The Delhi High Court has reaffirmed that principal employers cannot escape liability under the Employee’s Compensation Act, 1923 by outsourcing core operational tasks to intermediaries. In a significant ruling, the Court held that where an employee suffers injury while performing duties integral to the principal’s business, the statutory framework under Section 12 creates a deemed employer-employee relationship, ensuring access to compensation regardless of formal contractual arrangements.
Background & Facts
The Dispute
The respondent, Mohit, claimed compensation under Section 22 of the Employee’s Compensation Act, 1923 after sustaining grievous injuries in a road accident on 29.07.2022 while collecting blood samples for Thyrocare Technologies Limited. He alleged he was employed as a technician at Thyrocare’s Gagan Vihar branch and was on duty at the time of the incident. The appellant, Thyrocare, contested both the existence of an employer-employee relationship and whether the accident occurred in the course of employment.
Procedural History
- 2022: Claim application filed by respondent before the Commissioner under the Employee’s Compensation Act
- 2025: Commissioner held Thyrocare liable for compensation of Rs. 20,16,000 plus 12% interest from 29.07.2022
- 2025: Delhi High Court stayed release of deposited amount pending appeal
- 2026: Appeal filed under Section 30(1)(a) challenging the Commissioner’s findings
Relief Sought
The appellant sought quashing of the Commissioner’s order, arguing that no formal employment contract existed and that the accident did not arise out of or in the course of employment. The respondent sought confirmation of the compensation award and release of the deposited amount.
The Legal Issue
The central question was whether Section 12 of the Employee’s Compensation Act, 1923 creates a deemed employer-employee relationship between a principal employer and a worker engaged through a contractor or franchisee, even in the absence of a direct appointment letter or salary records.
Arguments Presented
For the Appellant
Thyrocare contended that no employer-employee relationship existed because:
- No appointment letter, salary slips, or signed contract were produced
- The respondent’s ID card was merely a photocopy, not an original issued by Thyrocare
- The ID card was generated via www.carbi.com, a platform accessible only to franchises, not directly by Thyrocare
- Reliance was placed on M/s Indraprastha Gas Limited v. Ambrish Kumar to argue that mere possession of an ID card does not prove employment
For the Respondent
The respondent argued that:
- He was engaged to perform core business functions - blood sample collection - integral to Thyrocare’s operations
- The ID card, though photocopy, was verified and issued through Thyrocare’s official portal
- Thyrocare itself opposed the impleadment of Amitesh Goel, the alleged immediate employer, indicating recognition of its own liability
- Section 12 was designed to prevent evasion of liability by principal employers through contractual delegation
The Court's Analysis
The Court emphasized the welfare-oriented nature of the Employee’s Compensation Act and the limited scope of appellate interference under Section 30, which restricts appeals to substantial questions of law only. It cited Golla Rajanna v. Divisional Manager to underscore that factual findings by the Commissioner are final unless legally flawed.
"Under the scheme of the Act, the Workmen's Compensation Commissioner is the last authority on facts. Parliament has thought it fit to restrict the scope of the appeal only to substantial questions of law, being a welfare legislation."
The Court noted that while Thyrocare denied direct employment, it admitted that:
- The ID card was generated through its official website (www.carbi.com)
- Access to the portal was restricted to its authorized collection centres
- The address on the ID card matched Thyrocare’s registered branch
- The company operated over a thousand collection centres staffed by technicians
Crucially, the Court distinguished Indraprastha Gas on the ground that in that case, the employer categorically denied the authenticity of the document. Here, Thyrocare did not dispute the ID card’s origin or authenticity.
The Court further relied on Shri Krishan v. Jasoda Devi, holding that Section 12 must be interpreted broadly to include any undertaking involving labour, not merely commercial profit-making. The provision creates a deemed employer-employee relationship to ensure that workers are not left without remedy due to the financial instability of intermediaries.
The Court rejected the argument that absence of appointment letters or salary records negates employment, noting that such omissions are often deliberate to evade statutory obligations.
The Verdict
The appeal was dismissed. The Court held that Section 12 of the Employee’s Compensation Act establishes a deemed employer-employee relationship between principal employers and workers engaged through contractors or franchises. The Commissioner’s award of Rs. 20,16,000 plus interest was upheld, and the deposited amount was ordered to be released within one week.
What This Means For Similar Cases
Deemed Employment Under Section 12 Is Binding
- Practitioners must now treat workers engaged through franchises or third-party contractors as deemed employees of the principal if their work is integral to the principal’s business
- Absence of formal contracts or salary records cannot be used to deny liability under the Act
- The burden shifts to the principal employer to prove the worker was not performing core business functions
Documentary Evidence Must Be Evaluated Contextually
- Photocopies of ID cards issued through official portals are admissible as evidence of employment
- If the principal admits control over the system generating the ID (e.g., www.carbi.com), denial of employment becomes legally untenable
- Courts will look at operational reality, not just paperwork
Principal Employers Cannot Evade Liability Through Structural Arbitrage
- Companies using franchise models for core services (e.g., logistics, sample collection, delivery) must now assume statutory liability for workplace injuries
- Legal structuring to separate employment from business operations will not shield liability under Section 12
- Employers must ensure compliance even for non-direct hires performing essential functions
