Section 12 of ECA : Section 12: Contracting

Explanation using Example

Imagine a scenario where a construction company, BuildFast Inc., is the principal and they hire a subcontractor, SafeRoofs Ltd., to handle the roofing of a new building. John, an employee of SafeRoofs Ltd., falls from the roof and is injured while working on the construction site managed by BuildFast Inc. Under Section 12(1) of The Employees Compensation Act, 1923, BuildFast Inc. would be liable to pay compensation to John as if he were their direct employee, since the roofing work is part of the construction which is BuildFast Inc.'s trade or business.

After paying compensation to John, BuildFast Inc. can, according to Section 12(2), seek indemnity from SafeRoofs Ltd., because SafeRoofs Ltd. is the immediate employer of John. If SafeRoofs Ltd. had further subcontracted the roofing work to another contractor, then SafeRoofs Ltd. could, in turn, seek indemnity from that subcontractor.

As per Section 12(3), John also has the option to claim compensation directly from his immediate employer, SafeRoofs Ltd., instead of from BuildFast Inc.

However, if John's accident had occurred not on the construction site but, say, at a warehouse owned by SafeRoofs Ltd. and not controlled by BuildFast Inc., Section 12(4) clarifies that BuildFast Inc. would not be liable for compensation under this section of the Act.