S. 3 Employees’ Compensation Act | Death While Commuting To Work Covered Under Employment Injury | Supreme Court Clarifies ‘Notional Extension’ Doctrine Applies Even Beyond Factory Gates
Kiran Raj
The Supreme Court of India Division Bench of Justice Manoj Misra and Justice K.V. Viswanathan has held that an accident sustained by an employee while commuting to his workplace falls within the ambit of an injury "arising out of and in the course of his employment" under the Employees’ Compensation Act, 1923. The Court allowed the appeal filed by the deceased employee’s family and set aside the Bombay High Court judgment which had denied compensation. The Supreme Court restored the order of the Commissioner for Workmen’s Compensation awarding compensation and directed the insurance company and employer to pay the determined amount in terms of the original award.
Shahu Sampatrao Jadhavar wauty timings were from 3:00 AM to 11:00 AM. On 22 April 2003, the deceased left his home on a motorcycle to report s employed as a watchman in a sugar factory, designated as Respondent No. 2 in the present case. His regular dfor duty. Tragically, he met with a fatal road accident approximately five kilometres from the factory and did not reach his workplace. The deceased left behind a widow, four children, and his mother.
The family of the deceased filed a claim under the Employees' Compensation Act, 1923 (referred to as the EC Act). The employer and its insurance company, Oriental Insurance Company Limited (Respondent No. 1), contested the claim. They contended that the accident did not occur within the factory premises and therefore did not fall within the scope of employment.
The Commissioner for Workmen’s Compensation and Civil Judge, Senior Division, Osmanabad, adjudicated the claim and overruled the defence. It was held that the accident had a nexus with the employment. Accordingly, the Commissioner awarded Rs. 3,26,140/- as compensation along with 12% interest per annum from 22 May 2003. The Insurance Company was directed to deposit the compensation as there was a valid insurance policy. Further, the employer was ordered to pay 50% of the awarded amount as penalty. The compensation and penalty were directed to be paid within one month.
Aggrieved by this order, the Insurance Company preferred First Appeal No. 2015 of 2011 before the High Court of Judicature at Bombay, Bench at Aurangabad. The High Court reversed the findings of the Commissioner and held that the accident occurred while the deceased was on his way to the place of work, and therefore the accident did not arise out of the employment.
In support of its decision, the High Court relied on the Supreme Court judgment in Regional Director, E.S.I. Corporation & Another vs. Francis De Costa and Another, (1996) 6 SCC 1, which arose under the Employees' State Insurance Act, 1948 (ESI Act). The Court noted that although the statutes were different, both laws employed the same phrase "arising out of and in the course of employment". Accordingly, the High Court denied the family members' claim.
The family of the deceased filed a Special Leave Petition challenging the High Court's judgment. During the Supreme Court proceedings, counsel for the appellants submitted that the nature of the deceased’s work exposed him to risks directly connected with his employment. It was argued that there was a clear causal connection between the employment and the accident, invoking the principle of notional extension. It was further submitted that the EC Act was a beneficial piece of legislation intended to protect employees.
In rebuttal, counsel for the Insurance Company contended that the accident occurred before the deceased had reached the place of employment, and therefore the accident did not arise in the course of employment. It was argued that the decision in Francis De Costa was squarely applicable, and that the theory of notional extension could not apply since the employee was engaged in a purely personal activity while commuting.
The Supreme Court considered whether the accident causing the death of the deceased could be said to have "arisen out of and in the course of employment". The Bench recorded: "We have carefully considered the submissions of the learned counsel for the parties and perused the records."
The Court reviewed Section 3 of the EC Act and Section 2(8) read with Section 46(1)(d) of the ESI Act, noting that both statutes contain identical language regarding the requirement that the accident must arise out of and in the course of employment.
The Court examined the precedent in Francis De Costa and observed: "The injury was sustained while the employee was on his way to the factory... A mere road accident, while an employee is on his way to his place of employment cannot be said to have its origin in his employment." The Court acknowledged that, based on Francis De Costa, the appellants would not be entitled to compensation.
However, the Court noted a significant statutory development: the enactment of Section 51E of the ESI Act with effect from 1 June 2010. The section provides: "An accident occurring to an employee while commuting from his residence to the place of employment for duty or from the place of employment to his residence after performing duty, shall be deemed to have arisen out of and in the course of employment if nexus between the circumstances, time and place in which the accident occurred and the employment is established."
The Court then posed three incidental questions: whether Section 51E has retrospective effect; whether it is applicable to claims under the EC Act; and whether the factual matrix attracts the ingredients of Section 51E.
It recorded: "We have no manner of doubt that the said amendment is clarificatory in character and will have retrospective effect." The Bench reasoned that the provision was intended to clarify an existing ambiguity and thus operated retrospectively.
The Court found that both the EC Act and ESI Act are beneficial legislations with similar objectives and overlapping operational spheres. It stated: "The EC Act is also a beneficial piece of legislation... The EC Act is a social welfare legislation meant to benefit the workers and their dependants in case of death of workman due to accident caused during and in the course of employment."
Regarding statutory interpretation, the Court relied on Justice G.P. Singh’s commentary to conclude that declaratory statutes may be applied retrospectively: "If a statute is curative or merely declaratory of the previous law retrospective operation is generally intended."
Further, the Court considered the theory of notional extension and cited Saurashtra Salt Mfg. Co. v. Bai Valu Raja and BEST Undertaking v. Agnes. It observed: "The facts and circumstances of each case will have to be examined very carefully in order to determine whether the accident arose out of and in the course of the employment."
In the context of statutes in pari materia, the Court observed: "We interpret the phrase 'accident arising out of and in the course of his employment' occurring in Section 3 of the EC Act to include accident occurring to an employee while commuting... provided the nexus... is established."
Applying the facts, the Court concluded: "The deceased was a night watchman and was dutifully proceeding to his workplace to be well on time, there was a clear nexus between the circumstances, time and place in which the accident occurred and his employment."
The Court allowed the appeal filed by the appellants and set aside the judgment of the Bombay High Court. It restored the order passed by the Commissioner for Workmen's Compensation and Civil Judge, Senior Division, Osmanabad. The judgment recorded: "The appeal is allowed and the judgment of the High Court of Judicature at Bombay, Bench at Aurangabad dated 01.12.2011 in First Appeal No. 2015 of 2011 is set aside."
Further, the Court declared: "The judgment of the Commissioner for Workmen’s Compensation and Civil Judge, Senior Division, Osmanabad in Workmen’s Compensation Application No. 28 of 2005 dated 26.06.2009 is restored."
It confirmed the compensation awarded: "A sum of Rs 3,26,140/- along with interest @ 12 per cent per annum from 22.05.2003 to the family members."
The Court did not interfere with the direction regarding penalty against the employer: "The employer was asked to pay 50 per cent of the awarded amount as penalty."
The Supreme Court directed that there would be no order as to costs.
Advocates Representing the Parties:
For the Petitioners: Mr. Atul Babasaheb Dakh, AOR; Mr. Diganta Gogoi, Adv.; Mr. Bitu Kumar Singh, Adv.; Mr. Praveen Kumar Pandey, Adv.
For the Respondents: Ms. Amrreeta Swaarup, AOR
Case Title: Daivshala & Ors. versus Oriental Insurance Company Ltd. & Anr.
Neutral Citation: 2025 INSC 904
Case Number: Civil Appeal No. 6986 of 2015 (@ SLP (C) No. 16573 of 2012)
Bench: Justice Manoj Misra, Justice K.V. Viswanathan
