TMI Blog1997 (1) TMI 559X X X X Extracts X X X X X X X X Extracts X X X X ..... t on the decision of the Supreme Court in Shri Ram Prasad v. Commissioner of Income-Tax, New Delhi, AIR 1973 SC 637 and of the Madras High Court in Non -Ferrous Rotting Mills (P) Ltd. v. The Regional Director, Employees' State Insurance Corporation, Madras, 1977 Lab. I.C. 1706, respectively. 2. The Employees' Insurance Court had taken the view that the remuneration paid to the Managing Director is not in the nature of wages paid to an employee and there is no justification in treating a Managing Director of a company as its employee. It therefore held that the E.S.I. Corporation is not entitled to contribution on the remuneration paid to the Managing Director treating her as an employee. The above finding is under attack in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State Insurance Corporation, Chandigarh and Anr., 1985 Lab I.C. 1318. 4. We find it not possible to agree with the wide proposition of law put forward by the Employees Insurance Court that treating a person who is a Managing Director of a company as an employee is not justified at all under any circumstances. The question that has to be examined is whether, in this particular case, the Managing Director who is admittedly receiving a remuneration of ₹ 500/- p.m. would come within the definition of 'employee' under the Employees' State Insurance Act, 1948 (hereinafter referred for short 'the Act'). Unlike in the case of the partner receiving remuneration it cannot be said that a Director or Managing Director of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supreme Court came to the conclusion that powers of the Managing Director had to be exercised within the terms and limitations prescribed thereunder and subject to the control and supervision of the Directors, which, would indicate that he was employed as a servant of the Company. 5. A similar question was considered by the Privy Council in Catherine Lee v. Lee's Air Farming Ltd., 1961 AC 12. In that case one Lee who was holding all the shares except one of a Private Limited Company was its governing Director too. Being a qualified pilot, he was manning the Company's air-craft. While piloting one of Company's airplane Lee was killed. The question arose as to whether Lee was a worker under the Company and whether his wife wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the Employees' State Insurance Act due to an employee'. But the decision of the Madras High Court as well as the Karnataka High Court are in support of the case put forward by the appellant. 7. The decision relied on by the respondents are all cases where question arose as to whether a partner can be treated as an employee. While approving the decision of this Court in ILR 1975 (2) Ker 207 (supra) the Supreme Court observed in (1985-I-LLJ-69) (supra) as follows at p71: The partnership business belongs to the partners and each one of them is an owner thereof. In common parlance the status of the partner qua the firm is thus different from employees working under the firm, it may be that a partner is being paid some remunera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employee and therefore not covered by the provisions of the Act. Merely because it is legally possible for a Director or Managing Director to function in the capacity of an employee also it does not mean that in all cases a Director or Managing Director who receives remuneration has necessarily to be treated as an employee. It has to be further established that either under the provisions of Articles of association or of separate agreement there was a contract of employment between the Company and the Managing Director or the Director. In the present case the appellant has not pleaded or placed any material either before the Employees Insurance Court or before this Court to the effect there was such a contract of employment between the Man ..... X X X X Extracts X X X X X X X X Extracts X X X X
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