Case: EMPLOYEES STATE INSURANCE CORPORATION THR. REGIONAL DIRECTORS Vs. VENUS ALLOY PVT. LTD. THR. MANAGAING DIRECTOR

3. Put in brief, the relevant background aspects of the matter are that the respondent-Company had been covered under the ESI Act and had been depositing the amount of contribution with reference to the wages paid to some of its employees. However, in an inspection carried out by the Appellant- Employees State Insurance Corporation (the Corporation), it was observed that the respondent-Company had not made the contribution in respect of the remuneration paid to the Directors. There had been exchange of communications in regard to the liability of the respondent–Company and ultimately, by the order dated 06.04.2005, the Deputy Director of the appellant-Corporation called upon the respondent to make payment of contribution in relation to the remuneration paid to the Directors. Such a demand was questioned by the respondent- Company by way of an application under Section 75 of the ESI Act (Case No. 171 of 2005) that was considered and decided by the Employees State Insurance Court at Indore (the ESI Court) by its order dated 24.12.2005.The ESI Court noted that both the parties had not adduced any evidence and sought disposal of the case only on the basis of arguments. The parties referred to a few citations but in essence, both the parties relied upon the decision of this Court in the case of Employees State Insurance Corporation Vs. Apex Engineering Pvt. Ltd., as reported in 1997 (77) F.L.R. 878. The ESI Court observed that in the said case, the Managing Director was found performing some particular work but there was no illustration that the provisions of the ESI Act were applicable on the amount received by the Directors; and rather took the view that the illustrations produced by the respondent-Company were to the effect that Directors do not fall under the category of the employees. The ESI Court, therefore, declared the aforesaid order dated 06.04.2005 void and unfair, while observing asviewed the above judicial illustration produced in case. The illustration on which both parties put their faith according to their view, has been adjudicated by Hon?ble Supreme Court. It seems by its perusal that managing director performs some particular works. The provisions of ESI Act are applicable on the payment that is made to him for those particular and additional works. There is no dispute in relation to the amount receiving by managing director in this case but there is dispute in relation to the amount receiving by directors. There has no judicial principle been established in any of judicial illustration produced in the case that the provisions of ESI Act are applicable on the amount receiving by the directors on the other hand judicial illustration produced by the plaintiff reveals that neither amount receiving by the directors fall under the category of pay nor directors fall under the category of employee. Hence in the right (sic) of above judicial illustration the order dated 06.04.05 passed by defendant is proved void and unfair.In the appeal preferred by the appellant-Corporation under Section 82 of the ESI Act against the aforesaid order dated 24.12.2005, the High Court of Madhya Pradesh at Indore Bench, while relying on the decision of the Bombay High Court in the case of Sakal Papers Private Limited Vs. Employees State Insurance Corporation reported in MHLJ 1995 Vol. 2 Page 69 and another decision of the Bombay High Court in the case of Employees State Insurance Corporation Vs. Apex Engineering Pvt. Ltd. reported in MHLR 1990 Vol. 2 Page 850, concluded that the Directors of the respondent establishment do not come within the purview of the ?employees?, as defined under sub-section (9) of Section 2 of the ESI Act and dismissed the appeal with the followingOn due consideration of the aforesaid and in view of the law laid down by the Bombay High Court, I am of the view that the Directors of the respondent establishment does not come within the purview of the employee as defined under section 2(9) of the ESI Act. The learned court has not committed any legal error in setting aside the order dated 06.04.2005?

Court's reasoning:
7. Having given anxious consideration to the rival submissions and having examined the record with reference to the law applicable, we are clearly of the view that the impugned orders cannot be sustained and the application filed by the respondent-Company under Section 75 of the ESI Act deserves to be dismissed.We are clearly of the view that what has been observed and held by this Court in Apex Engineering (supra), in relation to the Managing Director of a Company, applies with greater force in relation to a Director of the Company, if he is paid the remuneration for discharge of the duties entrusted to him.It is noticed that in the present case, the appellant-Corporation in its impugned order dated 06.04.2005 specifically asserted that the Directors of the Company were paid remuneration at the rate of Rs. 3,000/- p.m. and they were falling within the definition of "employee" under the ESI Act and hence, contribution was payable in regard to the amount paid to them. Interestingly, even while seeking to challenge the aforesaid order dated 06.04.2005 by way of proceedings under Section 75 of the ESI Act, the respondent-Company chose not to lead any evidence before the Court. Hence, there was nothing on record to displace the facts asserted on behalf of the appellant-Corporation in its order dated 06.04.2005; rather the factual assertions in the said order remained uncontroverted. The order dated 06.04.2005 had been questioned by the respondent-Company only on the contention that the Directors do not fall within the category of "employee" but no attempt was made to show as to how and why the remuneration paid to its Directors would not fall within the purview of "wages" as per the meaning assigned by sub-section (22) of Section 2 of the ESIThe ESI Court cursorily attempted to distinguish the decision of this Court in Apex Engineering (supra) only with reference to the fact that therein, the amount was being received by the Managing Director. The High Court, on the other hand, overlooked the said decision of this Court and relied only on the decisions of the Bombay High Court though the propositions in the referred decisions of the Bombay High Court stood effectively overruled by the decision in Apex Engineering (supra) where this Court held in no uncertain terms that the High Court was in error in taking the view that the Managing Director of the Company was not an employee within the meaning of Section 2 (9) of the ESI Act. The said decision directly applies to the present case and we have no hesitation in concluding that the High Court in the present case has been in error in assuming that the Director of a Company, who had been receiving remuneration for discharge of duties assigned to him, may not fall within the definition of an employee for the purpose of the ESI Act. There had been no reason to interfere with the order dated 06.04.2005 as issued by the appellant- Corporation.