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* IN THE HIGH COURT OF DELHI AT NEW DELHI

% Date of Decision: 27th September, 2017

+ FAO 135/2016 & CM No.11283/2016 & 34897/2016

SHRI KRISHAN ..... Appellant

Through: Mr. R.K. Sahni, Adv.

versus

JASODA DEVI AND ORS ..... Respondents

Through: Mr. S.L. Kashyap, Adv. for
respondents no.1 to 4.

CORAM:
HON'BLE MR. JUSTICE J.R. MIDHA

JUDGMENT

1. The appellant has challenged the order dated 14 th January, 2016

whereby Commissioner, Employees‟ Compensation has awarded
compensation of Rs.3,68,340/- to respondents No.1 to 4.
2. The appellant was constructing a gymnasium in property
No.699, Gram Sabha, Pooth Kalan, Delhi through the contractor
(respondent No.5). On 06th March, 2010, Babu Lal was working as a
labourer (Baildar) under the contractor (respondent No.5) on the first
floor of the gymnasium. Babu Lal was carrying construction material
(tasla with masala) on his head when the pad (balli and fatta), on
which Babu Lal was standing, overturned due to which Babu Lal fell
down and suffered grievous injuries. Babu Lal was taken to Braham

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Shakti Hospital, Pooth Kalan, Delhi where he expired on 10 th March,
2010. The police registered FIR No.60/2010 under Section 288/337
IPC at P.S. Begumpur, Delhi. Babu Lal was survived by his widow,
two daughters and one son who filed application for compensation
before the Commissioner, Employees‟ Compensation.
3. The appellant contested the claim on the ground that he had
given the contract for construction to respondent No.5. Respondent
no.5 (the contractor) contested the claim on the ground that he was not
the contractor but a co-worker and he worked on the construction site
under the appellant on daily wages.
4. Respondent no.1 appeared in the witness box as PW-1 and
deposed that the appellant was running the business of gymnasium in
property No.699, Gram Sabha, Pooth Kalan, Delhi and her husband
was working in the construction of the first floor on 6 th March, 2010
when the pad overturned due to which the deceased fell down and
suffered fatal injuries. PW-1 produced the copy of FIR marked as
Ex.PW-1/1, receipt as Ex.PW-1/2, cremation receipt as Ex.PW-1/3,
post-mortem report as Ex.PW-1/4, death certificate as Ex.PW-1/5,
hospital receipt as Ex.PW-1/6, notice of demand and postal receipts as
Ex.PW-1/8 to PW-1/11. Respondent no.1 examined Meera as a
witness who deposed that she was working near the site of the
accident and she saw the deceased lying at the site of the accident.
5. The appellant appeared in the witness box as RW-1 and
deposed that he had given the contract for construction of gymnasium
to respondent no.5. The appellant admitted in cross-examination that
he paid Rs.50,000/- to respondent no.1 towards the medical expenses

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of the deceased, Babu Lal. The copy of the receipt for Rs.50,000/-
was marked as Ex.RW-1/B. The appellant proved the copy of the
agreement with the contractor (respondent no.5) as Ex.RW-1/C.
6. The Commissioner, Employees‟ Compensation held that the
appellant was carrying on construction of gymnasium in property
No.699, Gram Sabha, Pooth Kalan, Delhi and Babu Lal was working
as a workman on 6th March, 2010 when he suffered an accident arising
out of and during the course of his employment which resulted in the
fatal injuries. Following Bhutabhai Angadbhai v. Gujarat Electricity
Board, 1987 (1) L.L.N 156, the Commissioner held the appellant,
being the principal employer, liable to pay the compensation under
Section 12 of the Employees‟ Compensation Act. The Commissioner,
Employees‟ Compensation awarded compensation of Rs.3,68,340/-
along with the interest @ 12% per annum.
7. Learned counsel for the appellant urged at the time of the
hearing that the appellant is not liable to pay any compensation as
appellant had engaged respondent No.5 as a contractor and Section 12
of the Employee‟s Compensation Act is not applicable to the present
case.
Liability of the principal under Section 12 of the Employee’s
Compensation Act
8. Section 12 of the Employee‟s Compensation Act imposes the
liability of payment of compensation on the principal with right to
recover the same from the contractor in respect of work being carried
out by the contractor. Section 12 of the Employee‟s Compensation
Act is reproduced hereunder:

FAO 135/2016 Page 3 of 70

 “Section 12. Contracting.-
(1) Where any person (hereinafter in this section referred
to as the principal) in the course of or for the purposes of his
trade or business contracts with any other person (hereinafter
in this section referred to as the contractor) for the execution by
or under the contractor of the whole or any part of any work
which is ordinarily part of the trade or business of the
principal, the principal shall be liable to pay to any employee
employed in the execution of the work any compensation which
he would have been liable to pay if that employee had been
immediately employed by him; and where compensation is
claimed from the principal, this Act shall apply as if references
to the principal were substituted for references to the employer
except that the amount of compensation shall be calculated with
reference to the wages of the employee under the employer by
whom he is immediately employed.
(2) Where the principal is liable to pay compensation
under this section, he shall be entitled to be indemnified by the
contractor, or any other person from whom the employee could
have recovered compensation and where a contractor who is
himself a principal is liable to pay compensation or to
indemnify a principal under this section he shall be entitled to
be indemnified by any person standing to him in the relation of
a contractor from whom the employee could have recovered
compensation and all questions as to the right to and the
amount of any such indemnity shall, in default of agreement, be
settled by the Commissioner.
(3) Nothing in this section shall be construed as
preventing an employee from recovering compensation from the
contractor instead of the principal.
(4) This section shall not apply in any case where the
accident occurred elsewhere that on, in or about the premises
on which the principal has undertaken or usually undertakes, as
the case may be, to execute the work or which are otherwise
under his control or management.

(Emphasis supplied)

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Object of Section 12 of the Employee’s Compensation Act
9. In Bhutabhai Angadbhai v. Gujarat Electricity Board, 1987
(1) L.L.N. 156, the Division Bench of Gujarat High Court explained
the object of Section 12 of the Workmen‟s Compensation Act as
under:
―9. The object of enacting Section 12 of the Act is to give
protection to the workmen and secure compensation from the
persons who can pay and in case of an accident such
workmen will not be dependent, sometime upon a petty
contractor who will not be able to pay compensation on
account of his financial inability. In our opinion, the main
object of enacting Section 12 of the Act is to secure
compensation to the employees who have been engaged
through the Contractor by the principal employer for its
ordinary part of the business, which, in the ordinary course,
the principal employer is supposed to carry out by its own
servants.
10. While imposing this liability on the principal employer,
sub-Section (2) of Section 12 of the Act has provided that the
principal employer will be entitled to be indemnified by the
contractor in case the principal employer is required to pay
compensation to the employees of the contractor.‖
(Emphasis supplied)

10. In M.R. Mishrikoti v. Muktumsab Hasansab Asoti, (1972) 2

Mys LJ 449, the Division Bench of Mysore High Court explained the
intention of the legislature in enacting Section 12 of the Employees‟
Compensation Act as under: -
―7. In the aforesaid proviso, the term ‗employer‘ is
used in contradistinction to the injured workman or the
dependent of a deceased workman who had made an
application for compensation and who can also appeal from
an order of the Commissioner if he feels aggrieved by such
order. The intention of the Legislature in enacting that

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 proviso appears to be that the injured workman or the
dependent of a deceased workman who has been awarded
compensation by the Commissioner, should not be put to any
difficulty in realising such amount of compensation on
account of any recalcitrance of the employer or on account
of the vicissitudes of his (the employer‘s) financial position
after he prefers an appeal.‖
(Emphasis supplied)

11. In Koli Mansukh Rana v. Patel Natha Ramji, 1992 ACJ 772,
the Gujarat High Court explained the object of Section 12 as under:
―15 ...the very object behind the provisions of section
12 of the Act is to secure compensation to the workman who
cannot fight out his battle for compensation by a speedy
process. A person who employs others to advance his own
business and interest is expected to provide a surer basis for
payment of the injured workman than the intermediary, who
may often turn out to be a man of straw, from whom
compensation may not be available. This is the purpose for
which the claimant is given the option under section 12(3) of
the Act to claim the compensation either from the principal
or from the employer.‖
(Emphasis supplied)

12. In Executive Engineer/Deputy General Manager, Sub Urban

Division, DHBVNL, Bhiwani v. Priyanka, 2017 (153) FLR 302, the
Punjab and Haryana High Court explained the object of Section 12 as
under:
―10…….The avowed object of the said Section is to confer
benefits on the employee and their legal representatives in
the cases of death for their right to compensation either from
the principal or from the contractor at their option. The
purpose being that a contractor may be merely a man of
straw and, therefore, might not be in a position as such to
pay off the claims immediately and, therefore, their interests

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 were to be protected to avoid any direct confrontation. The
right of the principal to be indemnified has thus been
incorporated. The interest of the principal employer has
been duly safeguarded under Section 12(2), who has
entrusted the work to the contractor stipulating the right of
indemnification under the Act.‖
(Emphasis supplied)
Interpretation of the words "trade" and “business” in Section 12
13. In Payyannur Educational Society v. Narayani, (1996) 72 FLR
709, two workmen engaged in land excavating operation were buried
alive in a landslide whereupon claim for compensation was made
against an educational society. The society contested the claim on the
ground that the society sold the soil to the contractor, who had
engaged the workman and was liable to pay the compensation. It was
further pleaded that ordinary business of the society was to impart
education and digging work was not part of its ―trade‖ or ―business‖.
The Division Bench of Kerala High Court headed by K.T.Thomas, J.
as he then was, held that the word ―business‖ used in Section 12 of
the Act has been intended to convey the meaning as the work or task
undertaken by the person concerned which are not restricted to trade
or commercial work alone. The relevant portion of the judgment is
reproduced hereunder:
―1. Two workmen while engaged in a land excavating
operation, were buried alive under heaps of mud billowed on
them in a landslide and the site became their grave
instantaneously, Dependents of those who died in such a
trice made claims for compensation from the owner of the
land (appellant) and two others (respondents 2 and 3). The
Workmen's Compensation Commissioner (for short 'the
Commissioner') found that it was the appellant who had

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 employed them, and on that finding he directed the appellant
to pay compensation amount to the dependents of those two
victims. These appeals are in challenge of the common
award passed by the Commissioner.
2. There is no dispute that at the time of the catastrophe the
two workmen were engaged in excavation work on
appellant's land. Appellant is a registered society called
"Payyannur Educational Society". Appellant's contentions
were that the two workmen were not employed by the society
but they were recruited by the second respondent to whom
the society sold soil at the rate of Rs. 15/- per Lorry load and
that the mishap occurred during the operation undertaken by
the second respondent who was permitted by the society to
do the excavatory work and collect the soil. In other words,
appellant's main case is that it was not the employer.
xxx xxx xxx
7. Learned counsel for the appellant advanced the following
arguments to bypass Section 12 of the Act. That provision
can be invoked only if the digging work as part of "the trade
or business" of the society and further such should have been
the normal business of the society. According to the counsel,
the ordinary business of the society is to impart education
and the digging work was not a part of it at all.
xxx xxx xxx
9. It is trite law that the safe guidance for interpreting any
provision in a statute or for understanding the scope and
meaning of a particular word in provision, is to ascertain the
intention of the legislature. However wide in the abstract,
general words and phrases are more or less elastic and
admit of restriction or extension to suit the legislative
intention. "The object of the legislation would afford answer
to the problems arising from ambiguities which it contains",
(vide Maxwell on the "Interpretation of Statutes" 12th edition
at page 86).
10. We bear in mind that one of the objects for enacting the
Act even as early as 1923 was to ameliorate the hardships of
economically poor workmen who were exposed to risks in
work, or occupational hazards by providing a cheaper and

FAO 135/2016 Page 8 of 70

 quicker machinery for compensating them with pecuniary
benefits. With the progress of times the concept impelled the
courts, by and large, to make stretched constructions without
violating the fundamental principles in order to advance the
above object. Looking at it from the above angle, the object
of the legislature in providing Section 12 in the Act is to
safeguard the right to compensation when the employer
delegates the work to another person.
11.We will now proceed to consider in what manner the
words "business" and "ordinarily" in Section 12 of the Act
should be understood.
12. Section 3 of the Act imposes a liability on the employer
to pay compensation in cases where personal injury is
caused to a workman by accident arising out of and in the
course of the employment. Section 12 of the Act has, in
effect, stretched the contours of the word "employer" wider
as to include the person contracting with another person for
carrying out the work of the former. In such cases, the
provision enjoins that the principal shall stand substituted as
the employer. This is achieved by the words 'where
compensation is claimed from the principal, this Act shall
apply as if references to the principal were substituted for
references to the employer". The principal may have any
claim for contribution from his contractor or delegatee, but
that can be dealt with as between them separately. The
victim or his dependents are not to be involved in such
disputes. This much can easily be discerned from the section.
13. The meaning of the two crucial words in Section
12 has to be understood in the above context. We do not
think that the word "business" in the section need be
restricted to what is synonymous with trade. The use of the
conjunction "or" should be understood as disjunctive for
covering totally different areas unconnected with "trade'. A
reference to the Dictionary would reveal that the word
"business" has different shades of meanings. Among them
the most suitable in the present context is that which "The
Oxford Advanced Learners Dictionary of Current English"
has given as its third meaning: "Task, duty, concern or

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 undertaking to do a work". Some succinct illustrations have
also been given in the said dictionary to drive the meaning
home. They are: "It is a teacher's business to help his pupils;
I still make it my business to see that money is paid
promptly; that is no business of yours". In none of the
illustrations the word "business" is used to denote anything
connected with trade or commerce. We think that, the word
business used in Section 12 of the Act has been intended to
convey the meaning as the work or task undertaken by the
person concerned which are not restricted to trade or
commercial work alone. Hence the interpretation given to
the words "trade or business" appearing in Article 19 of the
Constitution, or in the Rent Control Law is not apposite in
the context of Section 12 of the Act. We may observe with
great respect that the Division Bench of this Court in
Travancore Devaswom Board v. Prushothaman (1989 2 LLJ
114), has not adopted any principle in conflict with the
above view.
14. In Bata Shoe Company v. Union of India AIR 1954
Bombay 129 Gajendragadhkar, J. (as he then was) observed
that the word "business" in its wider connotation may have
more extensive meaning than the word "trade". His Lordship
then quoted Jessel M.R. in Smith v. Anaerson 1880 15 Ch D
247 who stressed the meaning of business as "anything
which occupies the time and attention and labour of a man
for the purpose of profit". This wide meaning was followed
in Public Works Dept. v. Commissioner 1981 Lab I.C. 498
by a Division Bench consisting of Dr. A.S. Anand, J. (as His
Lordship then was) and I.K. Kptwal, J. in Workmen's
Compensation cases. We are, therefore, emboldened by the
above decisions in adopting the wide connotation for the
word "business" in the present case.
15. Our next endeavour is to ascertain what the legislature
meant by the word "ordinarily" in Section 12 of the Act. The
word "ordinarily" is an elastic term. It is seen used in
different statutes. The word has different shades of meaning
in different contexts (vide Kailsdh Chandra v. Union of
India (1961-II-LLJ-369) (SC). If it is used for referring to

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 jurisdictional aspects it may mean "in large majority of
cases but not invariably". When the word is used for
referring to residential qualification it may sometimes
include even temporary residence. But the word "ordinarily"
is employed in Section 12 of the Act for a different
connotation. That has to be understood in the background of
the preceding portion in the section wherein execution of the
work carried out through any other person contracted by the
principal for this purpose is mentioned. What the principal
would have done if he has not contracted with another
person to carry out that work? He himself would have
normally done that work or caused it to be done under his
supervision. The word "Ordinarily" is used in Section 12 of
the Act for projecting that idea. So the word "ordinarily"
in Section 12 of the Act means "otherwise, normally". We
cannot confer any other meaning to the term "ordinarily" as
it appears in the section. We did not find anything contrary
to the above legal position in the decision of the Division
Bench of this Court in Vijayaraghavan v. Velu (1973 I LLJ
490).
16. Learned counsel for the appellant lastly contended that
as the soil was sold to the second respondent, appellant had
lost any ownership thereof and hence he cannot be made
liable. What was sold by the appellant was only the soil and
not the land. As long as the soil was not separated and
transported, it remained as part of the land. The work
involved in transforming land into soil must necessarily have
been done when the ownership and title of the land remained
with the appellant. So the appellant cannot disclaim liability
in that line either.
17.When the legal position is understood thus, we are of the
view that appellant is the employer vis-a-vis the victims, as
per Section 12 of the Act. Appellant is therefore liable to pay
the compensation due under the Act to the claimants.
Accordingly, we dismiss the appeals.‖
(Emphasis supplied)

14. In Public Works Department v. Commissioner, Workmen

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Compensation, (1981) Lab I.C. 493, the Division Bench of Jammu
and Kashmir High Court held that the word "business" occurring in
Section 12 has to be given an extended meaning, so as to include even
an activity which engages time, attention or labour as a principal
serious concern or interest of the Government or an individual without
an element of profit in it. The relevant portion of the judgment is
reproduced hereunder:
―4. Unlike the word "trade" which merely; connotes
commercial activity, the word "business" is of much wider
import and may be used in different contexts in different
senses. Used in one context, it may imply a particular
occupation or employment to earn livelihood or gain, whereas
used in a different context it may mean an activity which
engages time, attention, or labour as a principal serious
concern or interest. Its connotation may thus vary with the
varying contexts in which it is used. In taxins, statutes for
instance, the word "business" will always denote an activity
carried out with the object of earning profit, though the same
may not be true when used in relation to other activities. Used
in broader sense, a person building his residential house or a
Government constructing a road, may well be said to do
business in so far as the said activity engages his or its time,
attention or labour as principal serious concern or interest. In
saying so, I derive support from the following observations
made by their Lordships of the Supreme Court in M/s.
Hindustan Steel Ltd. v. State of Orissa, AIR 1970 S C 253:
"The expression "business" though
extensively used is a word of indefinite import, in
taxing statutes it is used in the sense of an
occupation, or profession which occupies the time,
attention and labour of a person, normally with the
object of making profit. To regard an activity as
business there must be a course of dealings, either
actually continued or contemplated to be

FAO 135/2016 Page 12 of 70

 continued with a profit motive, and not for sport or
pleasure."
Its amplitude has been more exhaustively dealt with by
Gajendragadkar J. in Bata Shoe Co. Ltd. v. Union of India,
AIR 1954 Bom 129 wherein it has been observed :
"In its wider denotation, the word "business"
may have a more extensive meaning than the word
"trade". But in the context, we think it would be
safe to adopt the definition of the word "business"
laid down by Jessel M. R. in 'Smith v. Anderson',
(1880) 15 Ch D 247 at p. 258 (B), where the
learned Judge has observed that 'anything which
occupies the time and attention and labour of a
man, for the purpose of profit, is business". It is
true that the word "business" in its most general
and unrestricted sense may conceivably cover all
human activities. It may even include the business
of governing a country. But we are disposed to
hold that the context in which the word has been
used in S. 18 (b), Presidency Small Cause Courts
Act, S. 20, Civil P. C. and CL 12 of the Letters
Patent, requires that this word should not be
construed in such a wide and unrestricted sense."
5. The next question which then falls for determination is; what
meaning should be assigned to the word "business" occurring
in Section 12?
6. It is well settled that where a word used in a statute is
capable of two meanings, only that meaning should be
assigned to it which carries out its object. This rule 'of
interpretation of statutes has been often times affirmed by their
Lordships of the Supreme Court. In M/s. New India Sugar
Mills Ltd. v. Commr. of Sales Tax, Bihar, AIR 1963 S C 1207 it
was held:
"....It is a recognised rule of interpretation of
statutes that the expressions used therein should
ordinarily be understood in a sense in which they
best harmonise with the object of the statute, and
which effectuate the object of the Legislature. If an

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 expression is susceptible of a narrow or technical
meaning, as well as a popular meaning the Court
would be justified in assuming that the Legislature
used the expression in the sense which would carry
out its object and reject that which renders the
exercise of its powers invalid."
Again, in South Asia Industries Pvt. Ltd. v. S. Sarup Singh AIR
1966 SC 346, it was observed:
".... A court would be fully justified in holding
that in such a case it was intended that an order
for recovery of possession can be made against the
assignee alone for that would enable the object of
the statute which was to enable the landlord to
recover possession, to be achieved. An
interpretation which defeats the objects of a statute
is, therefore, of course, not permissible."
7. The only object behind the provisions of Section appears to
be to secure speedy payment of compensation resulting from
injuries to a workman. The legislature intended to make doubly
sure payment of such compensation to the workman, or to his
dependants in the event of his death, as it could not exclude the
possibility of the contractor being in some cases a man of
straw, whose straitened circumstances might jeopardise the
changes of recovery of such compensation. If, therefore, a
restricted meaning is given to the word "business" so as to
imply an activity with the object of earning profit only, the
object behind Section 12 is likely to be defeated. Not only to
speak of the Government performing its various functions of a
welfare State, even many other persons may have to be kept
out of the purview of Section 12 by assigning such a limited
meaning to the word "business" occurring in it. Such an
interpretation would absolve from liability to pay
compensation even a person who would appoint a contractor
for building his residential house, as building one's residential
house cannot be said to have the object of earning profit or
gain behind it. It cannot, as such, be said to partake of
"business or trade" in commercial sense. Merely because the
word "business" is clubbed with the word "trade" in Section

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 12, it should not be inferred that it has been used in simple
commercial sense. Both these words have to be read
disjunctively and rot conjunctively. Similarly, the doctrine of
immunity attached to sovereign acts of State cannot be
extended to acts like constructing roads or bridges, as such
acts are not of such a nature as cannot be done by a private
person. Viewed thus, the word "business" occurring in Section
12 has to be given an extended meaning, so as to include even
an activity which engages time, attention, or labour as a
principal serious concern or interest of the Government or an
individual without an element of profit in it. It is one of the
meanings given to the word "business" in dictionary. (See
Webster's New International Dictionary, Vol. I, Ed. 1926).
Construction of roads being one of the principal concerns of
the Public Works Department of the Government inviting its
serious attention, it is "business" within the meaning of Section
12 and the appellant was thus the principal employer vis-a-vis
the deceased labourers.‖
(Emphasis supplied)

15. In Bala Mallamma v. Registrar, Osmania University, 2002

ACJ 986, a claim for compensation was made for the death of a
workman who fell down from a height of 40 feet while whitewashing
the walls of Osmania University Science College. The claim was
contested by the University on the ground that the University was
constituted for imparting education and the whitewashing of the walls
of the University was not a part of the ―trade‖ or ―business‖ of the
University. The Division Bench of Andhra Pradesh High Court,
following Public Works Department v. Commissioner, Workmen
Compensation, (supra), held that whitewashing/colour washing was a
regular feature of the activity of the University and it could be treated
ordinarily as part of the ―business‖ of the University because the

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words 'trade' or 'business', as used in the Act, have to be understood in
the context in which the Act was enacted, failing which the very
raison d'être of Section 12 of the Act would be defeated. The relevant
portion of the judgment is reproduced hereunder:
―14. The learned Counsel for the applicant has drawn our
attention to the judgment of the Supreme Court reported in
Mohan Lal v. R. Kondaiah, . Para No.3 of the said judgment is
important for the purpose of the present case, which is
reproduced below:
"The expression business has not been
defined in the Andhra Pradesh Buildings (Lease,
Rent and Eviction) Control Act, 1960. It is a
common expression which is sometimes used by
itself and sometimes in a collection of words as in
"business, trade or profession". It is a word of
large and wide import, capable of a variety of
meanings. It is needless to refer to the meanings
given to that term in the various Dictionaries
except to say that every one of them notices a large
number of meanings of the word. In a broad sense
it is taken to mean 'everything that occupies the
time, attention and labour of men for the purpose
of livelihood or profit'. In a narrow sense it is
confined to commercial activity. It is obvious that
the meaning of the word must be gleaned from the
context in which it is used. Reference to the
provisions of the Constitution or other statutes
where the expression is used cannot be of any
assistance in determining its meaning in Section
10(3)(a)(iii) of the Andhra Pradesh Buildings
(Lease, Rent and Eviction) Control Act, 1960. It is
not a sound principle of construction to interpret
expressions used in one Act with reference to their
use in another Act; more so if the two Acts in
which the same word is used are not cognate Acts.
Neither the meaning, nor the definition of the term

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 in one statute affords a guide to the construction of
the same term in another statute and the sense in
which the term has been understood in the several
statutes does not necessarily throw any light on the
manner in which the term should be understood
generally. On the other hand, it is a sound, and,
indeed, a well-known principle of construction that
meaning of words and expressions used in an Act
must take their colour from the context in which
they appear".
15. This judgment reiterates a principle of interpretation and
the principle is that the meaning of the word must be gleaned
from the context in which it is used. Meaning assigned to a
word in a particular Act may mean one thing and the meaning
of the same term may give a different meaning when used in a
different Act. Therefore, the word 'trade' or 'business' as used
in this Act have to be understood in the context in which this
Act has been enacted. Basically the Act has been enacted to
provide compensation to the workers suffering during the
course of employment. It is also the purpose of the Act that
they should get speedy remedies and it appears that the
intention of enacting the Section 12 of the Act was only to
ensure that compensation is paid by the principal expeditiously
and if this purpose of the Act and the provision are kept in
mind, then the word 'trade' or 'business' may not have the same
meaning which it would have, for instance, when used in
interpreting a taxing statute. If the plea of the University is
accepted that they are engaged in imparting education,
conducting examinations and conferring degrees only and
cannot be termed to be doing any business or trade and hence
they are not liable to pay compensation, then any person
engaged for similar activity by any Government Department,
any University, any hospital, if faced with an accident, would
not be able to get compensation in terms of Section 12 of the
Act although such a person would be a workman under the
Act. Similarly if an individual who wants to construct a
residential house of his own engages a person for construction
of the house and if such a person faces an accident during the

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 course of the building of the house, he would be remediless
under the Act. Even otherwise the normal activity of the
University is imparting education, conducting of examinations
and conferring degrees, this they cannot do without having
proper buildings.‖
(Emphasis supplied)
16. In Govind Goenka v. Dayawati, 2012 (2) TN MAC 105 (Del.),
the appellant engaged a contractor for repairs and alterations in his
shop. A portion of the wall fell on a labourer who suffered fatal
injuries whereupon a claim for compensation was made against the
owner who contested it on the ground that the deceased labourer was
employed by the contractor. This Court, following the judgement of
Division Bench of Andhra Pradesh High Court in Balla Mallamma v.
Registrar, Osmania University (supra), held that the word ―business‖
in Section 12 has to be given an extended meaning. The relevant
portion of the judgment is reproduced hereunder:
― 6. As would be seen from the definition of "employer"
envisaged under Section 2(e) of the Act, the same is of wide
amplitude and would certainly encompass the present
appellant who at the relevant time had employed the services
of the contractor to carry out the job of repairs and alterations
in his shop. The contractor who had taken the services of the
deceased workman as a labourer no doubt will also be covered
within the definition of employer but qua the appellant he
would remain his agent and the appellant would be the
principal employer. There is thus no difficulty to arrive at a
conclusion that the appellant for all intents and purposes was
the principal employer who had engaged the services of an
Agent contractor to carry out the said job of the repair work.
xxx xxx xxx
9. So far as the interpretation of section 12 of the Act is
concerned, again reference has been made to the principal
making a contract for the purposes of trade or business, the

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 judgment of the Division Bench of Andhra Pradesh High Court
in the case of Balla Mallamma v. Registrar, Osmania
University, Hyderabad and Anr, 2001(2)T.A.C.182(AP) is a
complete answer………
10. As would be seen from the above judgment of the Hon'ble
Division Bench where the Osmania University, Hyderabad had
engaged services of a contractor for white washing and
painting the walls of the University and a worker employed by
the contractor while white washing the walls had fallen and
died and the objection raised was that whitewashing the walls
of the University would not be an activity which could be
construed as an activity for the purposes of trade and business
of the University. Giving an extended meaning to the word
"business" employed in the said section 12, the Hon'ble
Division Bench took a view that the restricted meaning given
to the said expression would defeat the very raison d‘être
of section 12 of the Act.
12. The said interpretation given by the Division Bench also
finds support from the amendment brought by the Parliament
in the definition of Section 2(1)(n) of the Act omitting the
words "Casual workman" and a workman who is employed
other than for the purposes of employer's trade or business.
Reverting back to the facts of the present case, here also the
deceased workman was employed by the contractor and
although for carrying out repair job it might not be the
principal activity of the appellant but yet the appellant cannot
escape its liability keeping in view the object of the said
beneficial piece of legislation.
13. For the expeditious grant of compensation in the event of
such accidents taking place in favour of the victim's dependent
members, this act was enacted and a hyper technical
interpretation of the statute would not only defeat the purpose
of the said Act but would be adding insult to injury………‖
(Emphasis supplied)

17. In Raj Pal Saini v. Kamla, (2016) 151 FLR 302, a mistry
suffered an electric shock during the construction of second floor of a

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building. The owner of the building contested the claim on the ground
that he had engaged the contractor who in turn had engaged the
employee. Following Govind Goenka (supra), this Court held the
owner liable to pay compensation under Section 12 of the Act. The
relevant portion of the judgment is reproduced hereunder:
―6. On careful consideration of the rival contentions of
the parties, this Court is of the view that the appellant,
being the principal employer, is liable to pay the
compensation to the respondent who was admittedly
engaged in the construction work at the petitioner‘s
house and was electrocuted on 16th December, 2009. This
case squarely covered by Govind Goenka v. Dayawati
(supra) in which this Court held that the principal
employer cannot escape its liability on the ground that
the deceased employee was employed by the contractor.‖
(Emphasis supplied)

18. In Delhi Development Authority v. Raju @ Maya Ben, (2014)

143 DRJ 612, an electrician appointed by a contractor in a high rise
building fell down and suffered 100% disability. Applying Section 12
of the Employees‟ Compensation Act, this Court upheld the
compensation awarded against the principal. The relevant portion of
the judgment is reproduced hereunder:
―4. As per Section 12 of the Act two persons are liable to the
employee who suffers an accident arising out of and in the
course of the employment. One is the parent employer who
employed him and second is the person with whom the
employee is working on the directions of his parent employer,
called the principal under Section 12. As per Section 12 of the
Act the person with whom the employee is working, though not
employed by such a person, such person became a principal
employer and an employee is entitled to claim compensation
from the person with whom he is working i.e. the principal

FAO 135/2016 Page 20 of 70

 although not directly employed by the said person/principal.
The right given under Section 12 of the Act is only an
alternative right and an employee can also sue his parent
employer. In the present case, the parent employer respondent
no. 2 herein and the person with whom the respondent no.1
was working was the appellant no.1. The requirements of
Section 12 of the Act are therefore clearly satisfied in the facts
of the present case.
5. The issue argued before this Court on behalf of the
appellant is that since the respondent no. 1 was not employed
by the appellant no.1, therefore, no liability arises of the
appellant no.1, in my opinion, is clearly answered against the
appellant no.1 in view of the clear language of Section 12 of
the Act which has been reproduced above. Appellant no.1
therefore, in terms of Section 12 of the Act is principal in case
injuries were caused to respondent no.1/employee while
working with the appellants, although the respondent no. 2 was
the actual/parent employer of the respondent no. 1 herein.‖

19. In Lokhart Estate, Devicolam v. Kaliappan, 1976 (1) L.L.N.

532, the Division Bench of Kerala High Court held the tea estate liable
to pay compensation in respect of death and injury of workmen
employed through the contractor for construction of cooli-lines for the
estate workers as construction of cooli-lines was part of their business.
The relevant discussion of Section 12 in the said judgment is
reproduced as under:
―4………… It is necessary, in order to render a person, who
has not directly employed the workman or workmen
concerned, liable to answer the claim for compensation, to
show the existence of various requisites which would
attract Section12(i) and one of them is that the principal
employer has, in the course or for the purpose of his trade or
business contracted with any other person for the execution by
or under the contractor of the whole or any part of any work

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 which is ordinarily part of the trade or business of the
principal. It is said that the trade or business of the principal
here is that of producing tea in the Estate, manufacturing it,
preparing it for the market and marketing it and any work
which is ordinarily part of this work could alone fall within the
scope of Section12(i). Consequently, it is said that if the
workmen were engaged in such activities as construction of
cooli-lines when they met with the accident, even if the cooli-
lines were constructed for the purposes of the Estate, that
would not enable a claim to be made against the Estate as the
principal employer. This contention calls for examination of
what the trade or business of the principal is. The term ―trade"
or "business" would not have been used in Section 12(i) to
mean the same, though in certain contexts they may bear the
same meaning. The very fact that both these terms are
employed in the section would indicate that they connote
different ideas and they do not cover the identical field, "trade"
as generally understood means activities of buying and selling
and the business which is related to such buying and selling
whereas "business" is a term of such larger import. All
categories of business need not be trade, since there are many
categories in which there is no element of trade at all, Taking
for instance, the case of a tea estate, the trade may refer to the
activities of buying and selling, buying for the purpose of the
business of the tea estate and selling the products of the tea
estate. Business is a concept which takes in all the activities
including the running of a hospital for the Estate, the
maintenance of cooli-lines, providing such amenities as are
agreed to between the management and the labour and all
other incidental activities. It goes without saying that in the
assessment to income-tax, if the Estate is to claim deduction
for expenses of business, expenses such as those incurred for
the purpose of running a hospital for the benefit of the Estate
will be claimed as business expenses though they are not to be
treated as trading expenses.
5. In a different context the question of the distinction between
business and trade was considered by the Chancery Division in

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 the decision in, In re A Debtor (1927 (1) Chancery 97). Sir
Scrutton, L.J., said in that case:
"The word 'trade' is often confined to buying
and selling commodities. Where to draw the line
between what is a profession and what is a trade is
a matter which it is not possible to deal with by
any general definition. 'Business' is a much wider
term than 'trade.' The word 'business' at least
covers a continuous occupation involving
liabilities to others.‖
We cannot agree with the counsel for the principal employer
that the construction of cooli-lines in the estate is not part of
the business of the principal. Section 15 of the Plantations
Labour Act, 1951 obliges every employer to provide and
maintain for every worker and his family residing in the
plantation necessary housing accommodation. It is a statutory
duty. In discharge of such duty, the employer may himself
construct houses for residence of the workers or such work
may be done through a contractor. If he does such work by
himself, it cannot be said that it is not part of his business, for,
the business is not concerned merely with growing tea and
selling it. Tea can be grown only in the tea estate and a tea
estate could be run only in accordance with certain regulations
and one of the regulations is that quarters are to be provided.
Even if there be no statutory obligation if it is the usual
requirement of the business or a term of the employment, then
work such as construction of cooli-lines would be part of the
business of the employer. If that be so, the consequences
cannot be avoided by entrusting the work to a contractor.‖
(Emphasis supplied)
20. In Kerala Balagram v. Kochumon, 1997 (3) L.L.N. 921, an
employee suffered amputation of two fingers while working for a
charitable society. The application for compensation was contested on
the ground that the appellant was a charitable society and conducts no
―trade" or "business" and therefore, the deceased was not be a

FAO 135/2016 Page 23 of 70

workman. The Kerala High Court rejected the argument and held that
the agricultural operations of the charitable society are covered in the
term "business" and merely because the nature of the society is
charitable, it will not get absolved from the liability under the Act. The
relevant portion of the judgment is reproduced hereunder:
―3.…………The words 'trade or business' are used in several
statutes like fiscal statutes, rent laws and labour laws, apart
from Article 19(1)(g) of the Constitution of India. The meaning
ascribed to such words shall always be with reference to the
context and with respect to the content of the statute itself.
Therefore, the meaning that is ascribed in one statute cannot
be taken to interpret the very same words in another statute
legislated with altogether a different intention and object. The
said words in the fiscal statutes or rent laws cannot have a
similar meaning when employed (sic) in any welfare
legislation like Workmen's Compensation Act.
4. Even if profit motive must be there, to consider a venture as
'business', even then the appellant cannot escape from the
liability. As is seen from Schedule II the workmen engaged in
farming and agricultural operations come within the definition
of the 'workman'. The appellant society is also conducting
agricultural operations and farming. Even if private individual
or society conducts agricultural operation for in, house use
and consumption and not for the purpose of sale, there will be
a profit element in the conduct of agriculture. No society or
individual will, under normal circumstances, without
expecting a surplus, invest funds for agricultural operations.
The appellant society conducting a destitute home in
conducting agricultural operation, because it is more
profitable to produce paddy by itself rather than purchasing it
from outside for feeding the children and with an intention
that by investing funds in the agriculture it can produce paddy
worth more than the amount invested. That itself is sufficient
profit motive. Therefore, the agricultural operations of the
appellant come within the term 'business' employed in Section
2(1)(n) of the Act. Merely because the nature of the appellant

FAO 135/2016 Page 24 of 70

 society is charitable, it will not get absolved from the liability
under the Act to compensate the workman who had met with
an accident during the course of employment in connection
with its business.‖
(Emphasis supplied)
21. In Assistant Director of Horticulture Division, Anna Pannai v.
Andi, 1993 (3) L.L.N 493, the horticulture department allotted the
work for digging a well. A labour employed by a contractor for
digging the well died in an accident during the course of employment
whereupon the legal representatives raised the claim against the
government which was contested on the ground that the digging of the
well was entrusted to a contractor who alone is liable to pay
compensation. It was further contended that digging of a well is
neither a ―trade‖ nor a ―business‖. Rejecting this contention, the
Madras High Court held the construction of wells and deepening of
existing wells as ordinary work of P.W.D., and therefore, it would be
considered as a ―business‖ within the ambit of Section 12 of the Act.
The relevant portion of the judgment is reproduced hereunder:
―8. In this case, the digging of the well is the work that was
entrusted to the contractor, for which purpose, the deceased
employee was employed. The question is, whether the digging
of well is a trade or business.
9. In a Welfare State, any activity by the State for the welfare
of the people, even though cannot be termed as 'trade', it will
come within the definition of 'business'. In Bai Mani and
Others v. Executive Engineer 1987 I.A.C.C. 76 the Gujarat
High Court had occasion to consider a case where the State
Government through its Public Works Department, was doing
excavation and construction work for the purpose of
constructing a dam. In that case, the Court said that the word
'business' has a much wider meaning and covers activities

FAO 135/2016 Page 25 of 70

 which may not be commercial and may include the
construction work carried out by the Public Works
Department. In that case, the learned Judge of the Gujarat
High Court followed an earlier decision of the same Court
reported in Executive Engineer, Kadana Dam and Another v.
Phebiben and Others 1977 A.C.J. 204. That was also a case of
construction of a dam by P.W.D. through a contractor. In that
case, the Court said that the word 'trade' means 'commercial
activity'. But the word 'business' has a much wider connotation
and covers activities which may not be commercial and may
include the construction work carried out by the Public Works
Department. Trade and business cover not only commercial
activity but also many other activities which will he covered by
the term 'business'. In the earlier decision of the Gujarat High
Court which was followed by the same Court in 1987 1 ACC
76, it was said that, 'Construction of all sorts of work
indisputably is the ordinary activity of the Public Works
Department and one such ordinary activity was sought to be
carried out through the contractor'. In this case, due to
drought conditions, naturally, construction of wells and
deepening of existing wells is one of ordinary work of P.W.D.,
one of the State Departments and therefore, it could be
considered as a 'business' coming within the scope of Sec. 12
of the Workmen's Compensation Act. In that view of the 30
matter, the finding of the authority that all the respondents are
liable to compensate the claimant is justified.‖
(Emphasis supplied)

22. In Koodalingam v. Superintending Engineer, Project Circle,

Public Works Department, Kozhikode, 1994 (2) L.L.N. 779, the
Division Bench of Kerala High Court held that Section 12 would
apply notwithstanding the agreement or contract entered into between
the principal and contractor regarding their liability for payment of
compensation under the Act. The agreement of contract between the
principal and the contractor governs only their inter-se rights and

FAO 135/2016 Page 26 of 70

liabilities, and cannot affect the right of the workmen or their
dependants to get the compensation form the principal or from the
contractor at their option. Relevant portion of the judgment is as
under:
―11..........The avowed object with which Section 12 was
enacted as part of the Act as seen from the Report of the Select
Committee is to enable the workmen or the dependents of the
workmen to proceed against the contractor or against the
principal or both and to make the contractor liable to
indemnify the principal in all cases in the absence of any
agreement to the contrary. The Report of the Select Committee
would also show that while finalising the provision the
Committee has eliminated the provision which in the Bill as
introduced exempted the Government and local authorities
from liability imposed by this clause. The Committee has
observed that these authorities are liable just in the same
manner as private individuals. If these were the avowed
objects with which Section 12 of the Act was incorporated in
an enactment which itself is a beneficial legislation intended to
confer benefits on the workmen, we are of the view that the
provisions in Section 12(1) would apply notwithstanding the
agreement or contract entered into between the principal and
contractor regarding their liability for payment of
compensation under the Act. So long as the Section has not
been made specifically subject to any contract to the contrary,
the Section would have application in all cases where the
conditions specified in the Section are satisfied. The fact that
no non obstante provision is used in the Section may not be a
sufficient reason to exclude the application of the Section to
cases where the conditions are satisfied. At best, agreements or
contracts entered into between the principal and contractor
can govern only their inter se rights and liabilities and cannot
affect the right of the workmen or their dependents to get
compensation either from the principal or from the contractor
at their option. Right to get indemnified from the contractor
specifically conferred on the principal under Section 12(2) of

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 the Act sufficiently safeguards the interest of the principal who
has entrusted the work to the contractor stipulating the liability
under the Act.‖
(Emphasis supplied)

23. In Superintending Engineer, Mettur Thermal Power Station,

Tamil Nadu Electricity Board, Mettur v. Veerappan, 2011 (2) TN
MAC 88, the Electricity Board entered into an agreement with the
contractor to remove the coal dust whereupon the contractor engaged
the workmen. While collecting coal from heap of waste, the coal
suddenly slided on the workmen resulting in fatal injuries. The claim
for compensation was made against the Board under Section 12 of the
Employees‟ Compensation Act. The Madras High Court examined
Section 12 and held that the removal of coal ash was an ordinarily a
part of ―trade‖ or ―business‖ of the Electricity Board under Section
12 and therefore, the Board was liable to pay the compensation.
Relevant portion of the said judgment is reproduced hereunder:
―44. The contention of the Board that they have to be absolved
of their liability arises only in a case, if the contract was to do
certain things, not ordinarily a part of business or trade. If
removal of coal ash was a requirement, incidental or
connected with the generation of electricity, the business of the
Principal Employer, then the work would have been done by
the Board or through an Immediate Employer, under his
supervision, if he had contracted the Immediate
Employer/Contractor. …………
45. Merely because coal was sold for profit to the Immediate
Employer the Board cannot be permitted to contend that the
removal of coal dust is not ordinarily a part of their trade or
business. May be coal was sold, after removal, by the
Contractor, but that was not the main activity for which, the
Contractor was engaged. The activity for which the work was

FAO 135/2016 Page 28 of 70

 entrusted to an Immediate Employer, viz., the Contractor was
ordinarily a part of their work, i.e., trade or business. On the
facts of this case and applying the principles stated supra in
various decisions, this Court is of the view that the contract
executed by the Electricity Board with the Contractor, forms
part of the trade or business and hence, they are liable to pay
compensation to the legal representatives of a deceased
workmen.
46. Yet another aspect to be considered is whether the
execution of any agreement by the Immediate Employer, viz.,
the Contractor, to indemnify the Principal Employer, the
Electricity Board, would disentitle the injured workman or the
legal representatives from claiming compensation against the
Principal Employer. Such an agreement or contract entered
into between the Principal Employer and Contractor can only
govern their inter se rights and would not in any way affect the
rights of the workman or the dependents to get their
compensation either from the Principal Employer or from the
Contractor. Option is given to the claimants to claim
compensation from anyone of them or both.
47. Provision of Section 12(1) of the Workmen's Compensation
Act, would apply notwithstanding the agreement or contract
entered into between the Principal Employer and Contractor
regarding their liability for payment of compensation under
the Act. Section 12(2) of the Workmen's Compensation Act,
confers a right on the Principal Employer, who is made liable
to pay compensation under the provisions to get himself
indemnified by the Contractor and in such circumstances, both
the Principal Employer and the Contractor would be jointly
and severally liable to pay compensation.‖
(Emphasis supplied)

24. In Panditrao Shamrao Bhongade v. Sunanda, Widow of

Nagesh Dongra, 2000 (2) L.L.N. 527, a claim for compensation was
made in respect of the death of a labourer who suffered electric shock
during construction of a shopping complex. The owner of the

FAO 135/2016 Page 29 of 70

shopping complex contested the claim on the ground that he was
constructing a shopping complex on his own land and it is not the
―trade‖ or ―business‖ of the appellants to construct buildings and
therefore, they are not liable under Section 12 of the Employees‟
Compensation Act. The Nagpur Bench of Bombay High Court
rejected the argument and held the owner liable to pay the
compensation. Relevant portion of the said judgment is reproduced
hereunder:
―2. The original non-applicants No. 1 to 3 (appellants
herein) owned and possessed a plot on the southern bank of
Amba Nala at Amravati where they were making the
construction of their building known as 'Bhangade Complex'
(hereinafter referred to as shopping complex). They employed
original non-applicant No. 4 as Contractor for carrying out the
construction work. Deceased Nagesh was employed by the
Contractor original non-applicant No. 4 for construction work
as a labourer. On May 23, 1990 at about 3.30 p.m. the non-
applicant No. 3 asked Nagesh and 3/4 other workers, who were
doing the work at construction site of the said complex to lower
down the electric motor pump in the well of the non-applicants
No. 1 to 3. The water from that well was being utilized for the
construction of the said complex and while doing work by
lowering down the electric motor pump, deceased Nagesh
received electric shock and ultimately died.
xxx xxx xxx
9. The learned Counsel for the appellants emphasised on
the terminology in the course of or for the purpose of his trade
or business contracts with any other person for the execution by
or under the contractor of the whole or any part of any work
which is ordinarily part of the trade or business of the principal,
the principal shall be liable to pay any workman employed in
the execution of the work .....". What is contended is that the
appellants were constructing a shopping complex on their own
land. It is not trade or business of the appellants to construct

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 buildings and, therefore, they cannot be said to be principal
employers.
xxx xxx xxx
13. However, what is contended by the learned Counsel for the
appellants Mr. Chandrukar is that the appellants were
constructing the shopping complex on their own land and it was
not their regular trade or business to do construction work by
purchasing different plots and they were not in any way builders
by profession. To accept the argument would tantamount to not
only negativing the intention of the Legislature behind the
provision but to adding something to the provisions of Section
12 which states that it must be in the course of trade or business
of the person referred to as the principal who contracts with any
other person. A case wherein a person is building his own house
on his land or on land possessed by him has engaged an
contractor may not be covered but where a person is
constructing a building either for constructing and disposing of
and selling residential flats or for constructing a market
complex for selling the shops or leasing them out then it would
be difficult to comprehend that it was not in the course of his
trade or business. In other words, it is necessary to find that it is
his regular business to purchase plots and construct buildings
thereon. This would mean adding the word "regular" to the
provision of Section 12 which is against all the principles of
interpretation. The Legislature is presumed to know its business
well and when the Legislature has not used the words as "in the
course of regular trade or business" it is not possible to accept
the arguments of the learned Counsel for the appellants and to
hold that since it was not a regular business of the appellants to
construct shopping complex or buildings, they are not in the
position of the principal employers.
xxx xxx xxx
15……………While interpreting the provisions of
Workmen's Compensation Act, it must be borne in mind that it is
a beneficial legislation and should not be interpreted in a
manner so as not to deprive the claimant-workman of the
benefit of the legislation specially by adding certain words to
the terminology used in the statute. Since the statute does not

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 use the words in Section 12 as "in course of regular trade or
business," it must be accepted that it is only "in course of trade
or business" and if a person builds or constructs even one
building for sale of residential flats or for selling or leasing out
residential flats or shops, then it becomes his business. The sole
purpose of entering into such business is to earn profit and it
would be travesty of justice to hold that it is not his trade or
business since he was not regularly indulging into that activity.
In this connection, the learned Counsel for the respondents
relied on a decision of this Court in the case of Sarjerao Unkar
Jadhav v. Gurindar Singh and Anr., (1992 I LLJ 156) (Bom)
wherein the provisions of Section 12 were required to be
interpreted. In that case before this Court, the Electricity Board
had given a contract for painting electric poles and the
workman employed by the contractor was injured while
painting the poles. The question was, whether painting of
electric poles was ordinarily a part of trade or business of :
principal i.e. electricity board and giving a finding in the
affirmative the learned single Judge held in 1992 I LLJ 156 at
159, 160:
"9. The dispute in this case is regarding the second
condition only, there being no dispute that the
supply of electricity is the trade or business of
respondent No. 2 and the contractor was engaged
for the purpose of that trade or business. Therefore,
what is required to be considered is whether
painting electric poles is also a work which is
ordinarily a part of the trade or business of
respondent No. 2 and this requires to be examined in
the context of the three decisions relied upon by Mr.
Chandrachud. No doubt, the legislature has in its
wisdom used the expression "trade or business" in
Sub-section (1) of Section 12 at two places which
could not be without any purpose. In fact, the
purpose has been brought out very succinctly in the
three decisions relied upon by Mr. Chandrachud.
However, the safer test would be that if it is
ordinarily a part of business of the principal to

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 execute certain work, then ordinarily he will do that
work by his own servants and he cannot escape the
liability for accident that takes place merely because
he has engaged a contractor. Now, in the present
case, the trade or business of respondent No. 2 is to
supply electricity. One cannot supply electricity
without having electric poles. Electric poles are not
one or two in number. They are hundreds and
thousands having regard to the area of operation of
respondent No. 2. In Bombay climate, the poles are
likely to get rusted unless painted frequently. It will
thus be an ordinary part of respondent No. 2's
business to paint the poles if it is interested in
supplying electricity continuously and properly. It is
for this reason that I am inclined to hold that the
contractor was engaged not only for the purpose of
respondent No. 2's trade or business, but the activity
in which the workman was engaged was ordinarily a
part of its trade or business. Accordingly, I further
hold respondent No. 2 responsible and liable for
compensation under Section 12(1)of the
Workmen's Compensation Act."

25. In Sardar Sewa Singh v. Hindustan Lever Ltd., 1980 (1)

L.L.N. 566, the Allahabad High Court held Section 12 of the
Workmen‟s Compensation Act to be an enabling provision for the
benefit of the workmen enacted with a clear objective that the
workmen should not be hampered by technicalities or practical
difficulties of deciphering the correct employers. A pragmatic method
has been advised for fixing the liability on the principal employer for
affording speedy relief to the workmen for payment of compensation
on account of the accident. Section 12 imposes the liability on the
principal where several tiers of contractors or petty contractors are
employed. The relevant discussion of Section 12 is as under:

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 ―3………Chapter II of the Act captioned ―workmen's
compensation‖ deals with the question of compensation
claimed by a workman. Ordinarily such claims are disposed of
under the provisions of Ss. 3 to 5. The scheme of the Act is that
the ―employer‖ as defined in S. 2(c) should be liable in the
manner mentioned in S. 3. In view, however, of the vastly
increasing ramifications of industrial establishments and the
multiplicity of immediate and indirect or remote employers
which such process inevitably involves the Legislature has
inserted a provision in the Act which may relieve a workman of
the difficulty of ascertaining with precision as to who should
be deemed to be the actual employer liable for compensation
under the Act. Section 12, therefore, provides for a case where
we have several tiers of employers or petty employers. It is a
matter of common knowledge that in big industrial
establishments important branches of undertakings are
entrusted to contractors, who may in their turn have to employ
other petty contractor working under their direction and a
workman may be actually employed by one of these aforesaid
persons and in such an elaborate hereby there may be no
direct privity of contract between the principal and the
workman in the last analysis. The workman has for all
practical purposes to deal with an immediate employer but
when it comes to lodging a legal claim for compensation on
account of an accident he is concerned with the principal
employer and not the immediate employer qua the workman.
This is an enabling provision for the benefit of the workman
and enacted with the clear objective that the workman should
not be hampered by technicalities or practical difficulties of
deciphering the correct employers. A pragmatic method has
thus been devised for fixing the liability of the principal
employer and thereby affording speedy relief to the workman
for payment of compensation on account of the accident,
though the principal has been invested with the right of
indemnifying himself from the contractor who may have
employed the workman and may have been responsible for
immediately taking work from him.‖
(Emphasis supplied)

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Effect of amendment of Workmen’s Compensation Act by
Workmen’s Compensation (Amendment) Act, 2000
26. Definition of “Workman/Employee” - The definition of
‗workman‘, as it originally existed in the Workmen‟s Compensation
Act, 1923, excluded the workmen whose employment was of a casual
nature and who were employed otherwise than for the purpose of
employer‟s ―trade‖ or ―business‖. Section 2(1) (n) of the Workmen‟s
Compensation Act, 1923 was amended by Workmen‟s Compensation
(Amendment) Act, 2000 with effect from 8th December, 2000 whereby
the words “other than a person whose employment is of a casual
nature and who is employed otherwise than for the purposes of the
employer‘s trade or business” in the definition of ‗workman‘ in
Section 2(1) (n) were omitted.
27. Section 2(1) (n) of the Workmen‟s Compensation Act, prior to
the Workmen‟s Compensation (Amendment) Act, 2000 read as under:
―Section 2(1)(n) –
―workman‖ means any person (other than a person whose
employment is of a casual nature and who is employed
otherwise than for the purposes of the employer‘s trade or
business) who is –
(i) ...
(ii) employed ****]2 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 a workman who has been injured shall, where
the workman is dead, include a reference to his dependants
or any of them.‖
(Emphasis supplied)

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28. Section 2(1)(n) of the Workmen‟s Compensation Act, after the
Workmen‟s Compensation (Amendment) Act, 2000 reads as under:
―Section 2(1)(n) –
―workman‖ means any person who is –
(i) ...
(ia)...
(ii) 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 a workman who has been injured shall, where
the workman is dead, include a reference to his dependants
or any of them.‖
29. Workmen‟ Compensation Act was again amended in 2009 by
Workmen‟s Compensation (Amendment) Act, 2009 with effect from
18th January, 2010 whereby the words ―workman‖ and ―workmen‖,
were substituted with the words ―employee‖ and ―employees‖. The
Workmen Compensation (Amendment) Act, 2009 omitted Section
2(1)(n) that defined ―workman‖ and replaced it by Section 2(1)(dd)
which defined ―employee‖, though the substance of the definition
remained the same. The aforesaid amendment also changed the name
of the Workmen‟s Compensation Act to Employee‟s Compensation
Act. Section 2(1)(dd) of the Employee‟s Compensation Act reads as
under:
―Section 2(1)(dd) –
―employee‖ means a person, who is –
(i) ...
(ii) ...

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 (iii) 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
dependants or any of them;‖

30. The definition of ―employee‖ in Section 2(1)(dd) of the

Employee‟s Compensation Act has to be read with Schedule II and the
relevant Entry No.(viii) of Schedule II reads as under:
―SCHEDULE II
[Section 2(1)(dd)]
LIST OF PERSONS WHO SUBJECT TO THE PROVISIONS
OF SECTION 2(1)(dd), ARE INCLUDED IN THE
DEFINITION OF EMPLOYEES
The following persons are employees within the meaning of
Section 2(1)(dd) and subject to the provisions of that section
that is to say any person who is –
―(viii) employed in the construction, maintenance, repair
or demolition of –
(a) any building which is designed to be or is or has
been more than one storey in height above the ground or
twelve feet or more from the ground level to the apex of
the roof; or......‖
(Emphasis supplied)

Interplay of Section 12 and Section 2(1)(dd) of the Employees

Compensation Act. (Earlier Section 2(1)(n) of Workmen’s
Compensation Act)
31. The effect of the omission of words “other than a person whose
employment is of a casual nature and who is employed otherwise than
for the purposes of the employer‘s trade or business” in the definition

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of workman in Section 2(1)(n) by the amendment in 2000 is that a
person whose employment is of a casual nature and is employed for
the purposes of the employer‟s trade or business comes within the
meaning of ―employee‖ as defined in Section 2(1)(dd) of the
Employees Compensation Act. Although the words ‗trade‘ or
‗business‘ remain in Section 12 of the Employees Compensation Act,
applying the rules of ‗purposive interpretation‘, ‗superior purpose‘,
and ‗felt necessity‘ this Court is of the view that the words ‗trade‘ or
‗business‘ in the definition of ―employee‖ in Section 2(1) (dd) were
omitted to grant all the benefits of the Act to casual employees and
employees employed other than for the purposes of employer's trade
or business.
32. In Govind Goenka v. Dayawati (supra), this Court examined
the effect of Workmen‟s Compensation (Amendment) Act, 2000 and
held that, after the amendment, the workman whose employment is of
casual nature and who is employed otherwise than for the purpose of
employer's trade or business, would also be covered within the
definition of “workman‖. Relevant portion of the said judgment is
reproduced hereunder:
―8. So far as the definition of workman envisaged in Section
2(n) of the said Act is concerned, there has been a drastic
change in the definition of the "workman" as it stood prior to
the amendment and after the amendment. Prior to the
amendment, certainly the workman whose employment was
of a casual nature and who was employed otherwise than for
the purpose of trade or business of the employer would not
fall in the said definition. However, after the amendment of
the said definition through the Amending Act 46 of 2000, the

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 Parliament had removed the said mischief which was then
prevailing and coming in the way of such casual workmen
who met with an accident during the course of the
employment unconnected with the employer's trade or
business. With the amendment of the said definition, now
certainly the workman whose employment is of casual nature
and who is employed otherwise than for the purpose of
employer's trade or business would also be covered within
the definition of workman.‖
(Emphasis supplied)

33. In Nandu @ Nandkishor S/o Laxmi Narayan Chandak v.

Sheela Bai, 2006 (1) M.P.L.J. 172, an employee met with an accident
while repairing a pump installed in sixty feet deep well situated in
residential premises which resulted in fatal injuries. The Madhya
Pradesh High Court held the deceased to be a workman within the
meaning of Section 2(1) (n) and Schedule II of the Workman‟s
Compensation Act.
34. In C. Arumugham v. Revathi, (2015) 1 TN MAC 734, an
employee fell down accidentally while painting a wall which resulted
in fatal injuries. The Madras High Court held that a person employed
in the construction of any building will come within the meaning of
―employee‖ as defined in Section 2(1)(dd) of the Employees‟
Compensation Act. The Madras High Court further held it mandatory
to deposit the entire award amount along with the interest within the
statutory period in order to maintain the appeal under Section 31 of the
Employees‟ Compensation Act and the appeal would not be
maintainable if the interest is not deposited. Relevant portion of the
said judgment is reproduced hereunder:

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 ―10. …………The effect of the said omission is that the
employees found in the list of persons mentioned in Schedule II
of the Employee's Compensation Act, 1923 are eligible to get
compensation. Clause (viii) of Schedule II of
Employee's Compensation Act, 1923 reads as follows:-
"(viii) employed in the construction, maintenance,
repair or demolition of --
(a) any building which is designed to be or is or
has been more than one storey in height above the
ground or twelve feet or more from the ground
level to the apex of the roof; "
A reading of the said provision would show that the person
employed in a construction of any building will come within
the meaning of 'employee' as defined under Section 2(1)(dd) of
the Employee's Compensation Act, 1923. As per the list of
employees given in clause (viii) of Schedule II, I am of the
opinion, even a person, who works in the house of an
individual, if sustains injuries during the course of said
employment, he is entitled for compensation under the
Employee's Compensation Act, 1923. Therefore, the question
as to whether the deceased was working in the Kalyana
Mandapam or in the house of the appellant is totally
immaterial after the omission of Section 2(1)(n) of the
Employee's Compensation Act, 1923. Therefore, the judgment
relied upon by the learned counsel appearing for the appellant
reported in (2003) 9 SCC 190 cannot be made applicable to
the facts of the present case.
11. It is the yet another submission of the learned counsel
appearing for the respondents that though a direction was
given by the Deputy Commissioner of Labour to the appellant
to pay the compensation amount along with interest at the rate
of 12% per annum after 30 days from the date of accident, the
appellant has not deposited the interest amount. Without
depositing the interest, the appellant has filed the present
appeal, which would amount to non-compliance of the
requirement of Third Proviso to Section 30(1) of the
Employee's Compensation Act, 1923. Therefore, on this
ground also, the appeal is liable to be dismissed. In this

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 regard, the learned counsel appearing for the respondents has
relied upon the decision of this Court reported in 2012(2) TN
MAC 750 - Oriental Insurance Co. Ltd. v. R.Mahalingam,
wherein, this Court, by relying upon the judgment reported in
1993 ACJ 736 ( J & K) - J & K SFC v. Ghulam Mohd, has held
as follows:-
"21. Appeal in hand is not accompanied by
the requisite certificate and therefore, instead of
certificate, a letter addressed to the Commissioner
enclosing a cheque accompanying the
Memorandum of appeal cannot be termed to be the
compliance to the requirement of Third Proviso
to Section 30(1) of the Act, 1923. The Insurance
Company / appellant having not deposited the
interest accrued on its failure to deposit the
amount within 30 days from the date of receipt of
order and as the Memorandum of Appeal is not
accompanied by a certificate by the Commissioner
to the effect that the Appellant Insurance Company
has deposited with him the amount payable under
the order appealed against is not sufficient
compliance of the requirement of Third Proviso
to Section 30(1) of the Act, 1923 and as such I hold
that the appeal filed by the insurance company is
not maintainable."
As per Section 30(1) of the Employee's Compensation Act,
1923, deposit of award amount with interest within the
statutory period is mandatory and only if the appellant satisfies
the requirement in filing the appeal, the appeal could be
entertained. But, here, the interest was not deposited by the
appellant. Now, the appellant herein has taken out an
application in M.P.No.1 of 2014 to condone the delay of 919
days in depositing a sum of Rs.1,43,568/- being the interest of
the award amount of Rs.7,97,600/- and another application in
M.P.No.2 of 2014 to permit him to deposit a sum of
Rs.1,43,568/- towards interest on the award amount of
Rs.7,97,600/-. I find that absolutely no sufficient cause has
been made out in the application to condone the delay.

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 Therefore, I am of the opinion, since the appellant has not
complied with the mandatory requirement as per Third Proviso
to Section 30(1) of the Employee's Compensation Act, 1923, on
that ground also, the appeal is liable to be dismissed and
further, I find that no substantial question of law is involved in
this appeal to make an interference in the order passed by the
Deputy Commissioner of Labour, Coimbatore.‖
(Emphasis supplied)

Rules of Interpretation of Social welfare legislations

35. The principles of statutory construction are well settled that the
words occurring in statutes of liberal import such as social welfare
legislation and 'Human Rights' legislation are not to be put in
procrustean beds or shrunk to Lilliputian dimensions. In construing
these legislations, the imposture of literal construction must be
avoided and the prodigality of its mis-application must be recognised
and reduced. Where legislation is designed to give relief against
certain kinds of mischief, the Court is, not to make inroads by making
etymological excursions but to advance the intent.
36. It is a recognised rule of interpretation of statutes that the
expressions used therein should ordinarily be understood in a sense in
which they best harmonise with the object of the statute, and which
effectuate the object of the Legislature. If an expression is susceptible
of a narrow or technical meaning as well as a popular meaning, the
Court would be justified in assuming that the Legislature used the
expression in the sense which would carry out its object and reject that
which renders the exercise of its powers invalid.
37. It is trite law that the safe guidance for interpreting any
provision in a statute or for understanding the scope and meaning of a

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particular word in provision, is to ascertain the intention of the
legislature. However wide in the abstract, general words and phrases
are more or less elastic and admit of restriction or extension to suit the
legislative intention. The object of the legislation would afford answer
to the problems arising from ambiguities which it contains.
Purpose of Employee's Compensation Act, 1923
38. In N.P. Lalan v. V.A. John, (1972) II LLJ 273 Ker, V.R.
Krishna Iyer, J. as he then was, explained the purpose of Employee's
Compensation Act in the following words:-
―4.The Act with which I am concerned relates to workers, and the
entire purpose of the statute is to see that the weaker section of the
community, namely, the working class, is not caught in the meshes
of litigation which involves a protracted course of appeal. That is
why the statute creates a special Tribunal and provides only for a
restricted appeal ………
xxx xxx xxx
Part IV of the Indian Constitution serves as a perspective while
construing the Workmen's Compensation Act. May be that pre-
Constitution statutes were interpreted in a particular way by
Courts on certain assumptions of the State's functions at that time.
Today it is absolutely plain that the Directive Principles of State
Policy, though not enforceable by a Court, are nevertheless
fundamental in the governance of the country, and must inform the
judicial mind when interpreting statutes calculated to promote the
welfare of the working class. In fact, Article 42 enjoins upon the
State to make provision for securing just and humane conditions of
work and Article 43 compels the State to endeavour to secure, by
suitable legislation, to all workers conditions of work ensuring a
decent standard of life. Indeed, the spirit of Part IV of the
Constitution must colour the semantic exercises of the judiciary
when applying the provisions of the Workmen's Compensation Act.
If that be the approach to be made, I am clear in my mind that the
argument that the proviso to Section 30 has been interpreted
liberally in the pre-Constitution days is of no significance. The

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 same words, with socio-economic developments in society, acquire
a new emphasis in tune with the changed conditions. It is clear
therefore, that the dynamics of legal interpretation based on social
changes which have taken place in the nation's life and goals
demand ………‖
(Emphasis supplied)
Rules of “Purposive Interpretation”, “Superior Purpose” and “Felt
Necessity”
39. In Lanco Anpara Power Ltd v. State Of Uttar Pradesh, (2016)
10 SCC 329, the appellants challenged the applicability of Building
and Other Construction Workers' (Regulation of Employment and
Conditions of Service) Act, 1996 (hereinafter referred to as “the
BOCW Act”) and the Buildings and Other Construction Workers'
Welfare Cess Act, 1996 (hereinafter referred to as “the Welfare Cess
Act”) on the ground that they were registered under the Factories Act,
1948 and therefore, they were not covered by the definition of
―building or other construction work‖ as contained in Section 2(1)(d)
of the BOCW Act and, therefore, the said Act was not applicable to
them by virtue of Section 1(4) of BOCW Act. The Supreme Court
held that the “superior purpose” of BOCW Act and the Welfare Cess
Act has to be kept in mind as both these enactments namely BOCW
Act and Welfare Cess Act are social welfare legislations. It was
further observed that the concept of “felt necessity” and “purposive
interpretation” would apply since the purpose of BOCW Act is to take
care of a particular necessity i.e. welfare of unorganised labour class
involved in construction activity as stated in the Statement of Objects
and Reasons of the BOCW Act. The relevant portion of this
judgement is reproduced herein under:-

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 ―25. We have bestowed our due and serious consideration to
the submissions made of both sides, which these submissions
deserve. The central issue is the meaning that is to be assigned
to the language of Section 2(1)(d) of the Act, particularly that
part which is exclusionary in nature i.e. which excludes such
building and construction work to which the provisions of the
Factories Act apply. Before coming to the grip of this central
issue, we deem it appropriate to refer to the objectives with
which the Factories Act and the BOCW Act were enacted, as
that would be the guiding path to answer the core issue
delineated above.
xxx xxx xxx
39. ……… As pointed out above, if the construction of this
provision as suggested by the appellants is accepted, the
construction workers who are engaged in the construction of
buildings/projects will neither get the benefit of the Factories
Act nor of the BOCW Act/Welfare Cess Act. That could not have
been the intention of the legislature. The BOCW Act and the
Welfare Cess Act are pieces of social security legislation to
provide for certain benefits to the construction workers.
40. Purposive interpretation in a social amelioration legislation
is an imperative, irrespective of anything else. This is so
eloquently brought out in the following passage in Atma Ram
Mittal v. Ishwar Singh Punia [Atma Ram Mittal v. Ishwar Singh
Punia, (1988) 4 SCC 284] : (SCC p. 289, para 9)
―9. Judicial time and energy is more often
than not consumed in finding what is the intention
of Parliament or in other words, the will of the
people. Blackstone tells us that the fairest and most
rational method to interpret the will of the
legislator is by exploring his intentions at the time
when the law was made, by signs most natural and
probable. And these signs are either the words, the
context, the subject-matter, the effects and
consequence, or the spirit and reason of the law.
See Commentaries on the Laws of
st
England (facsimile of 1 Edn. Of 1765, University
of Chicago Press, 1979, Vol. 1, p. 59). Mukherjea,

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 J. as the learned Chief Justice then was,
in Poppatlal Shah v. State of Madras[Poppatlal
Shah v. State of Madras, AIR 1953 SC 274 : 1953
Cri LJ 1105 : 1953 SCR 677 : (1953) 4 STC 188]
said that each word, phrase or sentence was to be
construed in the light of purpose of the Act itself.
But words must be construed with imagination of
purpose behind them said Judge Learned Hand, a
long time ago. It appears, therefore, that though
we are concerned with seeking of intention, we are
rather looking to the meaning of the words that the
legislature has used and the true meaning of what
words [Ed.: Lord Reid in the aforecited case had
observed: (AC p. 613 : All ER p. 814)―We often
say that we are looking for the intention of
Parliament, but this is not quite accurate. We are
seeking the meaning of the words which
Parliament used. We are seeking not what
Parliament meant but the true meaning of what
they said.‖] as was said by Lord Reid in Black-
Clawson International Ltd. v. Papierwerke
Waldhof-Aschaffenburg A.G. [Black-Clawson
International Ltd. v. Papierwerke Waldhof-
Aschaffenburg A.G., 1975 AC 591 : (1975) 2 WLR
513 : (1975) 1 All ER 810 (HL)] We are clearly of
the opinion that having regard to the language we
must find the reason and the spirit of the law.‖
(emphasis in original)
41. How labour legislations are to be interpreted has been
stated and restated by this Court time and again. In M.P.
Mineral Industry Assn. v. Regl. Labour Commr. (Central) [M.P.
Mineral Industry Assn. v. Regl. Labour Commr. (Central), AIR
1960 SC 1068] , this Court while dealing with the provisions of
the Minimum Wages Act, 1948, observed that this Act is
intended to achieve the object of doing social justice to
workmen employed in the scheduled employments by
prescribing minimum rates of wages for them, and so in
construing the said provisions the court should adopt what is

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 sometimes described as a beneficent rule of construction.
In Surendra Kumar Verma v. Central Govt. Industrial Tribunal-
cum-Labour Court [Surendra Kumar Verma v. Central Govt.
Industrial Tribunal-cum-Labour Court, (1980) 4 SCC 443 :
1981 SCC (L&S) 16] , this Court reminded that semantic
luxuries are misplaced in the interpretation of ―bread and
butter‖ statutes. Welfare statutes must, of necessity, receive a
broad interpretation. Where legislation is designed to give relief
against certain kinds of mischief, the Court is not to make
inroads by making etymological excursions.
42. We would also like to reproduce a passage
from Workmen v. American Express International Banking
Corpn. [Workmen v. American Express International Banking
Corpn., (1985) 4 SCC 71 : 1985 SCC (L&S) 940] , which
provides complete answer to the argument of the appellants
based on literal construction: (SCC p. 76, para 4)
“4. The principles of statutory construction
are well settled. Words occurring in statutes of
liberal import such as social welfare legislation
and human rights‘ legislation are not to be put in
Procrustean beds or shrunk to Lilliputian
dimensions. In construing these legislations the
imposture of literal construction must be avoided
and the prodigality of its misapplication must be
recognised and reduced. Judges ought to be more
concerned with the ―colour‖, the ―content‖ and
the ―context‖ of such statutes (we have borrowed
the words from Lord Wilberforce‘s opinion
in Prenn v. Simmonds [Prenn v. Simmonds, (1971)
3 All ER 237 : (1971) 1 WLR 1381 (HL)] ). In the
same opinion Lord Wilberforce pointed out that
law is not to be left behind in some island of literal
interpretation but is to enquire beyond the
language, unisolated from the matrix of facts in
which they are set; the law is not to be interpreted
purely on internal linguistic considerations.‖

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 43. In equal measure is the message contained in Carew and
Co. Ltd. v. Union of India [Carew and Co. Ltd. v. Union of
India, (1975) 2 SCC 791] : (SCC p. 802, para 21)
―21. The law is not ―a brooding omnipotence in
the sky‖ but a pragmatic instrument of social order. It is
an operational art controlling economic life, and
interpretative effort must be imbued with the statutory
purpose. No doubt, grammar is a good guide to meaning
but a bad master to dictate.‖
44. The sentiments were echoed in Bombay Anand Bhavan
Restaurant v. ESI Corpn. [Bombay Anand Bhavan
Restaurant v. ESI Corpn., (2009) 9 SCC 61 : (2009) 2 SCC
(L&S) 573] in the following words: (SCC p. 66, para 20)
―20. The Employees‘ State Insurance Act is
a beneficial legislation. The main purpose of the
enactment as the Preamble suggests, is to provide
for certain benefits to employees of a factory in
case of sickness, maternity and employment injury
and to make provision for certain other matters in
relation thereto. The Employees‘ State Insurance
Act is a social security legislation and the canons
of interpreting a social legislation are different
from the canons of interpretation of taxation law.
The courts must not countenance any subterfuge
which would defeat the provisions of social
legislation and the courts must even, if necessary,
strain the language of the Act in order to achieve
the purpose which the legislature had in placing
this legislation on the statute book. The Act,
therefore, must receive a liberal construction so as
to promote its objects.‖
45. In taking the aforesaid view, we also agree with the learned
counsel for the respondents that ―superior purpose‖ contained
in the BOCW Act and the Welfare Cess Act has to be kept in
mind when two enactments — the Factories Act on the one hand
and the BOCW Act/Welfare Cess Act on the other hand, are
involved, both of which are welfare legislations. [See Allahabad
Bank v. Canara Bank[Allahabad Bank v. Canara Bank, (2000)

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 4 SCC 406] , which has been followed in Pegasus Assets
Reconstruction (P) Ltd. v. Haryana Concast Ltd. [Pegasus
Assets Reconstruction (P) Ltd. v. Haryana Concast Ltd., (2016)
4 SCC 47 : (2016) 2 SCC (Civ) 524 : (2016) 1 Scale 1] in the
context of the Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002 and the
Companies Act, 1956.] Here the concept of ―felt necessity‖
would get triggered and as per the Statement of Objects and
Reasons contained in the BOCW Act, since the purpose of this
Act is to take care of a particular necessity i.e. welfare of
unorganised labour class involved in construction activity, that
needs to be achieved and not to be discarded. Here the doctrine
of purposive interpretation also gets attracted which is
explained in recent judgments of this Court in Richa
Mishra v. State of Chhattisgarh [Richa Mishra v. State of
Chhattisgarh, (2016) 4 SCC 179.
(Emphasis supplied)

Rule of liberal interpretation of social welfare legislations

40. In Prakash Cotton Mills (P) Ltd. v. State of Bombay, (1957) 2
LLJ 490, Chagla J. unerringly observed that no labour legislation, no
social legislation, no economic legislation, can be considered by a
Court without applying the principles of social justice in interpreting
the provisions of these laws. Social justice is an objective which is
embodied and enshrined in our Constitution. It would indeed be
startling for anyone to suggest that the Court should shut its eyes to
social justice and consider and interpret a law as if our Country had
not pledged itself to bringing about social justice.
41. The rule of interpretation is that welfare, social and beneficial
statutes are not to be construed strictly. In Regional P.F.
Commissioner v. Hooghly Mills Co. Ltd., [2012] 1 SCR 363, the
Supreme Court observed that a liberal rule of interpretation should be

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applied to social welfare legislations. The Court observed as follows:
―23. If we look at the modern legislative trend we will discern
that there is a large volume of legislation enacted with the
purpose of introducing social reform by improving the
conditions of certain class of persons who might not have been
fairly treated in the past. These statutes are normally called
remedial statutes or social welfare legislation, whereas penal
statutes are sometime enacted providing for penalties for
disobedience of laws making those who disobey, liable to
imprisonment, fine, forfeiture or other penalty.
24. The normal canon of interpretation is that a remedial
statute receives liberal construction whereas a penal statute
calls for strict construction. In the cases of remedial statutes, if
there is any doubt, the same is resolved in favour of the class of
persons for whose benefit the statute is enacted, but in cases of
penal statutes if there is any doubt the same is normally
resolved in favour of the alleged offender.‖
(Emphasis supplied)

Cessante ratione legis, cessat et ipsa lex

42. One of the most ancient maxims known to our law and
constantly followed by our Courts is cessante ratione legis, cessat et
ipsa lex i.e. when the reason for a law ceases, the law itself ceases.
This principle of law can be applied to the present proposition. A
restrictive interpretation to the words ―trade‖ or ―business‖ would
disallow large claims of employees who otherwise would be covered
by the Statute and the purpose behind the enactment would be lost.
This principle of law has been applied in H.H. Shri Swamiji Shri
Admar Mutt Etc, v. The Commissioner, Hindu Religious &
Charitable Endowments Department and Ors., [1980] 1 SCR 368 as
well as the Foreign Courts. In Fox v Snow, 6 N.J. 12 (1950), the
Supreme Court of New Jersey observed :

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 ―Cessante ratione legis, cessat et ipsa lex (the reason for a law
ceasing, the law itself ceases) is one of the most ancient maxims
known to our law and it is constantly followed by our courts. Of
this maxim it was said in Beardsley v. City of Hartford, 50
Conn. 529, 47 Am. Rep. 677, 682 (1883), "This means that no
law can survive the reason on which it is founded. It needs no
statute to change it; it abrogates itself." The same thought was
enunciated by Lord Coke in Milborn's Case, 7 Coke 7a (K.B.
1609): "Ratio legis est anima legis, et mutata legis ratione,
mutatur ex lex" (the reason for a law is the soul of the law, and
if the reason for a law has changed, the law is changed). "It is
revolting," says Mr. Justice Holmes, "to have no better reason
for a rule of law than that so it was laid down in the time of
Henry IV. It is still more revolting if the grounds upon which it
was laid down have vanished long since, and the rule simply
persists from blind imitation of the past," and "To rest upon a
formula is a slumber that, prolonged, means death.‖
(Emphasis supplied)

43. Summary of Principles

43.1. The Employees‟ Compensation Act, 1923 is a piece
of social beneficial legislation and its provisions have to be
interpreted in a manner so as not to deprive the employees of
the benefit of the legislation.
43.2. The object for enacting the Employees‟ Compensation
Act even as early as 1923 was to ameliorate the hardship of
economically poor employees who were exposed to risks in
work, or occupational hazards by providing a cheaper and
quicker machinery for compensating them with pecuniary
benefits.
43.3. Section 12 safeguards the right to compensation when
the employer delegates the work to another person. Section
12 is intended to secure to an employee the right to claim
compensation not only against his immediate employer who, in
the Act, is referred to as a contractor, but also against the person

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 who had employed such contractor to execute the work. The
Act refers to him as the principal.
43.4. The main object of enacting Section 12 of the Act is to
secure compensation to the employees who have been engaged
by the principal employer through the contractor for the work
which the principal employer is supposed to carry out by his
own employees. If a person substitutes another for himself to do
his work, he ought not to escape the liability which would have
been imposed upon him, if he had done it himself.
43.5. The intention of the Legislature in enacting Section 12
provision appears to be that the injured employee or the
dependent of a deceased employee who has been awarded
compensation by the Commissioner, should not be put to any
difficulty in realising such amount of compensation on account
of any recalcitrance of the employer or on account of the
vicissitudes of his (the employer‟s) financial position.
43.6. Section 12 of the Act has, in effect, stretched the
contours of the word "employer‖ wider as to include the person
contracting with another person for carrying out the work of the
former. In such cases, the provision enjoins that the principal
shall stand substituted as the employer. This is achieved by the
words “where compensation is claimed from the principal, this
Act shall apply as if references to the principal were substituted
for references to the employer”. The principal may have a claim
for indemnity from his contractor or delegatee but the victim or
his dependents are not to be involved in such disputes.
43.7. Section 12 will apply notwithstanding the agreement
or contract entered into between the principal and contractor
regarding their liability for payment of compensation under the
Act. The agreement or contract between the principal and the
contractor shall govern only their inter-se rights and liabilities,
and cannot affect the right of the employee or the dependants of
the employee, to get the compensation from the principal or

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 from the contractor at their option.
43.8. Section 12 shall apply even in cases of several tiers of
employers or petty contractors. It is a matter of common
knowledge that contractors in turn employ other petty
contractors working under their direction and an employee may
be actually employed by one of these aforesaid persons and in
such a case, there may be no direct privity of contract between
the principal and the employee in the last analysis. The
employee has, for all practical purposes to deal with an
immediate employer but when it comes to lodging a legal claim
for compensation on account of an accident, he is concerned
with the principal employer and not the immediate
employer qua the employee.
43.9. In case of the multiplicity of immediate and indirect or
remote employers/contractors, Section 12 relieves an employee
of the difficulty of ascertaining with precision as to who should
be deemed to be the actual employer liable for compensation
under the Act. The purport of Section 12 is to create a deemed
employer-employee relationship between the principal
employer and the employee of the immediate employer who is
brought in by the principal employer as his contractor.
43.10. Section 12 secures compensation to the employee who
cannot fight out his battle for compensation by a speedy
process. A person who employs others to advance his own
interest is expected to provide a surer basis for payment of the
injured employee than the intermediary, who may often turn out
to be a man of straw, from whom compensation may not be
available. This is the purpose for which the claimant is given
the option under section 12(3) of the Act to claim the
compensation either from the principal or from the contractor.
43.11. The contractor may not be a man of means or he may
be merely a man of straw or it may be that wittingly or
unwittingly he may possibly be part of an arrangement

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 conceived by the principal to avoid confrontation directly with
the employee engaged in the execution of the work. In either
case, the interests of the employee need to be protected and that
is what the provision secures to the employee. The principal can
seek indemnification from the contractor if he has been made
answerable for the payment of compensation. The right of the
principal to be indemnified has thus been incorporated
under Section 12(2), who has entrusted the work to the
contractor stipulating the right of indemnification under the Act.
43.12. Section 12 of the Act gives protection to the employee
in case of an accident and secures compensation from the
persons who can pay, so that such employee will not be
dependent upon a petty contractor(s) who may themselves not
be able to pay compensation on account of their financial
inability.
43.13. Section 12 is an enabling provision for the benefit of
the employee(s) and enacted with the clear objective that the
employee(s) should not be hampered by technicalities or
practical difficulties of deciphering the correct employers. A
pragmatic method has thus been devised for fixing the liability
of the principal employer and thereby affording speedy relief to
the employee for payment of compensation on account of the
accident, though the principal has been invested with the right
of indemnifying himself from the contractor who may have
employed the employee and may have been responsible for
immediately taking work from him.
43.14. The words ―trade‖ or ―business‖ used in Section 12
of the Act have to be understood in the context in which this
Act was enacted. The Act was enacted to provide compensation
to the employees suffering during the course of their
employment. It was also the purpose of the Act that employees
should get speedy remedies and it appears that the intention of
enacting the Section 12 of the Act was only to ensure that

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 compensation is paid by the principal expeditiously and if this
purpose of the Act and the provision are kept in mind, then the
words ―trade‖ or ―business‖ may not have the same meaning
which it would have, for instance, when used in interpreting a
taxing statute.
43.15. The words "trade" or ―business‖ are used in several
statutes like fiscal statutes, taxing statues and rent laws. The
meaning ascribed to such words shall always be with reference
to the context and with respect to the content of the statute
itself, Therefore, the meaning that is ascribed in one statute
cannot be taken to interpret the very same words in another
statute legislated with altogether a different intention and object.
The said words in the fiscal statutes or rent laws cannot have a
similar meaning when employed in any welfare legislation like
Employee‟s Compensation Act.
43.16. The term ―trade" or "business" would not have been
used in Section 12(1) to mean the same, though in certain
contexts they may bear the same meaning. The very fact that
both these terms are employed in the section would indicate that
they connote different ideas and they do not cover the identical
field, "trade" as generally understood means activities of buying
and selling and the business which is related to such buying and
selling, whereas "business" is a term of much larger import.
43.17. The word "trade" connotes commercial activity
whereas the word "business" is of much wider import and may
be used in different contexts in different senses. Used in one
context, it may imply a particular occupation or employment to
earn livelihood or gain, whereas used in a different context it
may mean an activity which engages time, attention, or labour
as a principal serious concern or interest. Its connotation may
thus vary with the varying contexts in which it is used. In taxing
statutes for instance, the word "business" will always denote an
activity carried out with the object of earning profit, though the

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 same may not be true when used in relation to other activities.
Used in broader sense, a person building his residential house or
a Government constructing a road, may well be said to do
"business" in so far as the said activity engages his or its time,
attention or labour as principal serious concern or interest.
43.18. The meaning of these two crucial words in Section
12 has to be understood in the context of its object. The word
"business" in the Section need not be restricted to what is
synonymous with ―trade‖. The use of the conjunction „or‟
should be understood as disjunctive for covering totally
different areas unconnected with ―trade‖. The word "business"
has different shades of meanings. Among them, the most
suitable in the present context is that which ―The Oxford
Advanced Learners Dictionary of Current English‖ has given
as its third meaning: “Task, duty, concern or undertaking to do
a work”. The word "business" in its wider connotation may
have more extensive meaning than the word ―trade‖. Lord
Jessel M.R. in Smith v. Anaerson, 1880 15 Ch D 247, stressed
the meaning of "business" as “anything which occupies the
time and attention and labour of a man for the purpose of
profit”. Some succinct illustrations have also been given in the
said dictionary to drive the meaning home. They are: ―It is a
teacher's business to help his pupils; I still make it my business
to see that money is paid promptly; that is no business of
yours‖. In none of the illustrations, the word ―business‖ is used
to denote anything connected with trade or commerce. The
word ―business‖ used in Section 12 of the Act has been
intended to convey the meaning “the work or task undertaken
by the person concerned” which is not restricted to trade or
commercial work alone.
43.19. The word "ordinarily" is an elastic term. It is seen to
be used in different statutes. The word has different shades of
meaning in different contexts. The word "ordinarily" is

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 employed in Section 12 of the Act for a different connotation.
That has to be understood in the background of the preceding
portion in the Section 12 wherein execution of the work carried
out through any other person contracted by the principal for this
purpose is mentioned. What the principal would have done if he
would not have contracted with another person to carry out that
work? He himself would have normally done that work or
caused it to be done under his supervision. The word
"ordinarily" is used in Section 12 for projecting this idea. So the
word "ordinarily" in Section 12 means "otherwise, normally".
No other meaning can be conferred to the term ‗ordinarily‘ as it
appears in Section 12.
43.20. Applying the rules of liberal and purposive
interpretation, superior purpose and felt necessity, the word
"business" occurring in Section 12 is given an extended
meaning, so as to include even an activity which engages time,
attention, or labour. Hence, construction of a residential house
would be covered in Section 12. This Court agrees with the
view taken by the different High Courts in the judgments
discussed herein above.
43.21. If the person who employs contractor is allowed to
evade his liability by raising the defence that only the contractor
or the intermediary should pay the compensation, then Section
12 will become redundant.
43.22. This interpretation finds support from the amendment
of Section 2(1)(n) of the Act (vide Workmen‟s Compensation
(Amendment) Act, 2000) by including casual employees and
employees employed other than for the purposes of employer's
trade or business in the definition of ―employee‖.
43.23. The definition of ―employee‖ envisaged in Section 2
(1) (n) of the said Act has undergone drastic change. Prior to the
amendment, an employee whose employment was of a
casual nature and who was employed otherwise than for the

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 purpose of trade or business of the employer; did not fall in the
said definition. However, after the amendment of the said
definition through the Amending Act 46 of 2000, the Parliament
had removed the said mischief which was then prevailing and
coming in the way of such casual employee who met with an
accident during the course of the employment unconnected with
the employer's trade or business. With the amendment of the
said definition, now an employee whose employment is of
casual nature and who is employed otherwise than for the
purpose of employer‟s trade or business is certainly covered
within the definition of employee.
43.24. Applying the rules of literal and purposive
interpretation, superior purpose and felt necessity, this Court is
of the view that the casual employees and employees employed
otherwise than for the purposes of the employer‟s trade or
business are entitled to all the benefits of the Employee‟s
Compensation Act including that of Section 12 of the Act. This
Court agrees with the view taken by this Court in Govind
Goenka v. Dayawati (supra).

Conclusion
44. In the present case, the appellant awarded the contract to
respondent no.5 (contractor) for construction of a gymnasium as part
of his trade and business in pursuance to which Respondent no.5
engaged the deceased, Babu Lal who suffered an accident arising out
of and during the course of his employment on 6 th March, 2010 which
resulted in fatal injuries. Applying the principles laid down in the
judgements discussed above, Babu Lal is held to be an employee
within the meaning of Section 2(1)(dd) read with Entry (viii) (a) of
Schedule II of the Employees‟ Compensation Act; respondent no.5 is

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held to be the contractor and the appellant is held to be the principal.
This Court is satisfied that the ingredients of Section 12 are satisfied in
the present case and the appellant, being the principal, is liable to pay
the compensation to the legal representatives of the deceased, Babu
Lal with right to recover the same from the contractor (respondent
No.5). This case is squarely covered by the principles laid down in
the judgments mentioned above.
45. Section 4A(3) of the Employees‟ Compensation Act provides
for penalty upto 50% of the compensation amount if the compensation
due under the Act is not paid within one month it fell due. Section
4A(3) of the Employees‟ Compensation Act is reproduced hereunder:-
“Section 4A. Compensation to be paid when due and penalty
for default.-
(1) .............................................
(2) .............................................
(3) Where any employer is in default in paying the
compensation due under this Act within one month from the
date it fell due, the Commissioner shall--
(a) direct that the employer shall, in addition to the amount of
the arrears, pay simple interest thereon at the rate of twelve
per cent. per annum or at such higher rate not exceeding the
maximum of the lending rates of any scheduled bank as may
be specified by the Central Government, by notification in the
Official Gazette, on the amount due; and
(b) if, in his opinion, there is no justification for the delay,
direct that the employer shall, in addition to the amount of the
arrears and interest thereon, pay a further sum not exceeding
fifty per cent, of such amount by way of penalty:
Provided that an order for the payment of penalty shall
not be passed under clause (b) without giving a reasonable
opportunity to the employer to show cause why it should not
be passed.‖

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46. In Rajan v. P.M. Subramonian, 1994 ACJ 25, the Division
Bench of Kerala High Court examined the scope of proviso to Section
4A(3)(b) of Employee‟s Compensation Act and adjudicated the issue
of penalty instead of remanding back the matter. The relevant portion
of the judgment is as under: -
―15. Now, we come to the main question raised in this appeal,
whether the imposition of penalty, and that too at the
maximum rate, without framing an issue, or without affording
the appellant an opportunity to be heard regarding imposition
of the penalty or its quantum is valid in law. The question of
framing an issue or putting the appellant on notice of the
proposal are really matters of fairplay and fair procedure
related to the principles of natural justice. Section 4-A(3) on it
terms does not contain any provision for framing an issue or
for hearing an employer before imposing penalty, or regarding
its quantum, but that is a requirement of natural justice. It was
held in A.K. Kraipak v. Union of India AIR 1970 SC 150, and
reiterated in Union of India v. J.N. Sinha 1970-II-LLJ-284 that
while the rules of natural justice do not supplant the law but
supplement it, if a statutory provision can be read consistently
with the principles of natural justice, Courts should do so
because it must be presumed that the Legislature and the
statutory authoritis intend to act in accordance with the
principles of natural justice. These rules being rules of fairness
should therefore be followed and read into every provision
unless their application is excluded either expressly or by
necessary implication. Section 4-A(3) does not expressly
exclude the application of the principles of natural justice, nor
is there anything therein excluding their application by
implication. In fact, as a quasi-judicial authority exercising
statutory powers involving determination of rights of parties, it
is elementary that the Commissioner should observe the rules
of natural justice in the performance of his functions. Though
the Act or the Rules do not envisage a full-fledged trial, as in a
civil court, a regular hearing and determination of rights is
contemplated therein. In fact, Rule 28 of the Rules framed

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 under the Act requires the Commissioner to frame and record
the issues upon which the right decision of the case appears to
depend. This is evidently intended to put the parties on notice
of the points arising for consideration and on which they are
expected to adduce evidence. It is a matter for the
Commissioner to decide whether penalty should be imposed or
not. Therefore, the question of imposition of penalty may arise
for consideration even without a specific plea in that behalf by
the workman, as held by the High Court of Punjab and
Haryana in Dalip Kaur v. Northern Railway 1992-I-LLJ-762.
Since the question of imposition of penalty is thus a matter
which will necessarily arise for consideration while passing an
award, it will be prudent and advisable for the Commissioner
to frame an issue as to whether penalty is imposable
under Section 4-A(3) and, if so, the quantum thereof to enable
the parties to address themselves on these aspects as well at
the hearing.
16. In Mathura Prasad v. Saiyed Khursheed Ahmad, (1981) 59
FJR 168, the High Court of Allahabad held that the
Commissioner should normally pass an order regarding
penalty also while disposing of the case, a proposition with
which we agree. In Vijay Ram v. Janak Raj (1981) ACJ 84, the
High Court of Jammu and Kashmir took the view that an order
imposing penalty may be passed by the Commissioner after he
has awarded the compensation, depending on the facts of a
given case. The learned Judge then proceeded to observe:
"But, in no case shall he impose a penalty
under Section 4-A, unless he has given to the
employer a prior reasonable notice of his
intention to do so, and thereby provided him an
opportunity of showing cause for delayed
payment of the compensation. Obligation on the
part of the Commissioner to hear the party to be
adversely affected is implicit in Sub-section (3),
for what was the reason for not making the
payment without delay, can be known to that
person alone who is required to make the
payment, and to none else. Unless, therefore, he

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 is called upon to show cause for the delayed
payment, it is not reasonably possible for the
Commissioner to come to a conclusion whether
or not there was any justification for the delay.
He cannot be allowed to reach his satisfaction at
his whim and caprice simpliciter. In what form
such a notice may be given will further depend
upon the facts of each case. In one case an issue
on the plea of penalty may constitute such a
notice, whereas in another case such a notice
may be reasonably inferred even from the
pleadings of the parties coupled with their
conduct during the trial,"
17. The Karnataka High Court dealt with the same question in
their decision in Oriental Insurance Co. v. Jevaramma, (1988)
ACT 671. The Division Bench followed an earlier decision of
the same High Court in N.A.K. Pathan v. Julekabi Pathan,
(1987) 70 FJR 40, in which it was held that what was
necessary under Section 4-A(3) was that the employer should
know the case he is required to meet and he was afforded a
reasonable opportunity of meeting the case. The subsequent
Bench observed that penalty cannot be imposed merely as a
matter of course, and the discretion to levy penalty must be
exercised judicially after due consideration of the relevant
circumstances. This presupposes an opportunity to be given to
explain the circumstances for the delay which entails material
consequences.
18. Section 4-A(3) is a penal provision imposing a penalty on
the employer. The satisfaction of the Commissioner
contemplated therein should be based on materials. It has to
be reached on a conspectus of all the facts and circumstances
of the case. There may be umpteen reasons why the employer
is not liable for the penalty. There can be various reasons for
nonpayment of the amount of compensation on the due date, or
for its delayed payment. The employer may be able to point out
justifiable reasons for the delay or the non-payment. In any
case, he may also be able to make out sufficient reasons why
the penalty should either be waived, or be fixed at a low

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 amount. In fact, the section vests a discretion in the
Commissioner in the matter of penalty, the prescription being
only of the maximum. The reasons made out by the employer
may have an impact not only on the question of imposition of
penalty, but also on its quantum. All this cannot be effectively
decided unless the attention of the parties is focussed on the
question of imposition of penalty and the exercise of the
discretion, in which event the employer can place his materials
in justification of the delay or at least plead in mitigation for a
lesser amount of penalty. This he will not be able to do unless
he is given an opportunity to be heard in the matter.
19. The hearing to be afforded need not necessarily have the
trappings of a regular trial or hearing. The framing of an issue
under Rule 28 will suffice, but that may not be obligatory,
though desirable. The Commissioner may even in the course of
the hearing draw the attention of the parties to the question of
penalty and hear them. If such an opportunity to produce their
materials and to be heard, is afforded, that will be sufficient to
meet the requirements of natural justice. What is essential and
what is required is compliance with the rules of natural
justice, so that the affected party, namely, the employer, gets
an opportunity to produce his materials and to plead that there
was justification for the delay or for imposition of a lesser
amount than the maximum prescribed. Essentially, it is a
question of complying with the rules of natural justice.
20. The Law Commission of India had in its sixty-second
Report rendered in October, 1974, on the
Workmen's Compensation Act, suggested the addition of a
proviso to Section 4A(3) to provide for a reasonable
opportunity to the employer to show cause why an order for
payment of penalty should not be passed. The Act has not been
amended pursuant thereto, but we are of the view that the
recommendation of the Law Commission was only to make
explicit what otherwise was implicit in the section.
21. So far as this case is concerned, there was no issue framed
on the point. There is also no case that the Commissioner
heard the parties on the question of penalty after apprising
them of his proposal to impose the same or about the quantum.

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 The order impugned therefore suffers from the vice of violation
of the principles of natural justice in so far as it relates to the
imposition of penalty. This would normally require a remit to
the Commissioner but for the fact that the parties are agreed
that this question may be decided here itself to avoid further
protracted proceedings before the Commissioner.
22. Counsel for the appellant pleads that the appellant had
acted bona fide. He had a plea of non-liability. That found
acceptance with the Commissioner in the first instance, though
not with this Court. In such a case, it cannot be said that his
conduct was so contumacious or unreasonable as to require
being penalised under Section 4-A(3). A parallel case in the
High Court of Punjab and Haryana in Shiv Lal v. Punjab State
Electricity Board, (1991) ACJ 443, is relied on. It is also
stated that the respondent is now employed elsewhere, a fact
which is referred to in the appeal memorandum, though no
evidence was tendered about it before the Commissioner.
Counsel submits, on these premises, that the penalty, if at all it
is to be sustained, should be minimal.
23. On the other hand, counsel for the respondent points out
that the appellant had taken a totally false plea that the
respondent was not his workman at all. He succeeded in the
first instance on an irrelevant ground not raised in the written
statement, which was perversely accepted by the
Commissioner when the poor toddy tapper could not give the
number of the tree from which he fell down. He also refers to
the fact that the appellant behaved in a most cruel manner in
that he did not even arrange for the proper treatment of the
respondent in the hospital and he had to fend his way all
alone. His right hand has been amputated and he is disabled
for life. But he has been delayed in getting the compensation-
even the pittance provided by the Act for thirteen years.
24. Exercise of the discretion regarding imposition of penalty
has to be related to all these circumstances. Normally the
exercise of discretion has to be done by the authority who is
vested with that power. We have however thought it proper to
deal with the matter in this Court having regard to the request
made by the parties and the fact that we are exercising an

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 appellate power. The exercise of the discretion depends upon
the facts and circumstances of each case. Precedents like the
decision of the Punjab and Haryana High Court relied on by
the appellant rendered on their own facts cannot furnish any
true guidance for the exercise of the discretion in this case.
The facts in this case are clear. The accident took place on
November 19, 1979. The appellant did not deposit the whole or
any portion of the amount of compensation due to the
respondent till the order impugned was passed. On the other
hand, he took up every conceivable plea to defeat the claim of
the respondent. He could not sustain any of them eventually.
By this contumacious conduct, the respondent who has lost a
valuable limb, was deprived of the compensation due for well
over twelve years. The compensation is payable on the very
date on which the accident occurs though the employer is
given one month's time to make deposit of the amount. On the
facts above stated we are satisfied that there was no
justification for the delay in the payment of the compensation.
The Commissioner has imposed the penalty at 50 per cent. of
the amount of compensation. But, having regard to the fact
that the Commissioner himself contributed in part to the delay
by his first illegal order, we feel that a penalty of 75 per cent.
of the amount fixed by the Commissioner, namely, Rs. 10,080
will meet the ends of justice.‖
(Emphasis supplied)

47. The Commissioner, Employees‟ Compensation has not imposed

penalty under Section 4A of the Employees‟ Compensation Act.
Section 4A(3) of the Employees‟ Compensation Act provides for a
mandatory show cause notice and opportunity of hearing to the
appellant before imposing penalty. Since this appeal is continuation
of the proceedings before the Commissioner, Employees‟
Compensation, notice is hereby issued to appellant to show cause as to
why the penalty be not imposed under Section 4A(3) of the
Employees‟ Compensation Act. Reply to the show cause notice be

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filed by the appellant within four weeks.
48. There is no merit in this appeal which is hereby dismissed.
Pending applications are disposed of.
Disbursement of Compensation Amount
49. The appellant has deposited Rs.6,41,000/- with the
Commissioner, Employees‟ Compensation on 25 th April, 2016. The
Commissioner, Employees‟ Compensation is directed to disburse the
aforesaid amount along with interest accrued thereon to respondents
No.1 to 4 by directing the concerned bank to keep Rs.5,50,000/- in
FDRs in the following manner:-
(i) Rs.2,50,000/- be kept in 50 FDRs of Rs.5,000/- each in the
name of respondent No.1, Yashodha@Jasoda Devi for the
period of 1 month to 50 months respectively with
cumulative interest.
(ii) Rs.1,00,000/- be kept in 20 FDRs of Rs.5,000/- each in the
name of respondent No.2, Puja@Pooja for the period of 1
month to 20 months respectively with cumulative interest.
(iii) Rs.1,00,000/- be kept in 20 FDRs of Rs.5,000/- each in the
name of respondent No.4, Sahil@Suraj for the period of 1
month to 20 months respectively with cumulative interest.
(iv) Rs.1,00,000/- be kept in FDR in the name of respondent
No.3, Poonam till she attains majority with cumulative
interest. Upon attaining majority, the bank shall release the
interest portion to respondent No.3 by transferring the
same to her individual savings bank account as mentioned
hereinafter and keep the principal amount of Rs.1,00,000/-

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 in 20 FDRs of Rs.5,000/- each in the name of respondent
No.3, Poonam for the period of 1 month to 20 months
respectively with cumulative interest.
50. The balance amount, after keeping Rs.5,50,000/- in FDRs, be
released to respondents No.1, 2 and 4 in equal shares by transferring
the same to their respective individual savings bank accounts given
below:-
(i) Yashodha@Jasoda Devi (Respondent No.1)
A/c. No.60113421345
Bank of Maharashtra, Sector-24, Rohini Branch
IFSC Code :MAHB0001342
MICR Code:110014038

(ii) Puja@Pooja (Respondent No.2)

A/c. No.60249030784
Bank of Maharashtra, Sector-24, Rohini Branch
IFSC Code :MAHB0001342
MICR Code:110014038

(iii) Poonam (Respondent No.3)

A/c. No.60249032216
Bank of Maharashtra, Sector-24, Rohini Branch
IFSC Code :MAHB0001342
MICR Code:110014038

(iv) Sahil@Suraj (Respondent No.4)

A/c. No.60249032409
Bank of Maharashtra, Sector-24, Rohini Branch
IFSC Code :MAHB0001342
MICR Code:110014038

FAO 135/2016 Page 67 of 70

51. All the original FDRs shall be retained by the concerned Bank.
However, the statement containing FDR number, FDR amount, date of
maturity and the maturity amount be furnished to respondents No.1, 2
and 4.
52. The maturity amounts of the aforesaid FDRs along with the
interest shall be transferred to the aforesaid savings bank accounts of
the respective beneficiaries.
53. No loan or advance or pre-mature discharge shall be permitted
without the permission of this Court.
54. Bank of Maharashtra, Sector-24, Rohini Branch is directed not
to issue any cheque book or debit card to respondents no.1 to 4 and if
the same have already been issued, Bank of Maharashtra is directed to
cancel the same. Respondents no.1 to 4 shall produce the copy of this
judgement before the Bank of Maharashtra, Sector-24, Rohini Branch
whereupon Bank of Maharashtra shall make an endorsement on the
passbooks of respondents no.1 to 4 that no debit card or cheque book
shall be issued to respondents no.1 to 4 without the permission of this
Court.
55. Bank of Maharashtra, Sector-24, Rohini Branch shall permit
respondents no.1 to 4 to make cash withdrawals on the basis of the
withdrawal forms.
56. Bank of Maharashtra, Sector-24, Rohini Branch is directed to
send a compliance report with respect to cancellation of debit card or
cheque book of the respondents no.1 to 4 before the next date hearing.
57. List for reporting compliance by the Bank of Maharashtra and
for the consideration of reply of appellant to the show cause notice on

FAO 135/2016 Page 68 of 70

31st October, 2017.
Post script
58. Section 25A of the Employee‟s Compensation Act provides that
the Commissioner shall dispose of the matter relating to compensation
under the Act within a period of three months. Section 25A is
reproduced hereunder:-
―Section 25A. Time limit for disposal of cases relating to
compensation—
The Commissioner shall dispose of the matter relating to
compensation under this Act within a period of three months
from the date of reference and intimate the decision in respect
thereof within the said period to the employee.‖
59. This case relates to an accident dated 06th March, 2010 in
respect of which the application for compensation was filed on 7 th
December, 2010. The case was taken up for the first time by the
Commissioner, Employees‟ Compensation on 19th January, 2011
when the notice was issued to the respondents. The application for
compensation remained pending for more than five years. The case
was listed for 46 (forty-six) times out of which the Presiding Officer
did not take up the matter on 11 (eleven) dates being busy in
meetings/election-duty or was on leave. The Commissioner,
Employees‟ Compensation has also not imposed the penalty under
section 4A(3)(b). The manner in which the proceedings have been
conducted reflects a very casual approach. It appears that the
Commissioner, Employees‟ Compensation was pre-occupied with the
administrative work and was unable to devote time to the judicial
work.

FAO 135/2016 Page 69 of 70

60. Considering that the appeal from the order of the
Commissioner, Employees‟ Compensation lies before the High Court
under Section 30 of the Employee‟s Compensation Act, this Court is
of the view that the Commissioners, Employees‟ Compensation
should be drawn from the State Judicial Service in the rank of
Additional District Judge in terms of the Section 20 of the Employee‟s
Compensation Act. In FAO 385/2013 titled New India Assurance v.
Puran Lal, this Court has already recommended to the Government of
NCT of Delhi in this regard.
61. Government of NCT of Delhi is again directed to expedite the
consideration of the matter in this regard.
62. Copy of this judgement be sent the Secretary, (Law, Justice and
Legislative Affairs), GNCTD. Copy of this judgement be also sent to
Bank of Maharashtra, Sector-24, Rohini Branch, Delhi for
compliance.
63. Copy of this judgement be given dasti to counsel for the parties
as well as to Mr. Sanjoy Ghose, Additional Standing Counsel for
GNCTD who shall send the same to the Secretary, (Law, Justice and
Legislative Affairs), GNCTD.

SEPTEMBER 27, 2017 J.R. MIDHA, J.

ak/dk

FAO 135/2016 Page 70 of 70