Supreme Court Brings Commuting Accidents Within the Employees' Compensation Act Framework

The Hon’ble Supreme Court (“SC”) of India has issued a landmark verdict in the case of Daivshala and Ors. v. Oriental Insurance Company Limited and Anr., which significantly expands the interpretation of compensation claims under the Employees’ Compensation Act, 1923 (“EC Act”). The SC held that injuries sustained by employees while commuting to their workplace may, in appropriate circumstances, fall within the ambit of accidents “arising out of and in the course of employment”.

This interpretation marks a departure from earlier restrictive views and reflects the SC’s recognition that the risks faced by employees on their way to work can be closely linked to their employment. To reach this conclusion, the SC also drew upon developments under the Employees’ State Insurance Act, 1948 (“ESI Act”), particularly Section 51E, which expressly covers commuting accidents. By treating Section 51E as clarificatory, the SC harmonised the interpretation of both statutes and extended similar protection under the EC Act.

Background:

The case arose from a tragic incident in April 2003, where a night watchman employed at a sugar factory died in a motorcycle accident while travelling to report for duty. His family (“Appellants”) sought compensation under the EC Act, arguing that the accident had arisen “out of and in the course of employment”.

The employer and insurer resisted the claim, contending that the accident occurred outside the factory premises and before the employee had commenced work. In their view, the statutory requirement of the accident occurring “in the course of employment” was not met.

Conversely, the Appellants maintained that there was a clear nexus between the employee’s duties and the accident. By invoking the doctrine of notional extension, they argued that the risk was not merely personal to the employee but was incidental to his employment. Accordingly, they submitted that the accident should be treated as one arising “out of and in the course of employment”.

Faced with these opposing arguments the SC had to determine whether the doctrine of notional extension, under which the sphere of employment can extend beyond the physical workplace, applied to commuting accidents such as this one.

Analysis & Application

The SC commenced its analysis by considering the legal framework under the EC and ESI Act. Both statutes stipulate that compensation is payable only where an accident arises “out of and in the course of employment,” but while the ESI Act offers a comprehensive and broad coverage including sickness benefit, maternity benefit, and a wider definition of injury, the EC Act has a comparatively narrower scope focused mainly on compensation for work-related injuries or death. Until now, courts had largely adopted a restrictive view of this phrase under the EC Act, treating commuting as a purely personal act outside the course of employment. Consequently, compensation was denied in most commuting accident cases under the EC Act.

Limited exceptions existed, and these were confined to situations where the employee’s commute had a special nexus with the employment, such as when the employer provided the mode of transport (for instance, a company bus) or where the posting required employerarranged travel. A well-known example is Agnes v. Manager, Karnataka State Road Transport Corporation, where a bus driver injured while travelling home in employer-arranged transport was awarded compensation based on the reasoning that such travel was an integral part of the employee’s duties, thereby bringing the accident within the notional extension of employment.

This restrictive approach was reaffirmed by the SC in Regional Director, ESI Corporation v. Francis De Costa (“Francis De Costa”), where it had held that injuries sustained one kilometre away from the workplace could not be linked to employment unless they were directly incidental to work duties.

This position evolved with the introduction of Section 51E into the ESI Act in 2010, which expressly deems commuting accidents to arise “out of and in the course of employment” provided a nexus exists with the time, place and circumstances of employment. The SC explained that Section 51E was not a new principle but a clarificatory provision meant to resolve long-standing ambiguity. Being clarificatory, it was held to apply retrospectively to accidents occurring even before 2010.

The SC further held that although Section 51E was introduced under the ESI Act, its interpretation also applies to the EC Act since both statutes use identical language and serve the same protective purpose. Indian courts have consistently read them harmoniously, drawing on common jurisprudence.

Applying these principles to the present case, the SC noted that the deceased employee was travelling directly to the factory within a reasonable time of his duty hours and solely for the purpose of reporting to work. The timing, purpose, and circumstances of the journey demonstrated a clear nexus between the accident and his employment. By invoking the doctrine of notional extension, the SC concluded that the accident could not be seen as a purely personal risk but rather as one incidental to employment.

It accordingly upheld the order of the Commissioner for Workmen’s Compensation and Civil Judge, Senior Division, Osmanabad, awarding compensation under the EC Act, and allowed the appeal filed by the Appellants.

Conclusion:

This judgment therefore represents a decisive shift in Indian labour jurisprudence. By aligning the EC Act with the more progressive approach of the ESI Act, the SC has broadened the scope of compensable claims and reinforced the principle that welfare legislation must be construed liberally in favour of employees. The SC made it clear that employment is not always confined to the four walls of the workplace but may extend to activities and spaces intrinsically connected with the performance of duties.

For employers, this ruling carries significant compliance and risk management consequences. Unlike the ESI Act which applies only to certain categories of establishments, the EC Act applies far more widely making its expanded interpretation relevant to a much larger universe of businesses. This means that companies across industries such as factories, logistics providers, IT/ITES companies and professional service firms could potentially face increased exposure to employee compensation claims arising out of commuting accidents.

In practical terms employers should now:

• Integrate commuting risks into workplace safety and compliance frameworks: Policies on employee travel, transport facilities arranged by the company and even shift timings may need to be reviewed in light of the judgment.
• Strengthen documentation and reporting processes: Clear records of employee schedules, transport arrangements and accident reporting protocols will be critical in defending or mitigating liability.
• Reassess insurance coverage: Existing employer liability or workmen’s compensation insurance may not adequately account for commuting risks. Businesses should engage with insurers to understand coverage gaps and ensure policies are updated.
• Review HR and contract practices: Employment contracts, handbooks and internal policies may need revision to align with the expanded risk landscape and to demonstrate proactive compliance

A proactive and preventive approach is no longer optional. Employers who fail to adapt may find themselves exposed to unanticipated liabilities and disputes. On the other hand those who act now to align their compliance, HR and insurance frameworks with this new legal position will be better placed to safeguard both their workforce and their balance sheets.

Disclaimer: : The views in this article are author's point of view. This article is not intended to substitute legal advice. In no event the author shall be liable for any direct, indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information. For any further queries or follow up, please contact us at communication@businesslawchamber.com.