Sections 42-43 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 42 lets the ESI Corporation pay a benefit to an employee whom the employer failed to insure, or for whom contributions were not paid, and then recover the capitalised value of that benefit from the employer. Section 43 lets it claim extra sickness-benefit cost from the owner or occupier of a factory or establishment, or the owner of lodgings, where insanitary conditions or neglect of health regulations cause excessive sickness.
If an employer fails to insure an employee at appointment (or within an extended period), insures him only after an accident, or fails to pay contribution, and the employee loses, or gets a lower, benefit as a result, the Corporation may pay the benefit and recover its capitalised value from the employer after giving him a hearing (s.42(1)). The capitalised value may be adjusted for contribution, interest and damages the employer owes (proviso). Recovery can be as an arrear of land revenue or under sections 129 to 132 (s.42(2)). Section 43 covers excessive sickness caused by insanitary conditions or neglect.
The three triggers in section 42(1)
Every trigger below is a filing or registration lapse, so the most direct protection is accurate monthly filing, which is the work of our ESI and PF return filing service.
| Clause | Employer's failure | Result for the employee |
|---|---|---|
| (a) | Fails or neglects to insure an employee under section 28 at the time of appointment, or within such extended period as the Central Government prescribes | Employee becomes disentitled to a benefit |
| (b) | Insures an employee on or after the date of an accident that caused personal injury | Employee is disentitled to dependants' or disablement benefit from the Corporation |
| (c) | Fails or neglects to pay contribution the employer is liable to pay | Employee becomes disentitled to a benefit or entitled only to a benefit on a lower scale |
The rule is protective of the worker. The Corporation does not leave the employee without a remedy because of the employer's default. Instead, if satisfied "in the manner prescribed by the Central Government" that the benefit is payable, it pays the benefit at the rate the employee is entitled to, or would have been entitled to, had the failure not occurred.
The Corporation then turns to the employer. It is entitled to recover the capitalised value of the benefit paid, calculated in the prescribed manner, subject to the employer being given an opportunity of being heard.
How capitalised value is worked out
Rule 27 of the Central Rules, 2026 says the capitalised value of a permanent disablement benefit and dependants' benefit is calculated by multiplying the daily rate of benefit by a multiplication factor based on the age of the Insured Person or dependants, as provided in the regulations. The factors themselves are in the regulations, not in the Code or Rules text we have, so we do not quote any figure. Where a State Government is the appropriate Government, the State's own rules apply to that establishment; the Central Rules apply where the Central Government is.
The proviso: adjusting for contribution, interest and damages
The capitalised value to be calculated may be adjusted for any contribution, interest or damages the employer is liable to pay for delay in payment or non-payment of contribution. The purpose is to avoid double recovery: what the employer would in any case owe as contribution, interest or damages is taken into account. For interest and damages on defaults, see sections 127 and 128.
How the Corporation recovers: s.42(2)
The amount "may be recovered as if it were an arrear of land revenue or recovered in the manner specified under sections 129 to 132". The Code's general recovery chapter is explained in our article on section 129.
Example
A packaging unit hires a machine operator in April but does not register him. In June he loses part of a hand in an accident. Because he is not registered, he has no entitlement to disablement benefit. If the employer then registers him on or after the date of the accident (clause (b)), or never registered him (clause (a)), the Corporation can pay him the disablement benefit he would have had, and then recover the capitalised value of that benefit from the employer after hearing him. The cost can be far greater than the unpaid contribution would have been.
Disputes
A claim against an employer under section 42 is a matter the Employees' Insurance Court decides: section 49(1)(j). The employer must, before raising a contribution or dues dispute with the Corporation in that Court, deposit fifty per cent of the amount claimed, unless the Court waives or reduces it for reasons recorded in writing (s.49(2)). See sections 48 and 49.
Section 43: excessive sickness and the owner or occupier
Section 43 applies when the Corporation considers that sickness among Insured Persons is excessive because of:
- (a) insanitary working conditions in a factory or other establishment, or the owner's or occupier's neglect to observe health regulations under any enactment in force; or
- (b) insanitary conditions in tenements or lodgings occupied by Insured Persons, attributable to the owner's neglect to observe health regulations under any enactment.
| Step | Provision |
|---|---|
| 1. Claim | Corporation sends the owner or occupier a claim for the extra expenditure incurred as sickness benefit (s.43(1)) |
| 2. Reference | If not settled by agreement, the Corporation refers the matter, with a statement, to the appropriate Government (s.43(1)) |
| 3. Inquiry | If the appropriate Government thinks a prima facie case is made out, it may appoint a competent person or persons to inquire (s.43(2)) |
| 4. Determination | If default or neglect is proved, the inquiry determines the extra expenditure and who pays all or part of it (s.43(3)) |
| 5. Enforcement | The determination is enforceable as a decree for payment of money of a Civil Court (s.43(4)) |
For this section, "owner" of tenements or lodgings includes the owner's agent and a person entitled to collect rent as a lessee (s.43(5)). The section does not set a rupee ceiling or a time limit for the claim, and we do not supply one.
The employer's practical lesson is to keep workplace sanitation and health-regulation compliance documented, since a high sickness rate among insured employees can be traced back under s.43.
Need help keeping registrations and contributions current?
The exposure in section 42 arises from missed registration and missed contribution, both avoidable with routine checks. If you would like a review of your ESI position or help with monthly filings, our team can assist through ESI and PF return filing.
Key takeaways
- Section 42: if you fail to insure, insure late after an accident, or fail to pay contribution, the Corporation can pay the employee and recover the capitalised value from you.
- You must be heard before recovery; the amount may be adjusted for contribution, interest and damages you owe.
- Recovery can be as an arrear of land revenue or under sections 129 to 132.
- Section 43 lets the Corporation claim extra sickness-benefit cost from owners or occupiers for insanitary conditions or neglect of health regulations, after inquiry by the appropriate Government.
- Disputes go to the Employees' Insurance Court (s.49), with a fifty per cent deposit for contribution and dues disputes.
Read next
- Sections 39, 40 and 41: Medical benefit and general provisions
- Sections 44 to 47: Schemes for other beneficiaries, gig workers, exemption and priority of dues
- Penalties under the ESI Act for non-registration and default
- Common ESI violations and how to avoid them
Disclaimer: Based on the Code on Social Security, 2020 (as enacted) and, where noted, the Code on Social Security (Central) Rules, 2026 (G.S.R. 344(E), 8 May 2026), as on 30 September 2026. The Code is in force from 21 November 2025; some provisions may be notified later, and State Governments make their own rules for establishments where the State is the appropriate Government. Verify the current position before acting.