Orissa High Court
M.D. Toshali Sands vs Sugayan Kumar Mohapatra & Ors on 10 September, 2025
Author: Sanjeeb K Panigrahi
Bench: Sanjeeb K Panigrahi
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK
Date: 16-Sep-2025 16:57:44
IN THE HIGH COURT OF ORISSA AT CUTTACK
FAO No.455 of 2024
(From the award dated 19.12.2018 passed by the Railway Claims
Tribunal, Bhubaneswar Bench in OA No. 275 of 2015)
M.D. Toshali Sands, Puri .... Appellant (s)
-versus-
Sugayan Kumar Mohapatra & Ors. .... Respondent (s)
Advocates appeared in the case through Hybrid Mode:
For Appellant (s) : Mr.B.C. Pattnaik, Adv.
For Respondent (s) : Mr. P. K. Mishra, Adv.
CORAM:
DR. JUSTICE SANJEEB K PANIGRAHI
DATE OF HEARING:-13.08.2025
DATE OF JUDGMENT:-10.09.2025
Dr. Sanjeeb K Panigrahi, J.
1. In the instant Appeal, the Appellant challenges the order dated 24.06.2024 passed by the Commissioner for Employee's Compensation- cum-Divisional Commissioner, Puri in E.C. Case No. 03/2023, awarding compensation to the widow of late Judhisthir Sahoo.
I. FACTUAL MATRIX OF THE CASE:
2. The brief facts of the case are as follows:
(i) The claim petition was filed by Respondent No.2, Manorama Sahoo (widow), under Form "G" of the Employees' Compensation Act, 1923, seeking ₹9,00,000 plus 12% interest, alleging her husband died due to Page 1 of 16 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 16-Sep-2025 16:57:44 work-related strain while on duty as a security guard at Toshali Sands Hotel and Resort.
(ii) On 15.11.2022 at around 2:30 P.M., the deceased allegedly became unconscious during duty hours due to work pressure and died of myocardial infarction at 3:20 P.M. Post-mortem was conducted the next day.
(iii) The Commissioner held the appellant (Managing Director, Toshali Sands) as principal employer liable to pay ₹7,90,726 with 12% simple interest from 15.12.2022 until payment, with the right of indemnity against respondent No.1 (Gatikrushna Security and Services) under Section 12 of the Employees' Compensation Act.
(iv) Opposite party no. 2's evidence included her statement that her husband was employed by Opposite Party no. 1 as a security guard and was posted at Toshali Sands Hotel and Resort.
(v) The Commissioner also recorded exhibits such as salary passbook entries, bank statements, and email communications between the appellant and respondent no. 1 regarding the deceased's employment and settlement after death.
II. SUBMISSIONS ON BEHALF OF THE APPELLANT:
3. Learned counsel for the Petitioner earnestly made the following submissions in support of his contentions:
(i) The order is assailed as illegal, erroneous, and reflecting non-
application of judicial mind; it allegedly ignores material evidence and misdirects itself to reach an improper conclusion.
(ii) The Commissioner failed to appreciate that the deceased was employed and paid by Respondent No.1 (Gatikrushna Security and Services), not Page 2 of 16 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 16-Sep-2025 16:57:44 by the appellant. Therefore, liability for statutory benefits like ESI and PF lay with opposite party no. 1.
(iii) Section 12(2) and 12(3) of the Employees' Compensation Act, 1923 allow the principal employer to be indemnified by the contractor, and the Commissioner should have enforced this indemnity instead of fastening liability directly on the appellant.
(iv) The service agreement between the appellant and Respondent No.1 expressly provided that the security personnel remained employees of Respondent No.1 and all statutory liabilities (PF, ESI, etc.) would be borne by respondent no. 1. Salary and statutory records confirmed opposite party no. 1's responsibility.
(v) The Commissioner overlooked that the death was due to natural causes (heart attack) and not an "accident" arising out of employment, thereby rendering the award of compensation unsustainable under the Act.
(vi) The Commissioner erred in saddling the appellant with liability to pay not just compensation but also interest, contrary to law. Interest and penalty, under Section 2(1)(c), are not part of "compensation" and cannot be imposed on the principal employer; such liability rests only with the actual employer for default.
(vii) Judicial precedents such as Sarjerao Unkar Jadhav v. Gurindar Singh and Chief Executive Officer1, recognize that while compensation liability can extend to a principal employer, liability for penalty and interest cannot.
(viii) Respondent No.1's own communications admitted to paying the deceased and making a gratuitous payment of ₹25,000 to the family 1 1990 ACJ 719.
Page 3 of 16 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 16-Sep-2025 16:57:44 after death, which indicates their acknowledgment of the employer- employee relationship.
(ix) The Commissioner's findings selectively noted exhibits and cross-
examinations but failed to draw proper legal conclusions, especially regarding the natural cause of death and statutory obligations of opposite party no. 1.
III. ANALYSIS OF THE JUDGMENT OF THE LOWER COURT:
4. The Commissioner for Employee's Compensation, after considering the pleadings, oral and documentary evidence, and statutory provisions, recorded the following finding:
(i) The evidence, including FIR, post-mortem, inquest report, bank passbook entries, and email communications, proved that the deceased was receiving wages through his SBI account and was on duty at the time of his death. The denial by Respondent No.1 was found contradictory and unconvincing.
(ii) The court concluded that the death due to myocardial infarction amounted to an accident under Section 3 of the Act, since it occurred in the course of and arose out of employment due to work-related stress and strain. The nexus between employment and death was established on the standard of preponderance of probability.
(iii) Based on the HSC certificate, the age of the deceased was fixed at 47 years, and the minimum wages for semi-skilled workers at the time were taken at ₹9,698 per month. Applying Section 4(1)(a), the compensation was quantified as ₹7,90,726.
(iv) The court held both Respondent No.1 (contractor) and Respondent No.2 (principal employer) jointly and severally liable, but directed that Page 4 of 16 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 16-Sep-2025 16:57:44 Respondent No.2, being the principal employer, must deposit the compensation amount first. The Respondent No.2 was given liberty to recover the same from Respondent No.1 under Section 12 of the Act.
(v) Since the compensation was not deposited within one month of the death (due on 14.12.2022), the principal employer was held liable to pay simple interest at 12% per annum on the compensation from 15.12.2022 until actual payment, as per Section 4A(3).
(vi) The case was allowed in favour of the applicants, and Respondent No.2 (Toshali Sands) was directed to deposit the compensation with interest within 30 days by way of an A/c payee cheque in favour of the Commissioner for Employee's Compensation-cum-Divisional Labour Commissioner, Puri, for onward disbursement to the dependents.
(vii) The court reiterated the principal employer's right of indemnity against the contractor (Respondent No.1) under the terms of their agreement and Section 12 of the Act.
IV. COURT'S REASONING AND ANALYSIS:
5. Heard Learned Counsel for the parties and meticulously analysed the documents placed before this Court.
6. The facts in brief is that Late Judhisthir Sahoo was working as a security guard through a contractor and was posted at Toshali Sands Hotel & Resort. On 15.11.2022, he collapsed during duty hours and died shortly after due to a heart attack. His widow filed a claim under the Employees' Compensation Act, 1923, asserting that the death was work-
related. The Commissioner treated it as an accident arising out of employment, awarded ₹7,90,726 with 12% interest from one month after Page 5 of 16 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 16-Sep-2025 16:57:44 the death, and held both the contractor and the hotel jointly liable. The hotel was directed to deposit the amount first, with liberty to recover from the contractor.
7. The appeal by the principal employer raises two core issues. First, whether the death due to myocardial infarction qualifies as "personal injury by accident arising out of and in the course of employment"
within the meaning of Section 3 of the Act, thereby entitling dependents to compensation. Second, assuming the death is compensable, whether the Commissioner was correct in law to direct the appellant (principal employer) to deposit not only the compensation but also the statutory interest under Section 12, or whether such liability should rest exclusively on Respondent No.1 (the contractor/direct employer), particularly in relation to the interest component, given that the principal employer's role is essentially that of a guarantor/indemnifier.
8. The first issues pertains to whether the death by heart attack was indeed an accident arising out of and in the course of employment. Section 3(1) of the Act imposes liability on the employer to pay compensation if personal injury is caused to a workman by accident arising out of and in the course of his employment. Two conditions must thus co-exist: (i) the injury or death must be caused by an accident; and (ii) the accident must arise out of and in the course of employment. In the present case, the respondent-claimant asserts that the death of the workman, though by heart attack (a natural physiological event), should be deemed an "accident" attributable to the conditions of his employment, since it occurred due to work-related stress and strain while he was on active duty. The appellant, on the other hand, contends Page 6 of 16 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 16-Sep-2025 16:57:44 that a myocardial infarction is a natural ailment and not an injury caused by any accidental event or untoward incident at work; according to the appellant, there was no specific strain or mishap at work that triggered the heart attack, and hence the statutory requirements are not met.
9. The term "accident" is not defined in the Act. However, courts have interpreted it in a liberal and pragmatic sense to further the Act's beneficent object. An accident is generally understood as an untoward, unexpected event that is not designed or anticipated. Crucially, the Supreme Court has clarified that an injury or death brought about by an internal medical condition (such as a heart attack) can still be termed an "accident" under the Act, if it was precipitated or accelerated by the conditions of employment, for example, by strain or stress in the work.
10. In Shakuntala Chandrakant Shreshti v. Prabhakar Maruti Garvali2, the Supreme Court laid down the test for when a seemingly natural event (like a heart failure) would qualify as an accident arising out of employment. It held that the following principles must be satisfied:
"(1) There must be a causal connection between the injury and the accident and the accident and the work done in the course of employment.
(2) The onus is upon the applicant to show that it was the work and the resulting strain which contributed to or aggravated the injury.
(3) If the evidence brought on records establishes a greater probability which satisfies a reasonable man that the work contributed to the causing of the personal injury, it would be enough for the workman to succeed, but the same would depend upon the fact of each case."
2
(2007) 11 SCC 668.
Page 7 of 16 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 16-Sep-2025 16:57:44
11. In other words, the work need not be the sole or immediate cause of death, but it must be a contributing factor such that a reasonable person would regard the death as attributable, at least in part, to the rigours of employment.
12. Not every heart attack at the workplace is automatically compensable.
The claimant must adduce some evidence, direct or circumstantial, to establish that the nature of the duties or the circumstances under which the work was being performed had a role in precipitating the fatal attack. If a worker with a pre-existing condition succumbs to a heart attack during routine work which is not strenuous, and no peculiar exertion or stress is shown, courts have denied compensation on the ground that the statutory nexus ("arising out of employment") was not proved. For instance, in the Shakuntala Chandrakant (Supra), the deceased, a helper on a vehicle, died of a heart attack while traveling; the Supreme Court found no evidence of any extraordinary strain or stressful work conditions, noting that nothing has been brought on record to show that the heart attack was caused while doing any job, and hence held the death non-compensable. Similarly, in Jyothi Ademma v. Plant Engineer, Nellore3, compensation was denied where a worker's heart failure was not shown to be linked with his work duties.
13. On the other hand, where evidence indicates that the employee was engaged in arduous work or the death was preceded by unusually heavy exertion, strain, or stress in the course of employment, courts have treated the resultant cardiac arrest as an accident arising from 3 (2006) 5 SCC 513.
Page 8 of 16 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 16-Sep-2025 16:57:44 employment. The reasoning is that the physiological collapse was accelerated by the employment-related strain, even though the ultimate cause is internal.
14. Thus, in Mackinnon Mackenzie & Co. Pvt. Ltd. v. Ibrahim Mohammad Issak4, the Supreme Court observed that there must be a causal connection between the conditions under which the work is performed and the injury; if the work contributed to the risk or aggravated the injury, the claim would fall within the Act's coverage. The guiding principle from this authority is that if the balance of probabilities indicates that the employment exertion or stress contributed to the death, the benefit of the doubt goes in favor of coverage under the Act. The law does not require a visible external event like an injury or accident in the popular sense; an internal medical event can be deemed an "accident" if work was a contributory cause.
15. In the present case, the Commissioner has arrived at a factual finding that the death of the workman did arise out of his employment. This finding was based on the evidence that: (a) the deceased was on duty, actively engaged in his employer's work at the time he collapsed; (b) there was an assertion by the widow and in the FIR/inquest records that he had been working under pressure, and he became unconscious at work due to stress/strain of the job; and (c) there was no evidence of any other independent cause for the collapse, such as a pre-existing chronic heart disease manifesting at home or at rest, instead, the attack occurred during working hours at the workplace. The post-mortem report 4 (1969) 2 SCC 607.
Page 9 of 16 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 16-Sep-2025 16:57:44 confirmed death by myocardial infarction, but it did not rule out stress as a precipitating factor.
16. Notably, Respondent No.1 (the contractor employer) initially denied the employment and the incident in its written statement, but this denial was discredited by documentary proof of the deceased's posting and salary records. Once the fact that the workman was indeed on duty at the relevant time was established, Respondent No.1 did not bring any evidence to suggest that the heart attack was wholly unrelated to work conditions. There is no material on record to indicate that the deceased was doing something entirely unrelated to his job when the attack occurred, nor any evidence of a personal condition or circumstance outside the employment that triggered the death. In these circumstances, the workman literally died in harness, the Commissioner applied the test of preponderance of probability and found the nexus between the employment and the collapse to be made out.
17. The Court is mindful that compensation legislation is social welfare legislation intended to protect workers and their families from destitution caused by workplace mishaps. In borderline cases, the benefit of any doubt usually goes to the claimants, so long as the basic foundational facts (employment, injury/death during work, and plausible work-connection) are established. In the case at hand, the deceased was relatively young (47 years old) and had been gainfully employed; he collapsed at the workplace during working hours. There is no evidence of any purely natural disease unrelated to work (for example, a degenerative heart condition manifesting at home), the Page 10 of 16 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 16-Sep-2025 16:57:44 death literally coincided with a peak period of his work. Given these facts, and following the humane intent of the law, it is just and legal to conclude that the death arose out of the employment. This view finds support not only in the Commissioner's reasoning but also in comparable judgments.
18. Accordingly, this issue is answered in favor of the claimant. The death of Judhisthir Sahoo is rightly construed as an injury by accident arising out of and in the course of his employment as a security guard. The liability of the employer to pay compensation under Section 3 of the Act is therefore attracted.
19. Now, the next question is whether the Commissioner was correct in law to fasten the liability for this compensation (and interest) upon the appellant, who was not the direct employer of the deceased but the principal who had engaged Respondent No.1 as an independent contractor for security services.
20. Section 12 of the Employees' Compensation Act, 1923 is the specific provision that addresses the situation of workmen engaged through contractors. In essence, Section 12(1) states that when a principal i.e., someone who engages a contractor to execute any work which is part of the principal's trade or business employs workers through that contractor, the principal is liable to pay compensation as if the worker were directly employed by the principal. However, the amount of compensation is calculated with reference to the worker's actual wages under the contractor i.e., the immediate employer.
21. Importantly, Section 12(2) grants the principal employer a right to be indemnified by the contractor for any compensation paid i.e., the Page 11 of 16 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 16-Sep-2025 16:57:44 principal can recover the amount from the immediate employer. In short, the Act makes the principal employer secondarily (or vicariously) liable to the injured worker, as a measure of social protection, ensuring that if the direct employer is unable or unwilling to pay, the worker can recover from a potentially more solvent principal. The principal employer, after paying, can then seek reimbursement from the contractor. Section 12 does not abolish the contractor's primary liability; it simply provides an additional avenue of recourse for the workman.
22. The underlying rationale, as noted by the Madhya Pradesh High Court in State of M.P. v. Chitrekha5, is that Section 12 is designed "to protect the workman and secure compensation for him from persons in a better position to pay", while allowing those persons (the principals) to be indemnified by the actual employer. In the present case, there is no dispute that the work being performed by the deceased, security guard services at the hotel resort, was for the purposes of and in the course of the appellant's trade or business. Providing security to its premises is an integral aspect of running the hotel. The engagement of a security contractor (Respondent No.1) by the appellant brings the situation squarely within Section 12(1). Thus, even though the deceased was hired and paid by Respondent No.1, the Act treats the appellant as if it were the employer for the limited purpose of ensuring payment of compensation to the dependents of the deceased.
23. The appellant's argument that it had a contract with Respondent No.1 where the latter assumed all responsibilities for its employees (including ESI, PF contributions, etc.) does not alter the statutory 5 M.A. No. 534 of 1996.
Page 12 of 16 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 16-Sep-2025 16:57:44 liability under Section 12. Contractual arrangements between the principal and the contractor cannot override the rights of the workman under the Act. Such arrangements are relevant inter se the principal and contractor (for indemnity), but not as a defence against the claim of the employee or his dependents. In fact, the existence of clauses requiring the contractor to bear employment liabilities only buttresses the principal's right to indemnification; it does not negate the principal's secondary liability to the worker. Therefore, the Commissioner cannot be faulted for invoking Section 12(1) and directing the principal employer (appellant) to satisfy the award in the first instance. The statute clearly mandates this course when the workman chooses to proceed against the principal.
24. In the present case, the claimant rightly impleaded both the contractor and the principal. The Commissioner's order making them jointly and severally liable, with a direction for the principal to pay and then recover, is in line with the scheme of Section 12 and calls for no interference as to the principal liability for the compensation amount.
25. Although it is true that Section 12(1) creates a legal fiction substituting the principal as employer, but a legal fiction should not be extended beyond its intended purpose. The purpose here is to ensure payment of the compensation amount to the workman. The Act stops short of explicitly stating that the principal shall be liable for interest and penalty; indeed, the reference to "compensation" in Section 12(1) must be read in light of the definition in Section 2(1)(c) (which does not include interest or penalty.
Page 13 of 16 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 16-Sep-2025 16:57:44
26. If the legislature intended to make the principal liable for delayed interest or penalty, it could have said so, but it did not, instead, those remain tied to the defaulting employer. In practical terms, once the principal is aware of the claim and the Commissioner's proceedings, the principal would be expected to deposit the compensation to avoid further delay. In many cases, as here, the principal employer was brought into the picture only after the worker's death and on filing of the claim petition, the principal might not even have known of the accident immediately. To hold such a principal strictly liable for not paying within 30 days of the accident, when the responsibility primarily lay on the immediate employer, would be somewhat illogical and onerous. The more sensible interpretation is that the principal's liability covers the compensation, the principal sum, whereas any additional liability accruing due to delay (interest, penalty) should be borne by the party who actually defaulted on timely payment, i.e., the direct employer. This also aligns with the indemnity concept in Section 12(2). Just as the principal can recover the compensation amount from the contractor, it should also be able to recover, or simply not be asked to bear in the first place, the interest and penalty that are triggered by the contractor's failure.
27. In the present case, the Commissioner did grant the appellant a right of indemnity against Respondent No.1, but still made the appellant formally liable for interest. This Court is of the view that this aspect of the award needs modification. The equities of the case, as well as the weight of authority, support relieving the principal employer of the obligation to directly pay the interest, without of course prejudicing the Page 14 of 16 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 16-Sep-2025 16:57:44 claimant's right to receive interest from the party truly at fault (the contractor). It may be noted that Respondent No.1, despite service of notice, apparently did not seriously contest the proceedings below on merits (beyond denying the employment which was disproved) and has not appealed the Commissioner's order. Respondent No.1 thus stands as a judgment-debtor in default. In such a scenario, it is neither legally necessary nor fair to punish the principal employer for the contractor's recalcitrance.
28. The appellant, as principal employer under Section 12, is liable to pay the principal compensation amount adjudicated by the Commissioner (₹7,90,726), but should not be saddled with the liability to pay interest on that amount under Section 4A(3) of the Act. The interest at 12% per annum from 15.12.2022 till realization remains payable to the claimants, but that liability for interest shall be borne by Respondent No.1 (the actual employer/contractor), who defaulted in promptly paying the compensation.
29. In view of the discussion above, the appeal is partly allowed. The impugned order dated 24.06.2024 of the Commissioner is modified only to the extent that the appellant (principal employer) is held liable to deposit the compensation amount of ₹7,90,726/- before the Commissioner for disbursal to the claimant(s), but the appellant shall not be liable to pay the interest under Section 4A(3). The component of interest @12% per annum from 15.12.2022 till the date of actual payment shall be recoverable from Respondent No.1 (contractor firm, Gatikrushna Security and Services). It is made clear that the claimant (respondent no.2) is entitled to receive such interest on the Page 15 of 16 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 16-Sep-2025 16:57:44 compensation amount, and if Respondent No.1 fails to deposit the interest voluntarily, the claimant may take steps to execute the Commissioner's order (as modified by this judgment) against Respondent No.1 for the interest sum. The appellant's liability is confined to the principal compensation amount, which it may thereafter recover from Respondent No.1 as per Section 12(2).
30. In the result, with the above modification regarding interest liability, the award of the Commissioner is upheld. Given the facts and circumstances, there shall be no order as to costs in this appeal.
31. Interim order, if any, passed earlier stands vacated.
(Dr. Sanjeeb K Panigrahi) Judge Orissa High Court, Cuttack, Dated the 10th Sept., 2025/ Page 16 of 16