Employment LawNotional Extension of Employment and Coverage of Commute Accidents Under Employees’ Compensation Act

The Hon’ble Supreme Court of India, in the case of Daivshala & Ors. v. Oriental Insurance Company Ltd. & Anr., Civil Appeal Numbers 6986 of 2015 decided on 28.07.2025, enforced that an accident occurring to an employee while commuting from his residence to the place of employment or vice versa, is covered under the Employees’ Compensation (hereinafter referred to as “EC”) Act, 1923 provided there exists a clear nexus between the accident and the employment.

FACTS

Shahu Sampatrao Jadhavar was employed as a watchman with the Sugar Factory (hereinafter referred to as “Respondent No. 1”) having duty hours from 3:00 a.m. to 11:00 a.m.

On 22nd April, 2003 while proceeding from his residence to report for duty, he was riding his motorcycle when he met with a fatal accident at a distance of about 5 kms from the factory premises.

The deceased left behind his widow, four children, and his mother. His family (hereinafter referred to as “the Appellants”) filed a claim under the Employees’ Compensation Act, 1923.

The Commissioner for Workmen’s Compensation awarded them Rs. 3, 26,140/- with 12% interest from 22.05.2003 and directed the Insurance Company (hereinafter referred to as “Respondent No. 2”) for paying the compensation and the Respondent No. 1 to pay a penalty of 50%.

The Respondent No. 2 filed an Appeal before the Hon’ble High Court of Bombay, Aurangabad bench which reversed the order of Commissioner for Workmen’s Compensation holding that the accident did not arise out of employment since it occurred before the deceased reached the workplace.

Aggrieved by this, the Appellants filed an appeal before the Hon’ble Supreme Court of India.

ISSUES BEFORE THE SUPREME COURT

1. Whether the accident that occurred while the deceased was commuting to work arose “out of and in the course of his employment” under Section 3 of the EC Act?

2. Whether Section 51E of the Employees’ State Insurance Act, 1948, which recognizes commuting accidents as employment-related if nexus is established, can apply retrospectively and guide interpretation of the EC Act?

3. Whether the principle of notional extension applies to bring the accident within the ambit of employment?

CONTENTIONS OF THE PARTIES

The Appellants contented that the accident in question was not a personal misfortune but one arising out of and in the course of employment.

Further, the Appellants submitted that the accident had a direct and proximate nexus with the deceased’s employment, as he was on his way to attend his duty commencing at 3:00 a.m. and urged that the theory of notional extension applies, and the employment cannot be confined strictly to the factory premises.

It was contended by the Appellants that the Employees’ Compensation Act, 1923, being a beneficial legislation, requires a liberal interpretation so as to provide relief to the dependents of workmen.

Further the Appellants argued that the reliance placed by the Hon’ble High Court in case of Regional Director, E.S.I. Corporation v. Francis De Costa & Another (1996) 6 SCC 1, was said to be misplaced, as the subsequent insertion of Section 51E in the Employees’ State Insurance Act (hereinafter referred to as “ESI”), Act, 1948 clarifies that commuting accidents, where a nexus is established, are deemed to arise out of and in the course of employment.

The Appellants argued that in view of the odd duty hours of the deceased, the accident has occurred in circumstances clearly incidental to his employment.

On the contrary, the Respondent No. 2 contended that the accident in question cannot be said to have arisen out of and in the course of employment, as the deceased had not yet reached the premises of the factory and was still engaged in a personal activity of commuting.

Further stating that the employment commences only when the workman reaches the place of work, and any accident occurring prior thereto cannot fall within the scope of Section 3 of the Employees’ Compensation Act, 1923.

The Respondents relied on decision in Regional Director, E.S.I. Corporation v. Francis De Costa & Another (1996) 6 SCC 1, wherein this Hon’ble Court held that a road accident while commuting cannot be said to have its origin in the employment unless the workman was engaged in something incidental to his duties.

Further, the Respondents submitted that the principle of notional extension has no application in the present case, as the deceased was using his own vehicle and was not availing any facility provided by the employer. Hence, the award of the Commissioner was assailed as being unsustainable.

DECISION AND FINDINGS

The Hon’ble Supreme Court of India analyzed both the side’s arguments and allowed the appeal by setting aside the judgement of Hon’ble High Court of Bombay, Aurangabad Bench by restoring the award given by the Commissioner for Workmen’s Compensation of Rs. 3,26,140/- with 12% interest.

The Hon’ble court observed that the accident had a direct nexus with the employment of the deceased, as he was on his way to attend duty starting at 3:00 a.m.

The Hon’ble court observed, “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 from his residence to the place of employment for duty or from the place of employment to his residence after performing duty, provided the nexus between the circumstances, time and place in which the accident occurred and the employment is established.”

Hence, the theory of notional extension applied, since the risks faced while commuting at odd hours were incidental to his work as a night watchman. Further, section 51E of the Employees’ State Insurance Act 1948, though enacted in 2010, was held to be clarificatory and thus retrospective in operation.

Additionally, the Hon’ble High Court order in Regional Director, E.S.I. Corporation v. Francis De Costa & Another (1996) 6 SCC 1, was held to be misplaced in light of the legislative clarification brought by Section 51E. And held that both the Employees’ Compensation Act, 1923 and the Employees’ State Insurance Act, 1948 are beneficial legislations in pari materia, and interpretations under one can guide the other.

AMLEGALS REMARKS

In this ruling, the Hon’ble Supreme Court of reaffirm the welfare objective underlying the Employees’ Compensation Act, 1923. The Court rightly held that an accident occurring while commuting to work, if a clear nexus with employment exists, must be treated as arising out of and in the course of employment. This approach reflects a progressive understanding of the realities faced by workers, especially those with odd duty hours such as night watchmen.

The Hon’ble Court’s finding that Section 51E of the ESI Act is clarificatory and retrospective was particularly commendable, as it removed the harshness created by the earlier decision which had taken an unduly restrictive view. The recognition that the EC Act and ESI Act are in pari materia and must be construed harmoniously strengthens social security jurisprudence.

The Hon’ble Court’s insistence on a liberal interpretation of beneficial legislation, ensuring that dependents are not left uncompensated due to technicalities about the accident’s location.

Overall, the judgment strikes a fair balance between legal interpretation and social justice, reinforcing the protective purpose of labour welfare laws.

– Team AMLEGALS assisted by Khushi Jain (Intern)

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