TaxTMI 
TaxTMI 
1984 (11) TMI 316
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....d and the respondent did incur liability for contribution The respondent challenged its liability before the Employees Insurance Court at Calicut by contending that partners were not employees and when the three partners were excluded, the total number of employees did not exceed the statutory minimum. The Insurance Court found in favour of the respondent and an appeal under the Act was carried to the High Court by the appellant and a Division Bench of that Court following its earlier decision in Regional Director of E.S.I. Corporation v. M/s. Oosmanja Tile Works, Alwaye,( I.L.R. 1975 (2) Kerala 207) held that partners were not employees. It is against this decision that the present appeal has been carried. There is no dispute that under the Act, liability to pay contribution arises only when 20 or more persons are employed for wages. It is also not disputed that in the case of the respondent unless the three partners are included, the basic number of 20 is not reached and no liability under the Act accrues. The term 'employee' has been defined in s. 2(9) of the Act to mean "any person employed for wages in or in connection with the work of a factory or establishment to which....
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....is an owner thereof. In common parlance the status of a partner qua the firm is thus different from employees working under the firm, it may be that a partner is being paid some remuneration for any special attention which he devotes but that would not involve any change of status and bring him within the definition of employee. Learned counsel for the appellant strongly relied on a case of the Rajasthan High Court in Regional Director of E.S.I. Corporation, Jaipur v. P.C. Kasliwal and Anr.,([1981] Labour & Industrial Cases 671) The learned Single Judge has taken the view that a partner can be employed by the firm and if he draws emoluments within the prescribed limits for the work of the factory, he would be an employee under s. 2(9) of the Act. In the same decision it has also been held that a sleeping partner drawing a monthly allowance merely because he is a partner would not come within the ambit of the Act as an employee and contribution in respect of such partner would not be payable. As against this view there is a Division Bench decision of the Kerala High Court in Regional Director of E.S.I. Corporation v. M/s. Oosmanja Tile Works, alwaye (supra), where it has been held t....
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....n the Compensation Act though at the time of the injury he was performing special services under contract with his partner, separate and independent from the articles of partnership, and is A being paid compensation therefore in addition to his shale in profits. Again, in Le Clear v. Smith, (202 N.Y.S. 514) it was held that a partner, though he received a salary in addition to his share of the profits, was an employer and an not employee entitled to compensation under the Workman's Compensation Law, where the insurer did not insure the employers. In Berger Fidelity Union Casualty Co., v. Texas,( 293 S.W. 235) it has been held that a member of an employer firm cannot be an employee thereof. In Wearer v. Weinberger,( 392 F. Suppl ) it was held that "employee" is a person who renders service to another, usually for wages, salary or other financial consideration, and who, in performance of such service, is entirely subject to the direction and control of the other, such other being the employer. Crooks v. Glena Falls Indemnity Co.,( 268 P. 2d. 203) is an authority for the view that an employee is one who is subject to the absolute control and direction of the employer in regard to any ....
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....hen one comes to analysis an arrangement of this kind, namely, one by which a partner himself works, and receives sums which are called wages, it really does not create the relation of employers adjusting the amount that must be taken to have been contributed to the partnership assets by a partner who has made what is really a contribution in kind, and does not affect his relation to the other partners which is that of co-adventurer and not employee". Lord Justice Mathew pithily but with emphasis added: "The argument on behalf of the applicant in this appeal appears to involve a legal impossibility, namely, that the same person can occupy the position of being both master and servant, employer and employed." Lord Justice Cozens-Hardy also spoke in the same strain: "All that our decision in this case amounts to, I think, is that the Act only applies where there is on one side an employer, and on the other side a workman, who are different persons." This is in complete accord with our view. F.C. Bock and F.F. Manix in their book, the Australian Income Tax Law and Practice (1960 Edn., Vol. 3, page 3....