In a landmark judgment delivered on April 29, 2025, the Supreme Court of India, in Kamal Dev Prasad v. Mahesh Forge, ruled that functional disability can justify a departure from the standard Schedule under the Employees’ Compensation Act, 1923. The Division Bench comprising Justice Sudhanshu Dhulia and Justice K. Vinod Chandran enhanced the disability assessment of an injured employee from 34% to 50%, recognizing the serious loss of functionality in his primary working hand.
The Court made it clear that the Schedule in the Employees’ Compensation Act is not absolute. It emphasized that when multiple fingers of the same hand are damaged especially the operational hand mere aggregation of physical losses under the Schedule cannot fully capture the actual loss of earning capacity. The Bench stated:
“It is not as if there can never be a departure from the Schedule in deciding the functional disability, which it has been recognised would in certain cases have a corelation with the physical disability.”
This blog explains how the Supreme Court’s ruling in Kamal Dev Prasad v. Mahesh Forge redefined the approach to calculating compensation by prioritizing functional over scheduled disability.
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Factual Background of Functional Disability Case
Kamal Dev Prasad, employed since April 5, 2002, as a forging machine operator at Mahesh Forge, sustained a severe workplace injury on November 6, 2004. While operating the machine late at night, a component fell, and during his attempt to remove the handle lock band, his right hand was caught in the machine. This accident led to the loss of multiple phalanges across four fingers of his dominant hand, significantly impairing its functionality.
Under the Employees’ Compensation Act, 1923, the Commissioner initially assessed his disability at 100%, applying a statutory factor of 213.57 to his monthly wage of ₹2,500, resulting in a compensation award of ₹3,20,355. Additionally, a 12% interest from the accident date and a 50% penalty amounting to ₹1,60,178 were imposed due to the employer’s failure to disburse compensation within the stipulated one-month period.
However, the High Court later reduced the assessed disability to 34%, strictly adhering to the Schedule provided in the Employees’ Compensation Act, without considering the actual impact on the employee’s ability to perform his job. This reduction prompted the appellant to challenge the decision before the Supreme Court, seeking a reassessment that accurately reflects his functional disability and its effect on his earning capacity.
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Supreme Court’s Reasoning on Functional Disability Case
In the case of Kamal Dev Prasad v. Mahesh Forge, the Supreme Court provided crucial clarity on how functional disability under Employees’ Compensation Act should be assessed. A Division Bench highlighting the importance of evaluating the real-life impact of an injury rather than relying solely on the percentages listed in the Schedule of the Employees’ Compensation Act, 1923.
The Court took note that the appellant had lost multiple phalanges across four fingers of his right (working) hand, severely affecting his ability to perform his job. While the High Court had restricted the disability assessment to 34% based on the Schedule, the Supreme Court found that such a mechanical application ignored the actual functional loss.
The Court referred to Explanation 1 to Section 4(1)(c) of the Act, which allows aggregation of multiple injuries arising from the same accident. However, it clarified that the aggregation must not exceed the amount payable for permanent total disablement. The judgment observed that simply adding percentages for each injured finger does not capture the true extent of the injury’s impact on the worker’s life.
“The appellant’s working hand has been seriously mutilated by the loss of one or more phalanges of four fingers. The middle and index finger having been disabled completely, and the ring finger and the little finger having lost two phalanges and one phalanx respectively, Functionally it is difficult for the right hand to be used with the same grip as available prior to the accident. Though a 100% disability cannot be assessed, insofar as the mutilation of the one hand, which is also the operational hand, the right hand, we are inclined to determine the loss at 50%.”
This reasoning highlights the distinction between physical disability as outlined in the Schedule and the functional disability under Employees’ Compensation Act, which considers the practical inability of the injured person to carry out their work. By recognizing the loss of grip strength and fine motor skills in the dominant hand, the Court acknowledged that real earning capacity had been significantly impaired.
“The disability as determined by the statute is for the specific loss of a phalanx or a finger, and in the event of more than one such loss, it cannot be said that a mere aggregation would determine the actual loss.”
The Bench noted the mutilation of the right (operational) hand, stating that although 100% disability could not be granted, the functional disability under Employees’ Compensation Act could be reasonably fixed at 50%.
Using the wage ₹2,500, the Court recalculated the compensation as:
- ₹2,500 × 60% × 213.57 = ₹3,20,355
- 50% of this = ₹1,60,177.50
- Plus 12% interest from the date of the accident
- And 50% penalty = ₹80,088.75
The Court directed that any shortfall from the High Court’s earlier award should be paid with 12% interest and penalty, reaffirming the beneficial intent of the Employees’ Compensation Act, 1923.
“Though a 100% disability cannot be assessed, insofar as the mutilation of the one hand which is also the operational hand, the right hand, we are inclined to determine the loss at 50%.”
Such a nuanced reading of the Employees’ Compensation Act, 1923 ensures that workers are not undercompensated due to rigid reliance on scheduled percentages. Instead, it reinforces the welfare objective of the legislation providing fair and realistic compensation based on the actual consequences of a workplace injury.
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Understanding the Employees’ Compensation Act, 1923 and Key Sections Used
The Employees’ Compensation Act, 1923 is a welfare law in India designed to protect employees who suffer injuries at work. It ensures that if a worker is injured on the job, they or their family receive fair compensation from the employer. This Act is especially important for workers in manual and industrial jobs, like in this case involving Kamal Dev Prasad, where the employee suffered a serious injury while operating a forging machine.
Key Section: Section 4 of the Employees’ Compensation Act, 1923
The main section referred to in this case was Section 4, which deals with how compensation is calculated when an employee is injured. It covers:
- Section 4(1)(c): This part talks about compensation for permanent partial disablement, like losing fingers or a limb.
- Explanation 1 to Section 4(1)(c): This is important in this case. It says that if an employee suffers multiple injuries in the same accident, the compensation for each injury should be added together, but not more than the amount payable for total permanent disability.
The Court used this explanation to show that even though only fingers were injured, because all were on the dominant working hand, the injury had a much bigger impact on the employee’s ability to work. So, just adding percentages for each finger was not enough instead the real loss of earning capacity had to be considered.
Why Functional Disability Matters More Than Just Physical Loss
The Supreme Court made it clear that functional disability under Employees’ Compensation Act is what truly matters not just what the law’s Schedule says. The Schedule may only list certain percentages for losing a finger, but it does not account for how that injury affects the person’s actual work.
In this case, since the worker lost parts of four fingers on his right hand (his main working hand), the Court said that his functional disability was much more severe than what the Schedule suggested. They assessed his loss at 50% based on how much the injury affected his ability to earn a living not just the number of fingers lost.
Why This Interpretation is Important
This decision shows that the law should be interpreted with a welfare mindset, keeping in mind the real-life impact of the injury. It helps ensure that workers receive fair compensation based on their real loss of earning capacity, not just a fixed chart of percentages.
By focusing on functional disability under the Employees’ Compensation Act, the Court provided a more just and practical solution for injured workers.
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Implications of the Case on Functional Disability under Employees’ Compensation Act
This Supreme Court ruling in Kamal Dev Prasad v. Mahesh Forge sets an important precedent for how functional disability under the Employees’ Compensation Act, 1923 is assessed, with key implications including:
- Shift from Strict Schedule to Functional Assessment: The Court emphasized that compensation must reflect the real loss of earning capacity, allowing departure from the fixed Schedule when it doesn’t capture the full impact of an injury. This means tribunals and courts will now focus more on how an injury affects the employee’s ability to work, rather than just ticking off percentages in a chart.
- Fairer Compensation for Multiple Injuries: The decision clarified that simple aggregation of disability percentages for multiple injuries (like losing parts of several fingers) is insufficient. Instead, the overall functional impact on the worker’s primary hand or ability must be considered to calculate just compensation.
- Enhanced Protection for Workers with Serious Injuries: Injured employees will benefit from a more realistic approach to disability assessment, ensuring they are not undercompensated due to rigid statutory guidelines. This strengthens worker welfare and rights under the Employees’ Compensation Act, 1923.
- Responsibility on Employers: Employers are encouraged to promptly pay compensation as per fair assessments, or face penalties and interest, as seen in this case. This reinforces timely compensation to injured workers and discourages delays.
- Legal Precedent for Future Cases: This ruling provides a clear legal basis for courts and tribunals to prioritize functional disability in compensation claims, which will influence future workplace injury cases and potentially improve compensation standards across India.
The case advances a worker-centric approach in disability compensation, ensuring that awards under the Employees’ Compensation Act reflect the true impact of injuries on an employee’s ability to earn, promoting fairness and justice.
Final Thought
This case highlights the importance of assessing functional disability under the Employees’ Compensation Act based on the actual impact of the injury on a worker’s ability to earn a living. The Supreme Court’s decision ensures that injured employees receive fair compensation that truly reflects their loss of work capacity, rather than just relying on fixed percentages in the Schedule. This approach protects workers’ rights and promotes justice in workplace injury claims.
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