“Commuting-Accident Doctrine” Under the Employees’ Compensation Act: Supreme Court Integrates Section 51E Logic Into EC Act

Introduction

The decision in Daivshala & Ors. v. Oriental Insurance Co. Ltd., 2025 INSC 904, marks a transformative moment in Indian labour-insurance jurisprudence. The Supreme Court, through Viswanathan J. (joined by Misra J.), has harmonised the Employees’ Compensation Act, 1923 (“EC Act”) with the Employees’ State Insurance Act, 1948 (“ESI Act”) on the vexed question of accidents that occur while an employee is commuting to or from work.

The deceased, Shahu Sampatrao Jadhavar, a night-watchman at a sugar factory, died in a motorcycle accident five kilometres from the factory while travelling for his 3 a.m. shift. The Commissioner awarded compensation under the EC Act, but the Bombay High Court (Aurangabad Bench) reversed the award relying on Regional Director, ESIC v. Francis De Costa (1996) 6 SCC 1. The deceased’s family appealed.

The Supreme Court allowed the appeal, restored the Commissioner’s award, and—critically—held that by virtue of Section 51E (inserted in the ESI Act in 2010) the phrase “arising out of and in the course of employment” in the EC Act must now be construed to include commuting accidents, provided a nexus of circumstances–time–place with employment is established.

Summary of the Judgment

Key Holding: Accidents sustained by an employee while commuting between home and workplace are deemed to arise out of and in the course of employment under the EC Act, provided there is demonstrable nexus of circumstances, time and place with the employment.
Rationale: Section 51E (ESI Act) is clarificatory and declaratory, hence retrospective. Courts must read the identical phrase in the EC Act (Section 3) in pari materia with Section 2(8) ESI Act, thereby importing the Section 51E standard into EC Act claims.
Outcome: High Court judgment set aside; award of ₹3,26,140 plus 12% interest and 50% penalty on employer restored.
Consequences: The 1996 precedent Francis De Costa; to the extent it treated commuting accidents as outside employment, stands neutralised. Commissioners, High Courts, insurers and employers must now treat commuting accidents as compensable under EC Act—subject to the nexus test.

Analysis

A. Precedents Cited and Their Influence

Saurashtra Salt Mfg. Co. v. Bai Valu Raja (1958)
– Introduced the “theory of notional extension”, i.e., the employer’s premises conceptually extend beyond physical boundaries in certain circumstances.
– Provided jurisprudential foundation for later commuting-accident debates.
General Manager, B.E.S.T. Undertaking v. Agnes (1964)
– Recognised that where an employer provides transport or the entire city is effectively the workspace, travel accidents may be in the course of employment.
– Led to statutory recognition through Section 51C (ESI Act) for employer-provided transport accidents.
Francis De Costa (1996) 6 SCC 1
– Held that an accident one kilometre from the factory did not arise out of employment because the employee’s duty had not yet commenced.
– Dominated Indian law for nearly three decades; now expressly limited.
Bombay Anand Bhavan Restaurant v. ESIC (2009) 9 SCC 61 & Jaya Biswal v. IFFCO Tokio (2016) 11 SCC 201
– Reaffirmed that both ESI and EC Acts are beneficial and must receive liberal interpretation.

B. The Court’s Legal Reasoning

Statutory Comparison (Pari Materia): The Court emphasised that Section 3 EC Act and Section 2(8) ESI Act use identical wording (“accident arising out of and in the course of employment”). Hence, they must be interpreted uniformly, unless legislation indicates otherwise.
Section 51E as Clarificatory & Retrospective:
- Applying principles from Podar Cement (1997) 5 SCC 482 and K. Govindan (2001) 1 SCC 460, the Court held that statutes that “remove doubts” are declaratory and retrospective.
- Parliament inserted Section 51E precisely to quell confusion created by Francis De Costa; thus, it is declaratory.
Deeming Fiction vs. Clarifying Construction: The Court relied on Lord Radcliffe’s articulation (St. Aubyn, 1951) that “deemed” may be used to put beyond doubt an otherwise uncertain construction—here, it merely clarifies that commuting accidents are included.
Nexus Test: Importantly, the Court preserved a factual filter—the nexus of circumstances, time and place—to curb remote or unrelated claims. In this case, the fatal crash occurred:
- Within duty hours context (en route for a 3 a.m. shift);
- Along the direct route, only 5 km from the factory.
Rejection of High Court’s Reliance on Francis De Costa: Once Section 51E logic is introduced, Francis De Costa no longer holds sway. The High Court erred in treating steering to workplace as a “purely personal matter”.

C. Impact on Future Litigation and Labour Law

Uniform Commuting-Accident Doctrine: Commissioners, High Courts, insurers, employers and trade unions must recognise that commuting injuries are presumptively compensable under EC Act, subject to the nexus test.
Insurance Underwriting & Premiums: Employers and insurers will need to recalibrate risk assessment and premium quotations, as a wider class of injuries is now covered.
Judicial Economy: By settling interpretive uncertainty, the ruling should reduce protracted litigation over threshold liability issues and shift focus to quantum.
Influence on Related Statutes: The Court’s pari materia methodology may encourage analogous interpretive imports—for instance, motor-vehicle laws, migrant-worker safeguards, or social-security code provisions.

Complex Concepts Simplified

Notional Extension: A judicially created doctrine treating certain contiguous areas (e.g., access roads, employer-provided conveyance) as part of the workplace for compensation purposes.
Beneficial / Social-Welfare Legislation: Statutes enacted for workers’ protection; courts interpret them liberally to fulfil their humanitarian purpose.
Declaratory (Clarificatory) Statute: Law passed to clarify existing ambiguity rather than create new rights; presumed to apply retrospectively unless explicit otherwise.
Statutes in pari materia: Separate enactments dealing with the same subject matter; courts may read them together to ascertain consistent meaning.
Nexus of Circumstances–Time–Place: A factual link showing the accident occurred reasonably close in time, place, and purpose to the employment, preventing speculative or far-fetched claims.
“Deemed” Provision: A legislative technique that either (i) creates a legal fiction, or (ii) removes interpretive doubt. In Section 51E it performs the latter function.

Conclusion

The Supreme Court’s ruling in Daivshala decisively extends employees’ compensation coverage to commuting accidents, aligning the EC Act with the ESI Act’s post-2010 framework. The Court found Section 51E to be clarificatory, retrospective, and reflective of long-standing social-welfare objectives. The judgment neutralises the restrictive interpretation in Francis De Costa, reinforces the principle that remedial legislation must be read liberally, and sets a modern “Commuting-Accident Doctrine” founded on a clear nexus test.

Going forward, employees, employers, insurers, and adjudicators must recalibrate their expectations: when an employee’s journey to or from work is reasonably connected to their duties, compensation liability will presumptively arise. The case thus stands as a seminal precedent integrating welfare-oriented statutory construction with pragmatic workplace realities of 21^st-century India.