SBCMA No.50/2008 M/s. Chetak Stones Pvt Ltd Vs. Insurance Inspector & Anr. And SBCMA No.2529/2007 Insurance Inspector & Anr vs M/s. Chetak Stones Pvt Ltd -{ 1 }- S.B. CIVIL MISC APPEAL No.50/2008 M/s. Chetak Stones Pvt Ltd Vs. Insurance Inspector & Anr. And S.B. CIVIL MISC. APPEAL No.2529/2007 Insurance Inspector & Anr vs M/s. Chetak Stones Pvt Ltd DATE OF ORDER : - 8.9.2008 HON'BLE MR. PRAKASH TATIA, J. Mr.PS Bhati, for M/s. Chetak Stones Pvt Ltd. Mr. Rajkamal Soni for Insurance Inspector & Anr. <><><> Heard learned counsel for the parties. These two appeals have been preferred, one by M/s. Chetak Stones Pvt Ltd. and another by Employee State Insurance Corporation ( in short ESI) to challenge the order of the ESI Court, Sirohi dated 20th Sept., 2007 passed in case no.2/2004, whereby the court below partly allowed the application filed under Section 75 of the Employee State Insurance Act, 1948 (hereinafter referred to as the Act of 1948) of M/s. Chetak Stones Pvt Ltd.. SBCMA No.50/2008 M/s. Chetak Stones Pvt Ltd Vs. Insurance Inspector & Anr. And SBCMA No.2529/2007 Insurance Inspector & Anr vs M/s. Chetak Stones Pvt Ltd -{ 2 }- Brief facts of the case are that three directors of the appellant company were treated as employee of the company by the respondent ESI Corporation and since these employees contribution was not deposited by the company, therefore, a recovery notice of Rs.51,941/- was issued. The said notice was challenged by the company by filing petition under Section 75 of the Act of 1948. The only legal question involved in the present controversy was whether the directors of the appellant company were employees in terms of the definition given under sub-section (9) of Section 2 of the Act of 1948. Learned counsel for the appellant submitted that the trial court has committed error of law by holding the directors of the appellant as employees. It is also submitted that none of the director of the appellant was employee of the company and further none of the director of the appellant was the Managing Director of the company. It is also submitted that the directors of the company received certain amount as benefit from the share of the company. According to learned counsel for the appellant in a case where directors give some advise and the company SBCMA No.50/2008 M/s. Chetak Stones Pvt Ltd Vs. Insurance Inspector & Anr. And SBCMA No.2529/2007 Insurance Inspector & Anr vs M/s. Chetak Stones Pvt Ltd -{ 3 }- pays some amount to the directors then that amount cannot be treated to be salary and by virtue of that amount, the directors cannot be treated to be employee of the company. It is submitted that, therefore, the trial court has committed serious error of law in holding the directors of the company to be employees of the company. Learned counsel appearing for the ESI Corporation submitted that it is settled law that company is a legal entity and directors are not the company nor they are owner of the company. It is also submitted that in a case director receives salary from the company then the company is liable to contribute its share under the provisions of the Act of 1948. Learned counsel appearing for the ESI Corporation further submitted that the court below has committed error of law by holding that ESI Corporation could not have claimed Rs.13,500/- as contribution for the company's director Kamlesh. It is submitted that the law was amended with effect from 1.1.1997, which is apparent from the Gazette notification dated 23rd Dec., 1996. In view of the above, the finding of the trail court recorded in para no.9 of the impugned order SBCMA No.50/2008 M/s. Chetak Stones Pvt Ltd Vs. Insurance Inspector & Anr. And SBCMA No.2529/2007 Insurance Inspector & Anr vs M/s. Chetak Stones Pvt Ltd -{ 4 }- is absolutely erroneous. I considered the submissions of learned counsel for the parties and perused the facts of the case and the reasons given by the trial court. It is admitted fact that all the three directors of the company received salary and that salary has been shown in the income tax return submitted by the said directors of the company, copies of which have been placed on record as Ex.7 to 13. The company is a legal entity and directors are separate legal entity. It is true that directors on account of giving some advise to the company may get some monitory benefits and that itself may not amount salary nor by virtue of that amount, they can be considered to be employee of the company, but here in this case, the undisputed fact is that the directors of the company received the amount in the head of salary and they paid the tax on this income from salary. Therefore, on facts, the trial court was right in holding that the directors were getting the salary and because of that the relation of employer and employee came into existence and, therefore, the company was liable to contribute its share under the Act of SBCMA No.50/2008 M/s. Chetak Stones Pvt Ltd Vs. Insurance Inspector & Anr. And SBCMA No.2529/2007 Insurance Inspector & Anr vs M/s. Chetak Stones Pvt Ltd -{ 5 }- 1948. In view of the above reasons, I do not find any merit in the appeal preferred by M/s. Chetak Stones Pvt Ltd, i.e., S.B. Civil Misc. Appeal No.50/2008, hence, the same is hereby dismissed. So far as contribution of one of the directors Kamlesh is concerned, for that trial court has committed error of law, which appears to be because of the fact that amended provision was not brought to the notice of the trial court and, therefore, the trial court held that claim of the respondent ESI Corporation on account of salary of Kamlesh amounting to Rs.13,500/- is illegal. This finding is set aside. The appeal of the ESI Corporation,ie., S.B. Civil Misc. Appeal No.2529/2007 is allowed and it is held that ESI Corporation rightly issued certificate for recovery of Rs.51,941/-. No order as to costs. (PRAKASH TATIA), J. c.p.goyal/-