Employees Compensation Act, 1923

This article has been written by Priti Shekhawat, pursuing the Diploma in Labour, Employment and Industrial Laws (including POSH) for HR Managers from LawSikho. The article has been edited by Prashant Baviskar (Associate, LawSikho) and Smriti Katiyar (Associate, LawSikho).


The social security system of India comprises several schemes, laws, and regulations that are spread throughout India and grant government funds, pensions, and gratuity to employers. The Employees Compensation Act 1923 and the Employees State Insurance Act 1948 is also regarded as such type of laws which provides social-security to employees and thus introduced the “Doctrine of Notional Extension.”Under this legislation, it becomes the legal responsibility of an employer to provide damages to their employees, their family members in situations where injuries are inflicted during working hours at the workplace. Understanding whether an employee is entitled to compensation in scenarios where the accident.

Employees Compensation Act, 1923 and Employees State Insurance Act 1948 are Acts that came into existence to curb social security problems prevailing in the industrial system of our country in order to benefit the labourers. The doctrine of notional extension is one such theory that prescribes the compensation that is to be paid to the employees in case of an accident during the course of employment, but the real motive of adopting this provide theory was to include within its ambit, the injury and danger caused due to the employment but not necessarily at the workplace, during working hours or while coming to and from the place of employment.  

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Section 3(1) of Workmen’s Compensation Act, 1923- “injury should be caused to workmen by any accident which arises out of and in the course of employment.” The “course of employment” also continues after the employee left his actual place of work as the Doctrine of Notional Extension also includes entry and exit time and space. In S.A.I.L., Rourkela Plant v. Kanchanbala, Mohanty, an employee, had an accident while going to his house which resulted in his death due to construction work in the route. The actual residence was very far away from the area where the accident took place and the court observed that – “Doctrine of the notional extension will apply when a person going to or coming from his residence to the place of work. In this case, the employee adopted a route which was not normal and thus was not compensated.”

Section 2(8) of the Employees State Insurance Act “a personal injury to an employee caused by accident or an occupational disease arising out of and in the course of his employment, being an insurable employment, whether the accident occurs or the occupational disease is contracted within or outside the territorial limits of India.”

Employees in the course of employment who suffered any occupational disease will also be compensated. Whenever an employee is injured by any accident he is supposed to give a notice in writing and this has to be soon after the practicable occurrence of the incident which will include the name and address of the employee who is injured, date of the accident, and the cause of injury. There is also a medical examination offered by the employer to the employee who is injured and has given notice of such an accident to the employer. “Theory of added peril is contrary to the Doctrine of notional extension because added peril gives benefit to the employer but notional extension provides benefit to the employee. “This theory provides essential advantages to the workers who work in any organisation.

Critical analysis with case laws

For compensation to be paid by the employer to the employee there are three essential tests.

1. Occurrence of an accident.

2. Accidents should be “arising out of” and during the “course of employment.”

In Indian News Chronicle v. Mrs Lazarus, an employee died because of pneumonia as during the course of his employment he had to frequently go to the heating room from a cooling point. The court held that the injury was caused by an accident in the instant case and it is not considered to be a physical injury as the injury was because he was moving for work purposes.

3. The accident should result in such disability which is temporary or permanent, partial or total or death.

The burden of proof lies on the claimant to prove that the accident “arose out of and in the course of employment. ”Arising out of employment does not refer to personal injury but inflicted due to employment. Employee supposed to show that the injury was during the employer’s business and he was doing nothing for his own benefit. 

There is an exception to this theory that whenever an accident occurs in a public area and risks suffered by workmen is not because of his employment but because he was a public member then the employer will not be liable to pay compensation only if it can be shown that the employee acted on the direction of the employer.

There is an issue in the application of ratio judgment to cases under above mentioned three tests, the difference should be considered between “judgment in rem and personam.” This doctrine has given liberal rule of interpretation as employer liable to pay compensation even in cases he was not directly at fault. There is no specification as to what are the ‘necessary precautions,’ what acts to be performed by the employee or employer, compensation which is to be paid in several different circumstances, or about the gravity of an accident that occurred. The ‘compensation’ is expressly defined under Employees Compensation Act but it is not expressly stated under the Employees State Insurance Act.

Critical analysis of case laws

The judiciary expanded the scope of this doctrine and laid down several interpretations in this regard, specifically they laid down “liberal interpretation” for the term “in course of employment.” 

State of Rajasthan v. Ram prasad and another

In this case, the employee was dead due to a thunderstorm at the employment site. The Hon’ble SC held that it is essential to have “casual connection” between incidents that happened and employ activities only in such a situation the employee would be entitled to compensation. The employer will also be subjected to liability in the cases of natural calamities if it was caused due to the employment activity in such case the employer Smt. Geeta had to compensate the family of the dead employee and further, it was stated that the employer was present on the site where this thunder happened because of his employment activity.


The interpretation of the term in the course of employment is very liberally interpreted as in the case of “natural calamity” the employer was subjected to compensate employees. Calamities are the act of god and happening or non-happening is not in the hands of a person if this employee was not present in the employment area or because of his employment purpose still would have been subjected to death because of this lightning as it was a natural calamity and it can happen at any place at any time which is not in the hands of a human being. Calamity would have resulted in the death of the employer also and before assigning work to the employee as it cannot be predicted by an employer that such natural calamity could happen in that employment area or during working hours. Thus, doctrine should be interpreted in such a manner that may not harm the employer providing the compensation.

Savitri Devi v. Bharti filling station and another

In this case, the claimant’s son was working as a driver with the defendant (tanker’s owner) and had died while he was on his duty. The claim for compensation was denied by the defendant on the ground that there was no such connection between the death and the work of the deceased. Later, the Commissioner dismissed this petition filed for the purpose of compensation. Further, the High Court held that the commissioner wrongfully concluded that there was no connection between work and death of the deceased as the very fact that the deceased was working as a driver and that too of an oil tanker his job was full of stress and strain.


If the deceased was not present at the time of his employment hours in the oil tanker for the employment purpose it would not have resulted in his death as he would not have sustained such stress and strain during his employment hours therefore such compensation is the liability of the employer which is to be paid to the family of the deceased.

Trustees Tort of Bombay v. Yamunabai 

There was a bomb placed in the workshop premises which later exploded and resulted in injury to employees. Further, the court held that – “employee was not responsible for placing any such bomb but the injury was caused due to explosion which was during the time and place at which he was employed therefore such injury was the result of an accident which arrived out of his employment and employee received compensation.”


The rule also prescribes that – “If any particular accident would not have happened to an employee had he not been employed to work in the particular place and condition it would be an accident arising out of the employment.” 

Similarly, in case of the crash landing of a plane at the factory during the course of employment of such employees. They will be not answerable for aircraft crashes, and they were exposed to this risk because they were in the place of the accident because of their employment. In such cases, the compensation will be paid by the employer to the employee as he was exposed to the danger because of their employment.

Works Manager Carriage and Wagon Shop, E.I.R v. Mahabir

There was an employee named Mahabir who lived in Malhaur and traveled from Malhaur to Lucknow station in an employee’s special train. Travel from Lucknow station to Alambagh workshop was 1 mile away from the railway station and was regarded as the shortest route possible, one day after finishing his duty at 5:30 a.m he was just a short distance from the station platform and unfortunately he was run over by shunting engine at 6:30 a.m. His legs were crushed and it was held that “accidents arose out of and in the course of employment”. The interpretation was laid down of the words ‘work’ or ‘duty’ as according to the meaning prescribed in Section 3(1) of the Employees Compensation Act.


The expression “in the course of employment” not refers only to the actual work that any employee is performing but also within a course of service the works assigned to him, place of work, employment hours. From this, we may refer to “environmental accidents” that are accidents that result from the area where the employee is working and from the area he reached to his place of actual work for performing his obligations towards his employer will also fall within the expression “arising out of and in the course of employment.”There is an exception that whenever accidents occur in any public place which is not for employment purposes, the employer will not be liable to pay compensation, but in this case, the employee was in that location because of his purpose of employment there he was subjected to be paid compensation.

“Workmen Compensation Act 1923 and Employee State Insurance Act.” Whereas, the US follows the “Premises rule” which says that injury caused to the employee must be within the employment period and its location should be reasonable for the employee for the purpose of fulfilling his duties. It does not mean that the employee will actually be doing his job rather than it would be in the working hours when the injury occurs is compensable. 


The theory of notional extension is considered a “friendly concept” for employees as it provides them compensation benefits during their employment period and also gives them financial assistance when they suffered loss because of the death of any bread earner of the family. In these cases, liberal interpretation is made by the court to provide aid to the employees. However, in several cases, the claims have not reached the court and employers have received benefits in this regard. Applicable only to limited sections of the society, such as those working in factories, mines, industries considering their social and economic conditions with a notion to provide justice to the weaker sections of the society. 

This theory also includes the penalties provided, or the review of the injury which is caused to the employees, the medical examination to be done after the practical injury occurred, and also cases of delay in payment of compensation. Thus, this theory is complete in itself and is also providing justice to the depriving sections of the society 


  1. https://legislative.gov.in/sites/default/files/A1923-08.pdf
  2. https://www.esic.nic.in/Tender/ESIAct1948Amendedupto010610.pdf
  3. https://labour.gov.in/sites/default/files/TheWorkmenAct1923(1).pdf

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