The Workmen’s Compensation Act 1923

Object and purpose of the Act

To better understand the object and purpose of the Act it is necessary to understand the basic definitions,
scope and concept upon which the Act stands. For this, we are going to review some of the important
features and definitions promulgated under the Act.

For this, we are going to cover the following essential features as defined under the provisions of the
Act:

1. Dependant

The Act proceeds to primarily define dependents. Dependent in this case means those relations of a
deceased employee, who were dependent on the employee wholly or partially for sustenance.

These dependents are broadly categorised into three categories, viz. 1) direct dependents, like a widow 2)
major dependents like a son or daughter and 3) other dependents like for example parents, who are
(wholly or partially) dependent on the employee.

This definition is essential, as in case of death of an employee, at the time it would be essential to
understand who is considered and in particular to the case who are the dependants deserving to be
compensated on account of the death of the employee.

The above relationship chart illustrates clearly the relations classified as the dependents of a deceased
employee. as defined by the Employee Compensation Act, 1923:

As shown above, the following relations of deceased employees are classified as a dependant under
Section 2(1)(d) of the Act:

1. A widow, a minor or legitimate or adopted son, an unmarried legitimate or adopted daughter,

or a widowed mother.
2. 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.
3. If wholly or in part dependent on the earnings of the employee at the time of his death
4. A widower
5. A parent other than a widowed mother.
6. 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.
 7. A minor brother or unmarried sister, or a widowed sister, if a minor.
8. A widowed daughter-in-law.
9. A minor child of a predeceased son.
10. A minor child of a predeceased daughter, where no parent of the child is alive;
11. A paternal grandparent, if no parent of the employee is alive.

2. Employer

According to Section 2(1)(e), an employer includes:

1. Any body of persons, whether incorporated or not.

2. Any managing agent of an employer.
3. The legal representative of a deceased employer.
4. When the services of an employee are temporarily lent or let out to another person by the
compensation with whom the employee has entered into a contract of service or
apprenticeship, i.e. such other person while the employee is working for him.
It is essential to define the ‘employer’ as it is the employer who is liable to pay the compensation as per
the Act, nobody other than the someone who satisfies the definition of the employer as per the definition
laid down in the Act of one who is made expressly liable to pay compensation shall be responsible to pay
the compensation.

3. Employee

The chart is illustrative of the definition of employee as per Section(1)(dd) of the Act. However, the
Schedule II of the Act exhaustively defines further those defined as employees under the Act. The
definition of employee is far wider than the employer under the Act. The central and state governments
have been empowered to add to Schedule II, any class of personnel employed in any occupation, which
satisfies the government to be classified as a hazardous occupation. The injuries that fall under such
provisions can be expressly defined with limitations. It is important to note that as stated the definition of
the term employee is exhaustive as it covers what the definition includes as well as does not include in the
definition of an employee.

4. Wages

Section 2(1)(m) defines wages as including any privilege or benefit which is capable of being estimated
in money. The definition of wages is important as the amount of compensation lays its entire base on the
amount of wages of the employee.
5. Disablement: Partial and total

The Act doesn’t expressly define disablement. It only defines partial and total disablement. These
definitions elicit the idea that disablement under the ambit of the Act is the loss of capacity to earn and
depending on the nature of injury and percentage of loss of earning capacity, can be expressly defined as
partial or total.

6. Compensation

The amount paid by the employer, liable to compensate the employee for loss of earning capacity or
incapacitated by the disablement arising out of injury or accident or occupational illness, etc. Or the
amount to the dependents of a deceased employee that the employee is liable to pay as defined by Section
2(1)(c) of the Employee Compensation Act, 1923.

Now that the context of the Employee Compensation Act, 1923, is clear with the illustration of the
important definitions under the Act. It is now important to understand how the Act relates employer and
employee in terms of liabilities and compensation, which will also in turn expressly lay out the main aims
and objectives upon which this enactment was brought about.

Definitions

Dependents

Section 2(1)(d) of the ECA,1923 divides the dependents of the deceased employee in three categories as
follows :

A. First Category- The dependents belonging to this category are widow, minor (legitimate or adopted)
son, unmarried (legitimate or adopted) daughter, and a widowed mother.

The dependents of the first category are not required to prove their dependency on the deceased employee
at the time of his death. For example, the widow or any other dependent in this category may not be
dependent on the earning of the deceased employee, yet they fall within the definition of dependents of
first category and can claim compensation.

Widow

Widow belongs to the first category of dependents. A widow is not required to prove her dependency on
the deceased employee at the time of his death.

Mother
A foster parent is not included within the word 'parent'. So, a mother does not mean a foster mother.

B. Second Category
The dependents belonging to this category are 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.

The dependents belonging to second category are required to prove their physical or mental infirmity as
well as their total dependency on the earnings of the deceased employee. If the dependents prove the
above mentioned facts, only then they fall within the definition of the dependents of second category and
can claim compensation.

C. Third Category
The dependents belonging to this category are:

A widower,

A parent other than a widowed mother,

A minor illegitimate son,

An unmarried illegitimate daughter,

A daughter ( legitimate or illegitimate or adopted) if married and minor or if widowed and a minor,

A minor brother or an unmarried sister or a widowed sister if a minor,

A widowed daughter-in-law,

A minor child of a predeceased son,

A minor child of a predeceased daughter where no parent of the child is alive, or

A paternal grandparent of no parent of the employee is alive.

The dependents of the third Category must prove their whole or partial dependency on the earnings of the
employee at the time of his death.

Widower
Unmarried sister & Minor Brother
Unmarried sister and minor brother of the deceased employee fall in the third category of "dependents"
under clause (III) of sec. 2(d) if they prove their dependency whether partial or total on deceased
employee at the time of his death.
Employee
Employee means a person, who is:

According to Sec. 2(34) of the Railways Act,1989, railway servant means "any person employed by a
Railway Administration in connection with the service of a railway." According to the definition of
employee under Sec. 2(dd) , a railway servant is a employee if:

He is not 'permanently' employed in any administrative, district or sub- divisional office of a railway; and

He is not employed in any such capacity as specified in Schedule II of the Act.

A master, seaman or other member of the crew of a ship; A captain or other member of the crew of an
aircraft; a person recruited as driver, helper, mechanic, cleaner, or in any other capacity in connection
with a motor vehicle; 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

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 dependents or any of them.

Employer
According to the definition under Sec. 2(e), the term 'employer' includes the following persons:

Any body of persons whether incorporated or not.

Managing agent of the employer.

Legal representative of the deceased employer.

When the services of an employee are temporarily lent or let on hire to another person by the person with
whom the employee has entered into a contract of service or apprentice, means such other person while
the employee is working for him.
Manager is not employer
Manager does not represent the employer. Because manager acts in subordination to his employer. "

Disablement
Death or different kinds of disablements are result of an injury. The ECA,1923 provides compensation for
the kinds of disablements are as follows:
Permanent total disablement

Permanent partial disablement

Temporary disablement whether total or partial.

Permanent total disablement

Injuries deemed to result in " Permanent total disablement":

Every injury specified in Part I of Schedule I

According to Sec. 2(l), "permanent total disablement" is deemed to result every injury specified in Part I
of Schedule I of the ECA,1923.

Following are the injuriee deemed to result in "permanent total disablement" as contained in Part I of
Schedule I.

Loss of both hands or amputation at higher sites.

Loss of a hand and a foot.

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

Loss of sight to such an extent as to render the claimant unable to perform any work for which eyesight is
essential.

Very severe facial disfigurement.

Absolute deafness.

Incapacity for all work which the employee was capable of performing at the time of the accident :
Permanent total disablement

ii. Combination of injuries specified in Part II of Schedule I

According to Sec. 2 (l), " permanent total disablement " is deemed to result from the loss of earning
capacity, as specified in Part II of the Schedule I if the aggregate percentage of the loss of earning
capacity per cent or more.
For example, according to Part II of the Schedule I, the loss of earning capacity in case of amputation
through shoulder joint is 90%. Whereas loss of earning capacity for the loss of partial vision of one eye
has been specified to be 10% in Part II of Schedule I.

If an employee suffers injury resulting in loss of partial vision of one eye and amputation through
shoulder joint, then the aggregate percentage of the loss of earning capacity amounts to 100%. Thus, in
case the combination of injuries caused loss of 100% of earning capacity. Therefore, in such case the
disablement is deemed to be "permanent" and " total" in its nature.

Permanent partial disablement

According to Sec.2(g) of th ECA,1923, " permanent partial disablement" means such disablement as
reduces the earning capacity in every employment which he was capable of undertaking at that time."

According to Sec. 2(g), every injury specified in Part II of Schedule I is deemed to result in permanent
partial disablement. Part II of Schedule I specifies the percentage of loss of earning capacity for 48 kinds
of injuries.
Where permanent partial disablement results from injury not specified in Part II of Schedule I

In such a case the permanent partial disablement is assessed by the qualified medical practitioner. The
percentage of loss of earning capacity in such case is determined by the qualified medical practitioner.
However, according To Sec. 4(1)(c ), while assessing the loss of earning capacity, the medical
practitioner must have due regard to the percentage of loss of earning capacity specified for different
injuries in the Schedule.

- scheduled injury the physical disability is assessed by "qualified medical practitioner."

Temporary partial disablement

According to Sec.2(g), "partial disablement" means, where the disablement is of a temporary nature, such
disablement as reduces the earning capacity of an employee in any employment in which he was engaged
at the time of accident resulting in the disablement.

Loss of earning capacity may not be co- extensive with physical incapacity

Medical evidence is opinion evidence, and, it is only with regard to the physical aspect of the injuries, that
the opinion of a medical witness is relevant and admissible, as the opinion of expert. But loss of earning
capacity is not a matter for medical opinion and is not a matter to which a medical evidence can possibly
speak.

However, medical opinion is taken into consideration when the Tribunal is to assess the loss of earning
capacity. As loss of earning capacity is not necessarily extensive with the loss of physical capacity, and it
is always open for the Tribunal to assess the loss of earning capacity, having due regard to the medical
evidence on record.

Employer’s Liability
(A) Cases where they have to pay

 Injury by accident during employment

 Diseases in occupation

(B) Cases where they do not have to pay

 In case of any injury or damage which does not lead to the semi or total disablement of the workers
for a period exceeding 3 days.

 In case of any injury which does not result in death or permanent total disablement under the
following circumstances:
o the workman present at the time of the work under the control of drink or drugs.

o when the worker deliberately disobeys the rule which ensures their safety.

o non-application of the devices which are especially for the safety of the workers.

Compensation Determination

(A) In case of injury leading to Death

An amount equal to Fifty Percent of the monthly salaries of the dead employee multiplied by the appropriate
factor or with the amount of Rs.80,000 or more.

(B) In case of injury leading to permanent total disablement

An amount equal to 60% of the monthly wages of the injured workmen multiplied by the relevant factor or an
amount of 90,000 or more.

(C) In case of an injury occurring in permanent partial disablement

In this case of permanent disablement due to injury, an amount equal to the percentage of loss of earning
capacity is given to the disabled.

(D) In case of injury leasing to temporary disablement

According to Section 4(2), Half-monthly payments is given which is equal to 25% of the worker’s
compensation.

Workmen’s Compensation Calculation

To determine compensation in conformity with the legislation, the formulas in Section 4 of the Workmen's
Compensation Act are used:

 If an accident results in death, pay the appropriate factor 50% of the dead employee's monthly wage, or
Rs. 1,20,000, whichever is higher.
 An amount equal to 60% of the injured worker's monthly wage in the relevant factor, or Rs. 1,20,000,
whichever is greater, is granted if an accident leads in a permanent total disability.
Note: According to the newly released government guidelines, Rs. 15,000 is considered to be a wage for the
purposes of calculating compensation under the Workmen's Compensation Act of 1923. The applicable
provision in this matter is found in Section IV of this Act.

Appeals —
The Supreme Court observed that an appeal from an order of Workmen’s Compensation Commissioner
can be entertained only if there exists a substantial question of law to be considered/The bench of
Justices Abhay S Oka and Sanjay Karol observed that the Workmen’s Compensation Commissioner is the
last authority on facts.

(1) 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 153 [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:

Provided that no appeal shall lie against any order unless a substantial question of law is involved in the
appeal, and in the case of an order other than an order such as is referred to in clause (b), unless the
amount in dispute in the appeal is not less than three hundred rupees: Provided further that no appeal shall
lie in 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: [Provided further that
no appeal by an employer under clause (a) shall lie unless the memorandum of appeal is accompanied by
a certificate by the Commissioner to the effect that the appellant has deposited with him the amount
payable under the order appealed against.]

(2) The period of limitation for an appeal under this section shall be sixty days.

(3) The provisions of section 5 of 155 [the Limitation Act, 1963 (36 of 1963)], shall be applicable to
appeals under this section.
(i) The mere difficulty of applying the facts to the law will not amount to a substantial question of law;
Asmath Bedi (dead) v. Marlmuthu, 1990 LLR 450 (Mad).
(ii) An appeal against the order of the Compansation Commissioner lies only when a substantial question
of law is involved; Mangala Ben v. Dalip Motwani, 1998 LLR 656.
(iii) Scope of section 30 of the Workmen's Compensation Act for entertaining the appeal against the order
passed by the Commissioner is very limited. The said section 30 very clearly provides that the award of
the Commissioner passed under the aforesaid Act can be challenged in the appeal where substantial
question of law are involved; General Manager, C.C. Ltd. v. Bhim Yadav, 2003 LLR 574 (Jhk HC).