Summary
A company director receiving remuneration for assigned duties can fall within the ESI Act’s definition of employee, and that remuneration can constitute wages. The company did not controvert the Corporation’s factual findings or show why the remuneration was outside the statutory definition. Its challenge based on directors being categorically excluded was rejected and the contribution order sustained.
Issues
- Whether remunerated directors were employees for ESI contributions and whether the company had displaced the contribution demand.
Provisions considered
- Sections 2(9) and 2(22), Employees’ State Insurance Act, 1948The comprehensive employee definition covered remunerated directors discharging assigned duties in the circumstances; their remuneration attracted contribution as wages. (¶ 8–14)
Held
- A managing director may have the dual capacity of principal employer and employee. The precedent recognising that position applied with greater force to a director paid for discharging entrusted duties; designation as director did not itself exclude coverage. (¶¶ 11–12, 14)
- The Corporation specifically found remuneration of ₹3,000 per month and employee status. The company led no evidence to displace those facts, challenging only the proposition that directors could be employees and failing to explain why their remuneration was outside wages. (¶ 13)
- The ESI Court’s distinction of the Supreme Court precedent based on managing-director status was unsustainable. The High Court erroneously relied on Bombay High Court propositions effectively overruled by that binding precedent. There was no basis to interfere with the demand. (¶ 14–15)
Result
Appeal allowed; ESI Court and High Court orders set aside. Company’s application under Section 75 dismissed, sustaining the Corporation’s contribution order dated 6 April 2005.