a Code of social security benefits for the workers of this country.

Objectives

The Object of the Act is to provide for the payment of compensation by certain employers to their employees for injury caused to them by accident while in employment. If an employee contracts an occupational disease while in employment, it is also treated under the Act as injury caused by accident.

Applicability

In case of Maharashtra, The Employees’ Compensation Act is applicable to all shops & Establishments by virtue of Sec. 38-A of The Bombay Shops & Establishments.

Sec. 16 of the Apprentices Act extends the application of the Employees’ Compensation Act to the Apprentices appointed under Apprentices Act, 1961 rendering the employers liable to pay compensation for any personal injury or accident arising out of and in the course of employment caused to the apprentices.

Every Employer

  1. Employing persons listed in Schedule II to the Act;

  2. Carrying on an occupation listed in Schedule III to the Act

Is liable to pay compensation under the Act.

Eligibility

The following persons are liable to receive compensation under the Act:-

  1. Certain Railway Servants;

  2. Persons listed in schedule II to the Act,

  3. Persons employed in occupations listed in Schedule III to the Act.

Injuries Compensated under the Act

Under the Act injuries are broadly classified into four groups as those resulting in:-

  1. Death,

  2. Permanent Total Disablement,

  3. Permanent partial disablement &

  4. Temporary disablement whether total or partial

  5. Contracted an occupational diseases.

The Act provides for different scales of compensation for different kinds of injuries.

Conditions for Receiving Compensation

An employee to whom personal injury is caused by accident is entitled to receive compensation under the Act if the accident arose out of and in the course of his employment. That means the accident must occur while the employee is in employment and it must also be connected with his employment.

Circumstances in which the employer is not liable to pay compensation for injury to a workman:-

The employer is not liable to pay compensation for injury to an employee on following circumstances:-

  1. If the injury does not result in total or partial disablement of the employee for a period exceeding three days;

  2. If the injury does not result in death of the employee and is caused by an accident which is directly attributable to:-

    1. If an employee have been at the time thereof under the influence of drink or drugs

    2. The disobedience of the employee to an order expressly given, or to a rule expressly framed, for the purpose of securing the safety of workman, or

    3. The wilful removal or disregard by the employee of any safety guard or other device which he knew to have been provided for the purpose of securing the safety of employee.

Amount of Compensation

When the injury to an employee results in his death, the amount of compensation payable to his dependents is an amount equal to 50% of the monthly wages of the deceased employee multiplied by a figure ranging from 228.54 to 99.37 (depending upon the age of the deceased employee) or an amount of` 1,20,000, whichever is more. However, if the monthly wages of the deceased employee exceed` 8000/-, his monthly wages for the purpose of calculating the compensation shall be deemed to be ` 8,000/- only (w.e.f. 31st May 2010)

Note:- By Amendment Act of 2000 the minimum amount of compensation for death is enhanced from ` 50,000/- to ` 80,000/- and the deemed maximum monthly wage of the deceased employee is enhanced from ` 2,000/- to` 4,000/-

Amount of Compensation Received in case of permanent total disablement

When the injury of an employee results in his permanent total disablement, the amount of compensation he is entitled to receive is an amount equal to 60% of the monthly wages of the injured employee multiplied by a figure ranging from 228.54 to 99.37 (depending upon the age of the injured person) or an amount of ` 1,40,000/- whichever is more. However, if the monthly wages of the injured employee exceed ` 8000, his monthly wages for the purpose of calculating the compensation shall be deemed to be ` 8,000/- only.

When the injury of an employee results in his permanent partial disablement, the amount of compensation he is entitled to receive is a percentage of the compensation payable in the case of permanent total disablement. The percentage is determined with reference to the extent of loss of earning capacity caused by the injury and is a lumpsum payment.

In case of temporary Disablement

When the injury of an employee results in his temporary total disablement or temporary partial disablement he is entitled to receive compensation in the form of a half-monthly payment. The amount of a half-monthly payment is determined with reference to the monthly wages the employee was drawing at the time of the injury and is equal to 25% of the monthly wages of the employee. The maximum period during which the employee can receive compensation for temporary total disablement or temporary partial disablement is five years.

In case of Fatal Accidents

Payment of compensation in respect of employee whose injury has resulted in death is not to be made directly to the dependents of the employee. In such case the employers is required to deposit the amount of compensation with the Commissioner for Employee’s Compensation. The Commissioner will then apportion the amount among the dependents of the employee.

Note:- It is held that the payment of compensation directly to a dependent is not legal even if he is the only One dependent of the deceased employee claiming compensation.

Protection of Compensation

Compensation payable under the Act, whether in the form of a lump sum or in the form of a half – monthly payment, cannot be assigned, charged, attached or set – off against any claim

Special Powers of the Commissioner in respect of Lumpsum Payment

Where any lumpsum compensation is payable to an employee or a person under a legal disability, the employer must deposit it with the Commissioner for Employee’s Compensation. It is open to the Commissioner to invest such sum for the benefit of the woman or of such person during his disability.

Special Powers of the Commissioner in respect of Half-Monthly Payment

Where any half-monthly compensation is payable to a person under a legal disability, it is open to the Commissioner for Employee’s Compensation to order that such payment be made during the disability of the person to any dependent of the Employee or to any other person best fitted to provide for the welfare of the Employee.

Report of Fatal Accidents

If any accident occurs on the premises of any employer which results in death of an employee or serious bodily injury to an employee, the employer must, within 7 days of the death or serious bodily injury, send in the prescribed form a report to the Commissioner for Employee Compensation giving the circumstances attending the death or serious bodily injury.

When an Employee is injured while employed by a contractor, the principal employer is liable to pay compensation to him, but he is entitled to be identified by the contractor. The Employee is, however, free to recover compensation either from the principal employer or from the contractor.

Contracting Out

An employee is prohibited from contracting out of the benefits of the Act, i.e. from giving up his right to receive compensation from his employer under the Act. Any contract or agreement made by him relinquishing such right is null and void insofar as it removes or reduces the liability of any person to pay compensation under the Act.

The Procedure to be followed for computing compensation for death or disablement

The Compensation is computable on the basis of monthly wages and the relevant factor, specified in the second column of Sch. IV:-

Calculation of monthly wages:-

Sr. No

Graded Tenure of Service

Computation of Monthly Wages

A

Monthly wages in case of an employee in continuous service for not less than twelve months immediately preceding the accident

½ of the total wages due for payment in the twelve months preceding the accident (Sec. 5(a)) Ex. An employee’s total wages in the preceding 12 months is ` 40,800/- His monthly wages in this case will be:- ` 40,000 / 12 = ` 3,333/-

B

Monthly wages in case of an employee whose whole of the continuous period immediately preceding the accident is less than a month

The average monthly amount earned by any other an employee doing the same work during the twelve months immediately preceding the accident. Or in his absence, by a an employee employed in similar work in the same locality.

Ex.: A an employee doing the same work earns a total of ` 33,600/- as wages during the preceding 12 months. Average monthly amount = ` 33,600 / 12 = ` 2,800/-

C

Monthly wages in any other case where it is not possible to calculate it for want of information

The total wages earned in respect of the last continuous period immediately preceding the accident multiplied by thirty times & divided by No. of days of such continuous period.

Ex. An employee drawing in to wages of ` 4,000/- is in continuous period for 60 days immediately preceding the accident. The monthly wages can be arrived at : 4,000 x 30 / 60 = ` 2,000/-

After having determined the monthly wages, the Compensation will be computed as under:

D

Compensation in case of death

50% (fifty per cent) of monthly wages of the deceased employee (if the monthly wages exceed 8,000 the monthly wages are to be taken ` 8,000/- only) x the relevant factor specified in the second column of sch. IV

Or

An amount of ` 1,20,000/- whichever is more Sec. 4 (a)

Ex. An employee draws monthly wages of ` 9,000/- (worked out as above) dies of burn injuries while working at a furnace and his age is 42 years.

In terms of Sec. 4(a) his monthly wages is to be taken as ` 8,000/- only and 50% of it is ` 4,000/-

Thus compensation Payable = 4,000 x 178.49 = ` 7,13,960/-

E

Compensation in the case of permanent total disablement

60% of monthly wages of the deceased employee (if the monthly wages exceed ` 8,000/- the monthly wages are to be taken

` 8,000/- only) multiplied by the relevant factor specified in the second column of Sch. IV.

Or

` 1,40,000/- whichever is more Sec. 4 (b)

Ex. In the above example, if the injury results in permanent total disablement, the compensation payable will be as under ` 4,800 (60% of 8000) x 178=49 = ` 8,56,752/-

F

In case of permanent partial disablement resulting firm injury specified in part II of the Sch. I

Compensation will be calculated as in the case of permanent total disablement on the basis of the percentage loss of earning capacity, specified against each injury in part II of Sch. I

Ex. An employee’s monthly wages is ` 8,000/- and he suffered an injury of loss of three fingers of left hand. The percentage loss of earning capacity specified in Part II of Sch. I against the said injury is 30%. The employee’s age is 45 years. The compensation is worked out as under:-

Compensation that would have been payable in total permanent disablement

4,800 (60% of 8000) x 169=44 = ` 8,13,312/-

Compensation payable for loss of three fingers ` 8,13,312 x 30% = ` 2,43,993=60

G

In case of injury not specified in Sch. I

Compensation will be equal to such percentage of compensation payable for permanent total disablement as proportionate to the loss of earning capacity as assessed by the qualified medical practitioner, permanently caused by the injury.

H

In case of more injuries than one are caused by the same accident resulting in permanent partial disablement

The amount of compensation payable for all injuries shall be aggregated but it shall not exceed the amount payable, in the case of permanent total disablement 4 (C) (Explanation I)

Ex. An employee lost his right hand as well as four fingers of left hand by an accident. His monthly wages are ` 8,000/- his age is 45 yrs. The compensation is worked out as under:-

Compensation for permanent total disablement in his case will be = ` 8,13,312/- (ref. Col. F)

Compensation increase of loss of hand:- 8,13,312 x 60% = ` 4,87,987/-

Compensation in case of loss of four fingers of left hand:- 8,13,312 x 50% = 4,06,656/-

Aggregate of A + B = ` 8,94,643/-

The compensation payable is restricted to ` 8,13,312/-

I

In case of temporary disablement whether total or partial disablement

A half monthly payment of the sum equivalent to 25% of the monthly wages for the period of disablement or 5 yrs. Whichever is lesser.

Ex. An employee is temporarily disabled and his monthly wages is ` 8,000/-

Compensation in this is :- 8,000 x 25 / 100 = ` 2,000/- case will be –

This amount is to be paid on half monthly basis as specified in sub-sec. (2) of Sec. 4(c)

In the absence of any evidence as to the wages drawn by an employee, the minimum wages applicable to him at the relevant time shall be taken as the basis for determining the amount of compensation.

Claims for Compensation

The procedure for claiming compensation payable under the Act may be summarized as follows:-

  1. An application for claiming compensation payable under the act has to be made to the Commissioner for Employee’s Compensation in the prescribed form.

  2. Before filing the application the Employee has to give notice of the accident to the employer containing the details of the accident.

  3. Before filing the application the Employee has also to submit himself for medical examination if he is required to do so by the employer

  4. The application has to be made within 2 years of the occurrence of the accident or within 2 years from the date of death.

  5. If any applicant is poor, the Commissioner may exempt him from paying the application fees.

  6. The Commissioner can take the assistance of any person possessing special knowledge of any matter relating to the case for deciding the application.

  7. The Commissioner can recover the amount payable by any person under the Act as an arrear of land revenue.

Orders of the Commissioner for Employee’s Compensation Appealable

The provisions regarding appeals against the orders of the Commissioner for Employee’s Compensation may be summarised as follows: –

  1. If any party is aggrieved by an order of the Commissioner it can prefer an appeal against the order to the High Court provided that (i) a substantial question of law is involved in the appeal & (ii) the amount is dispute in the appeal is ` 300/- or more.

  2. Such appeal must be filed within 60 days.

  3. If the party preferring such appeal happens to be an employer, he must first deposit with the Commissioner the amount payable under the order appealed against.

List of Injuries Deemed to Result in Permanent Total Disablement

Sr. No

Description of Injury

Percentage of Loss of Earning Capacity

1

Loss of both hands or amputation at higher sites

100

2

Loss of hand and a foot

100

3

Double amputation through leg or thigh, or amputation through leg or thigh on one side and loss of other foot

100

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

List of Injuries Deemed to Result in Permanent Partial Disablement

Sr. No

Description of Injury

Percentage of Loss of Earning Capacity

1

Amputation through shoulder joint

90

2

Amputation below shoulder with stump less than 3[20.32] cm from tip of acromion

80

3

Amputation from 3[20.32] cms from tip of acromion to less than 3[11.43] cms below tip of olecranon

70

4

Loss of a hand or of the thumb and four fingers of one hand or amputation from 3[11.43] cms below tip of olecranon

60

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

*10-A

Guillotine amputation of tip of thumb loss of bone

10

Amputation Cases – Lower Limbs

11

Amputation of both feet resulting in end bearing stumps

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 distal to the proximal interphalangeal joint

30

15

Loss of all toes of both feet distal to the proximal interphalangeal joint

20

16

Amputation at hip

90

17

Amputation below hip with stump not exceeding 312.70 cms in length measured from tip of great treanchanter

80

18

Amputation below hip with stump not exceeding 312.70 cms in length measured from tip of great treanchanter but not beyond middle thigh

70

19

Amputation below middle thigh to 18.89 cms below knee

60

20

Amputation below knee with stump exceeding 18.89 cms but not exceeding 112.70 cms

60

21

Amputation below knee with stump exceeding 112.70 cms

2[50]

22

Amputation of one foot resulting in end bearing stump

2[50]

23

Amputation through one foot proximal to the metacarpophal-angeal joint

2[50]

24

Loss of all toes of one foot through the metacarpophal-angeal joint

20

Other Injuries

25

Loss of one eye, without complication, the other being normal

40

26

Loss of vision of one eye, without complications or disfigurement of eye-ball, the other being normal

30

226 A

Loss of partial vision of one eye

10

LOSS OF

A.

Finger of right or left hand Index Finger

27

Whole

14

28

Two phalanges

9

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

Right 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

46

Part, with some loss of bone

3

Four Toes of One Foot, Excluding Great Toe

47

Through metatarso-phalangeal joint

9

48

Part, with some loss of bone

3

SCHEDULE IV

Factors for working out Lumpsum Equivalent of Compensation Amount in case of permanent disablement and death

Completed years of age on last birthday of the workman immediately preceding the date on which the compensation fell due

Factors

Completed years of age on last birthday of the workman immediately preceding the date on which the compensation fell due

Factors

Not more than 16

228.54

41

181.37

17

227.49

42

178.49

18

226.38

43

175.54

19

225.22

44

172.52

20

224.00

45

169.44

21

222.71

46

166.29

22

221.37

47

163.07

23

219.95

48

159.80

24

218.47

49

156.47

25

216.91

50

153.09

26

215.28

51

149.67

27

213.57

52

146.20

28

211.79

53

142.68

29

209.92

54

139.13

30

207.98

55

135.56

31

205.95

56

131.95

32

203.85

57

128.33

33

201.66

58

124.70

34

199.40

59

121.05

35

197.06

60

117.41

36

194.64

61

113.77

37

192.14

62

110.14

38

189.56

63

106.52

39

186.90

64

102.93

40

184.17

65 or more

99.37]

Bar upon Contracting out:- Any workman relinquishing his right for personal injury not permissible.

Penalties:-

Non – Compliance with sections 10(3), 10(1A), 10B or 16

Fine which may extend to ` 5000/-

Recent Court Judgment

1) In order to cast liability for compensation on the employer it must be shown that the accident arose within and in the course of employment.

The deceased was in the employment of the owner of an auto rickshaw. On 23-9-2005 while proceeding by the road in the rickshaw, another rickshaw came from the opposite side and dashed against the rickshaw of the deceased. The deceased then questioned that driver of the opposite rickshaw as to why he was driving the vehicle so rashly and negligently. Then there was a quarrel between the two and in that quarrel the deceased fell down on the road and sustained head injury. He was removed to the hospital where he succumbed to the injuries. The respondents who are the legal heirs of the deceased filed a claim petition for compensation and the Commissioner of Workmen’s Compensation allowed that petition against which order the insurance company preferred an appeal in the High Court. The High Court referred to the decision in Rashida Haroon’s case 2010 (1) TN MAC 131 (SC) wherein it was held that the accident must arise within and in the course of employment. The claimant should prove the nexus between the death and the accident. The High Court held that in the instant case the deceased sustained his injuries not due to the accident but on account of the assault made by the driver of the opposite auto rickshaw following a quarrel. Thus there was no nexus between the accident and the death of the deceased. Consequently the insurance company cannot be fastened with any liability to pay compensation. Hence the appeal was allowed.

H.C. LL> (4) 2011 P. 106, New India Assurance Co. Ltd. V. Noorjahan Begum & 8 ors.

2) Insurer will not be liable if the act of workman was in breach of condition of the policy

The appellant is Insurance Company and the third respondent is the owner of the rice mill. The deceased workman was in the employment of the 3rd respondent as a driver and he died in an accident which took place upon the premises of the rice mill. There was an electricity transformer within the compound of the rice mill. There was failure of electricity supply of rice mill due to burning of one fuse in the transformer. The deceased workman attempted to put fuse wire during that attempt he suffered an electric shock, due to which he fell down and died on the spot. Respondent no.1 and 2 are his legal heirs and they filed a claim petition before the Commissioner for Workmen’s Compensation contending that respondent 3 who is the owner of the rice mill has instructed the deceased to install the fuse wire to the transformer located within the rice mill premises. The Commissioner for Workman’s Compensation allowed the claim petition and granted total compensation of ` 4,17,586/- to be paid to the respondent nos.1, and 2. Feeling aggrieved thereby the Insurance company filed an appeal in the High Court contending that replacing fuse wire in the transformer is outside the duty of driver of rice mill and that is not authorised by law and therefore it cannot be said that the accident in question occurred during the course of employment of the deceased workman.

The High Court observed that if the accident has 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 an added peril by his own imprudent act. The High Court referred to the provisions of Indian Electricity Rules 195 and pointed out that on a combined reading of the relevant rules, it emerges that the consumer can either undertake himself or permit to undertake repairs or adjustments or additions to installations which are anterior to the electricity meter and such repairs are not permissible in respect of installations which are posterior to the electricity meter. It was held that the deceased tried to do repaid work by way of applying electricity fuse to the transformer which was impermissible under the rules. Therefore there was violation of condition No. 3, of the insurance policy with the result that the insurance company cannot be saddled with the compensation. Hence the appeal was allowed.

H.C.A.P. LLJ III P. 835, United India Insurance Co. Ltd., Hyderabad v. Elkachenu Kistamma & Ors.

3) Employees Compensation Act, 1923 – Section 3 (Claim for compensation is not sustainable if the death of workman is not shown to be due to injury in accident arising in the course of employment)

Deceased Bholakal was working as Asstt. – Cum – Cleaner of a truck employed by respondent No. 1, on 10-3-2000 the said vehicle, carrying loads was on its way to Agartala. On the way the vehicle was parked near Dharamnagar Police station and the driver of the vehicle went to sleep in a nearby hotel. Deceased Bholakal however remained in the vehicle and was supposed to sleep in the cabin of the vehicle. On the next morning the driver found Bholakal lying dead inside the vehicle. He therefore informed the incident to Dharamnagar police station which registered a case under sec. 174 of Cr. P. Code. In the petition filed by his legal heirs for compensation, it was contended that the deceased performed strenuous job of cleaning and loading the vehicle in full day and due to heavy exertion he died because of heart failure. Respondent No.1, the owner of the vehicle filed his written statement that the deceased died due to drinking excessive quantity of alcohol and there was no accident at all in the course of employment and therefore the claim of compensation was not maintainable. Respondent no.2, the insurance company also took the same stand. The tribunal after considering the evidence on record including the post mortem reports held that the deceased died due to consumption of excessive quantity of ethyl alcohol and his death was not incidental to the nature of his work. Feeling aggrieved thereby the appellant filed the present appeal.

The High Court analysed the provisions of Section 3 of the Employees’ Compensation Act and observed that there is practically no iota of evidence that the deceased suffered any injury because of any accident arising out of or in the course of his employment and therefore no liability could be fixed on the employer for the death of the deceased. Consequently the appeal was dismissed.

H.C. Gau. CLR II 2012 P. 613, Sankar Kal, Tripura v. Sunil Kumar Saha & Anr.

Summary

The Employees’ Compensation Act applies to railways (other than those) employed in administrative work and persons employed in factories, mines, plantations, mechanically propelled vehicles, construction work, and certain other hazardous occupations. There is no wage limit for coverage under the Act. The Act, however, is not applicable to the persons who are covered under the Employees’ State Insurance Act, 1948. The Act provides for payment of compensation to workmen or their dependants, as the case may be, for industrial accidents (including prescribed occupational diseases) arising out of and in the course of employment and resulting in disablement or death. It is administered by the respective State governments / Union Territory administrations. The State Governments are required to appoint Commissioners for Employees’ Compensation for (a) settlement of disputed claims; (b) disposal of cases of injuries involving death; and (c) revision of periodical payments. The Compensation payable to the workman or to his dependants cannot be assigned, attached or charged.

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