Section 81: Distribution of compensation

Finin2min analysis — what the section actually does

Full statutory text — Section 81

81. Distribution of compensation.—(1) No payment of compensation in respect of an employee
whose injury has resulted in death, and no payment of a lump sum as compensation to a woman or a person
under a legal disability, shall be made otherwise than by deposit with the competent authority, and no such
payment made directly by an employer shall be deemed to be a payment of compensation:
    Provided that, in the case of a deceased employee, an employer may make to any dependant, advances
on account of compensation of an amount equal to three months' wages of such employee and so much of
such amount as does not exceed the compensation payable to that dependant shall be deducted by the
competent authority from such compensation and repaid to the employer.
   (2) Any other sum amounting to not less than five thousand rupees which is payable as compensation
may be deposited with the competent authority on behalf of the person entitled thereto.
   (3) The receipt of the competent authority shall be a sufficient discharge in respect of any compensation
deposited with him.
    (4) (a) On the deposit of any money under sub-section (1) as compensation in respect of a deceased
employee, the competent authority shall, if he thinks necessary, cause notice to be published or to be served
on each dependant in such manner as he thinks fit, calling upon the dependants to appear before him on
such date as he may fix for determining the distribution of the compensation.
   (b) If the competent authority is satisfied after any inquiry which he may deem necessary, that no
dependant exists, he shall repay the balance of the money to the employer by whom it was paid.
    (c) The competent authority shall, on an application by the employer, furnish a statement showing in
detail all disbursements made.
    (5) The compensation deposited in respect of a deceased employee shall, subject to any deduction made
under sub-section (1), be apportioned by order by the competent authority among the dependants of the
deceased employee or any of them in such proportion as the competent authority thinks fit, or may, in the
discretion of the competent authority, be allotted to any one dependant:
    Provided that the competent authority shall not make any order under this sub-section without hearing
the dependants and shall record reasons in the order for the apportionment of such compensation among
dependants or any of them, as the case may be.
    (6) Where any compensation deposited with the competent authority is payable to any person, other
than a woman or a person under legal disability, the competent authority may pay the compensation to the
person entitled thereto.
    (7) Where any lump sum deposited with the competent authority is payable to a woman or a person
under a legal disability, such sum may be invested, applied or otherwise dealt with for the benefit of the
woman, or of such person during his disability, in such manner as the competent authority may direct; and
where a half-monthly payment is payable to any person under a legal disability, the competent authority
may, of his own motion or on an application made to him in this behalf, order that the payment be made
during the disability to any dependant of the employee or to any other person, whom the competent authority
thinks fit to provide for the welfare of the employee.
     (8) Where, on application made to him in this behalf or otherwise, the competent authority is satisfied
that, on account of neglect of children on the part of a parent or on account of the variation of the
circumstances of any dependant or for any other sufficient cause, an order of the competent authority as to

the distribution of any sum paid as compensation or as to the manner in which any sum payable to any such
dependant is to be invested, applied or otherwise dealt with, ought to be varied, the competent authority
may make such orders for the variation of the former order as he thinks just in the circumstances of the
case:
    Provided that no such order prejudicial to any person shall be made unless such person has been given
an opportunity of showing cause as to why the order should not be made, or shall be made in any case in
which it would involve the repayment by a dependant of any sum already paid to him.
    (9) Where the competent authority varies any order under sub-section (8) by reason of the fact that
payment of compensation to any person has been obtained by fraud, impersonation or other improper
means, any amount so paid to or on behalf of such person may be recovered in the manner as specified in
sub-section (10).
    (10) The competent authority may recover as an arrear of land revenue any amount referred to in
sub-section (9), and for such purpose the competent authority shall be deemed to be a public officer within
the meaning of section 5 of the Revenue Recovery Act, 1890 (1 of 1890).

How to apply this provision

1. Primary statutory test — (1) No payment of compensation in respect of an employee whose injury has resulted in death, and no payment of a lump sum as compensation to a woman or a person under a legal disability, shall be made otherwise than by deposit with the competent authority, and no such payment made directly by an employer shall be deemed to be a payment of compensation:
2. Additional operative limb — Provided that, in the case of a deceased employee, an employer may make to any dependant, advances on account of compensation of an amount equal to three months' wages of such employee and so much of such amount as does not exceed the compensation payable to that dependant shall be deducted by the competent authority from such compensation and repaid to the employer.
3. Qualification / exception to test — Provided that, in the case of a deceased employee, an employer may make to any dependant, advances on account of compensation of an amount equal to three months' wages of such employee and so much of such amount as does not exceed the compensation payable to that dependant shall be deducted by the competent authority from such compensation and repaid to…
4. Numerical or timing control — Provided that, in the case of a deceased employee, an employer may make to any dependant, advances on account of compensation of an amount equal to three months' wages of such employee and so much of such amount as does not exceed the compensation payable to that dependant shall be deducted by the competent authority from such compensation and repaid to…
5. Evidence file — retain facts and records proving the role/status of: Employer, Employee / worker, Authority / officer.

Rules, forms and cross-references

A direct concordance is not exhaustive. Central/State jurisdiction, schemes, authority appointments, saved instruments and later notifications may change the practical route without changing the section wording.

Worked example

Q&A — Section 81

Source & verification trail