Lesson 4 of 5 · Employees' Compensation Insurance

Claims, Delay, Appeals and Penalties

The procedure under Chapter VII of the Code on Social Security, 2020: notice and the two-year claim period, deposit in death cases, interest and damages for delay, appeals to the High Court, the employer's duty to inform, and the offences.

Fact-checked 8 October 20266 practice questions in the game

Notice and claim

Under section 82, notice of the accident goes to the employer as soon as practicable. The claim itself is made to the competent authority within two years of the accident or, in a death case, within two years of the death; for occupational disease section 82 sets different starting points. The competent authority may entertain a late notice or claim if there was sufficient cause.

The application is made in the form and manner set out in rule 59 of the Social Security (Central) Rules, 2026. Compensation is payable as soon as it falls due, and an employer that disputes the extent of its liability must still make a provisional payment of the part it accepts.

Death cases: deposit, not direct payment

In a death case, section 81 requires the compensation to be deposited with the competent authority. The authority notifies the dependants and apportions the sum among them.

A direct payment by the employer to a family member is not deemed to be a payment of compensation, so it does not discharge the liability. The one allowance is that the employer may advance a dependant up to three months' wages, which is later deducted.

Delay: interest and damages

Section 77 applies where the employer is in default for one month after the compensation fell due. The competent authority then directs payment of interest. Rule 57 fixes it as simple interest at 12% a year, or any other rate the Central Government notifies.

If the delay has no justification, the authority may add damages of up to 50% of the arrears, after giving the employer an opportunity to show cause. The 1923 Act called this sum a penalty. Both the interest and the damages go to the employee or the dependants.

Appeals, information and offences

Section 99 gives an appeal to the High Court from specified orders of the competent authority, such as an order awarding or refusing a lump sum or awarding interest or damages. The appeal is filed within sixty days of the order. A substantial question of law must be involved and, in most cases, the amount in dispute must be at least ₹10,000 or any higher amount the Central Government notifies.

Rule 63 requires every employer, at the time of employment, to inform the employee of the right to compensation under the Code. This is done in writing and by electronic means, in English, Hindi or the official language of the area that the employee knows. The duty sits in the Rules, not in the Code itself.

Failing to pay compensation that is due is an offence under section 133, punishable with a fine that may extend to ₹50,000. A second or later conviction for failing to pay compensation carries imprisonment of two to three years and a fine of ₹3 lakh under section 134. These are separate from the interest and damages paid to the employee.

Rules at a glance

Time limit for a claimTwo years from the accident, or from the death in a death case; late claims for sufficient causeCode on Social Security, 2020 — section 82

Death casesDeposit with the competent authority; advance to a dependant of up to three months' wages allowedCode on Social Security, 2020 — section 81

Interest on delay beyond one monthSimple interest at 12% a year, or another rate notified by the Central GovernmentSection 77; Social Security (Central) Rules, 2026 — rule 57

Damages for unjustified delayUp to 50% of the arrearsCode on Social Security, 2020 — section 77

AppealTo the High Court within sixty days; substantial question of law; in most cases at least ₹10,000 in disputeCode on Social Security, 2020 — section 99

Duty to inform the employeeAt the time of employment, in writing and by electronic meansSocial Security (Central) Rules, 2026 — rule 63

Failure to pay compensation dueFine up to ₹50,000; repeat conviction: imprisonment of two to three years and fine of ₹3 lakhCode on Social Security, 2020 — sections 133 and 134

Illustration

A well-meant payment that does not count

Illustration: a loader at a warehouse dies in a work accident. Wishing to help quickly, the employer hands the full compensation amount to his widow. The loader also leaves a widowed mother. Under section 81 the direct payment is not deemed to be a payment of compensation; the amount has to be deposited with the competent authority, which notifies the dependants and apportions it among them. What the employer could have done at once was advance a dependant up to three months' wages, to be deducted later.

Worked example

The cost of paying six months late

Assumptions, for arithmetic only: compensation due ₹10,00,000; it is paid six months after it became payable; the interest rate is 12% a year simple under rule 57; no other rate has been notified.
The default has continued beyond one month, so section 77 applies.
Interest = ₹10,00,000 × 12% × 6 ÷ 12 = ₹60,000.
If the competent authority finds no justification for the delay, damages may be added up to 50% of the arrears: 50% × ₹10,00,000 = ₹5,00,000 at most.
Highest total on these assumptions = ₹10,00,000 + ₹60,000 + ₹5,00,000 = ₹15,60,000.

Result. Interest for the six months is ₹60,000. Damages are in the authority's discretion up to ₹5,00,000, so the amount payable lies between ₹10,60,000 and ₹15,60,000 on the assumed figures.

Key points

Notice goes to the employer as soon as practicable; the claim is made within two years of the accident or the death.
A late notice or claim can be entertained for sufficient cause.
In a death case compensation is deposited with the competent authority; a direct payment is not deemed a payment of compensation.
Default beyond one month attracts simple interest at 12% a year, or another rate the Central Government notifies.
Unjustified delay can add damages of up to 50% of the arrears.
Appeal lies to the High Court within sixty days on a substantial question of law.
Failing to pay compensation due is punishable with a fine of up to ₹50,000; a repeat conviction carries imprisonment of two to three years and a fine of ₹3 lakh.

Common misunderstandings

Paying the family directly in a death case does not discharge the liability: the compensation must be deposited with the competent authority.
The two-year limit is not absolute: the competent authority may entertain a late claim for sufficient cause.
The 50% sum is not automatic: it is added only where the delay has no justification, after the employer is heard, and the Code calls it damages, not penalty.
An appeal is not a rehearing on facts: it needs a substantial question of law.
The fine for the offence is not paid to the employee: it is separate from the interest and damages.

Questions people ask

Is the first offence of not paying compensation punishable with imprisonment?

No. It is punishable with a fine that may extend to ₹50,000. Imprisonment of two to three years, with a fine of ₹3 lakh, applies on a second or later conviction for failing to pay compensation.

From when does the two-year period run in a death case?

From the date of the death.

Where is the employer's duty to inform employees of their right found?

In rule 63 of the Social Security (Central) Rules, 2026, not in the Code itself.

What this lesson relies on

Code on Social Security, 2020 — sections 77, 81, 82, 99, 133 and 134
Social Security (Central) Rules, 2026 — rules 57, 59 and 63

This lesson was reviewed independently against these sources on 8 October 2026. Rules change: check the current regulation, scheme document or policy wording before relying on any figure. This is education, not advice.