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1997 (11) TMI 514
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....Shri S. Wasim A. Qadri, who was requested by us to assist the Court as amicus curiae, as respondent-company being served has to thought if fit to appear through any counsel. Before considering the main question in the controversy between the parties it is necessary to note the backdrop facts leading to these proceedings. Background Facts. Respondent is a private limited company incorporated under the Companies Act, 1956. It is engaged in the manufacture of motor seats. Its factory at the relevant time was located in M.I.D.C. Nagpur. It also had a branch factory at Nagpur. On or about 09th September 1969 the Board of Directors of the respondent-company resolved to elect one of the directors Shri V.N. Dhanwate as Managing Director of the company and also conferred on him the authority to borrow, invest and lend the funds with certain limitation specified in the Resolution. The Board of Directors also resolved to grant annual remuneration of Rs. 12,000/- to Shri Dhanwate for rendering services as Managing Director. The appellant Corporation by its communication dated 23rd May 1974 informed the respondent-company that Shri Dhanwate being the Managing Director who was also paid a ....
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....mitted that the High Court had erred in relying upon decision of this Court in the case of Regional Director Employees State Insurance Corporation Trichur V. Ramanuja Match Industries [(1985) 2 SCR 119] which did not apply on the facts of the present case. On the contrary according to him the controversy in the present case had to be decided in the light of judgment of this Court in the case of Shri Ram Prasad v. Commissioner of Income.tax. New Delhi, [AIR 1973 SC 637]. It was also contended that in any view of the matter even assuming that the Managing Director could be considered to be a principal employer as defined by Section 2 sub-section (17) of the Act there was nothing illegal in he being treated simultaneously as an employee if he satisfied all the requirements of Section 2(9) of the Act. In support of these contentions learned counsel placed reliance on various decisions of the High Court to which we will make a reference at an appropriate stage in this judgment. Learned counsel Shri Qadri, amicus curiae, was good enough at our request to look into the matter and fairly placed for our consideration the relevant aspects of the matter centering round correct construction....
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.... may be prescribed by the Central Government. Provided that an employee whose wages (excluding remuneration for overtime work) exceed such wages as may be prescribed by the Central Government at any time after (and not before) the beginning of the contribution period, shall continue to be an employee until the end of the period;" A mere look at the aforesaid provisions shows that before a person can be said to be an employee the following characteristics must exist qua his service conditions- (1) He should be employed for wages. This would pre-suppose relationship between him as employee on the one hand and the independent employer on the other; (2) Such employment must be in connection with the work of the factory or establishment to which the Act applies; (3) He must be directly employed by the principal employer on any work of, or incidental or preliminary to or connected with work of, the factory or establishment; (4) In the alternative he should be employed by or through an immediate employer on the premises of factory or establishment or under supervision of principal employer or his agent; (5) We are not concerned with clause (3) of the said definition. ....
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....t of the employer which would be the case of a managing partner in a partnership firm which by itself is not a legal entity. The first condition is, therefore, clearly satisfied in the present case. So far as the second condition is concerned it also cannot be denied that the duties as a Managing Director were entrusted to him in connection with the work of the establishment and for such work which he would carry out he would be entitled to the remuneration of the Managing Direct. The High court has placed strong reliance on the Articles of Association which stated the extra duties of Managing Director. But those extra duties were in connection with the work of the establishment and not dehors it and it was for these extra duties that he was to be paid the remuneration which otherwise would not have been paid to him if he had remained an ordinary director. Consequently the emphasis put by the High Court on these extra duties to be carried out by the Managing Director would not detract from the applicability of the second condition of the definition of 'employee'. So far as the third condition is concerned, by the resolution of the Board of Director he was directly employed and entr....
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....ger of the factory under the Factories Act, 1948, the person so named; (ii) in any establishment under the control of any department of any Government in India, the authority appointed by such Government in this behalf or where no authority is so appointed the head of the department ; (iii) in any other establishment, any person responsible for the supervision and control of the establishment ; The above provision would apply in a case where the Managing Director is found to be the owner or occupier of the factory. Now it is obvious that Managing Director by himself cannot be said to be the owner of the factory which belongs to the private limited company, namely, the respondent herein and the working of the factory is controlled by the entire body of Board of Directors. But the Managing Director though being one of the directors cannot be said to be the sole owner of the factory, Nor can he said to be an occupier of the factory as the does not occupy the factory only by himself. It is also not the case of the respondent that Shri Dhanwate had been named an occupier of the factory under the Factories Act, 1948. So far as the term 'occupier' of the factory is concerned it i....
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....he High court has noted that Shri Dhanwate was allowed to exercise all the powers exercisable by a director under the supervision and control of the Board of Directors. But even assuming that the High Court was right that Shri Dhanwate could be said to be principal employer there is nothing in that Act to indicate that a Managing Director being the principal employer cannot also be an employee. It other words he can have dual capacity. So far as this aspect of the matter is concerned we can profitably refer to a decision of a Bench of three learned Judges of this Court in the case of Shri Ram Prasad (supra). In that case this Court was concerned with the question whether the Managing Director of a company can be said to be a servant of the company whose remuneration could be treated to be salary assessable to income tax. The relevant observations of this court speaking through Jaganmohan Reddy, J., as found in paragraph 6 and 7 of the Report read as under: "Generally it may be possible to say that the greater the amount of direct control over the person employed, the stronger the ....
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....sable in terms of the articles of association by the Board of Directors and the company in its general meeting. The fact that power which is given to the Managing Director emanates from the articles, of association which prescribes the limits of the exercise of that power and that the powers of the assessee have to be exercised within the terms and limitations prescribed thereunder of the Directors in indicative of his being employed as a servant of the company. Hence remuneration payable to the assessee would be salary." We have already seen the powers and duties of Managing Director as entrusted to Shri Dhanwate as per the Articles Association. They clearly indicate that he had to work under the control and supervision of the Board of Directors and to discharge his function to earn his remuneration of Rs. 1000/- per month by working as Managing Director and by discharging extra duties as entrusted to him. The aforesaid decision of this Court clearly rules that the Managing Director while acting as such can have dual capacity both as Managing Director on the one hand and as servant or employees of the company on the other. The Division Bench is the impugned judgment with res....
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....the clear legal distinction between a firm and a company by observing that the position of a shareholder of a company is altogether different from that of a partner of a firm. A company is a juristic entity distinct from the shareholders but a firm is a collective name or an alias for all the partners. Of course the decision was rendered in the light of Income-tax Act wherein the question was whether agriculture income would include the divided paid to a shareholder of a company. It must, therefore, be held that the Managing Director of respondent-company could not be treated on par with partner of a partnership firm being given some remuneration for his extra work. The decision of this Court in Ramanuja Match Industries (Supra) was, therefore, clearly inapplicable to the facts of the present case and was erroneously pressed in service by the Division Bench of the High Court in the impugned judgment in deciding the appeal of the appellant-Corporation. Now is the time for us to refer to decisions of other High Courts and this Court to which our attention was invited by the learned counsel for the parties appearing before us. A Division Bench of the Karnataka High Court in t....
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....s, Lee killed. His widow claimed compensation for his death under the New Zealand Workers compensation Act, 1922 against the company. The Privy Council had to examine the question whether Lee even though being a governing director of the company could still be treated as a worker of the company when he was flying the company's aircraft as pilot on remuneration. The judicial committee of the Privy Council observed that company was different entity from Lee. Although Lee was the governing director of the company, he was nonetheless a worker under the company while flying its aircraft for wages. On the moot question posed for their consideration the Privy Council laid down the legal position in the following terms : "EX facie there was a contract of service. Their Lordships conclude, therefore, that the real issue in the case is whether the position of the deceased as sole governing director made it impossible for him to be the servant of the respondent company in the capacity of chief pilot of that company. In their Lordships' view, for the reasons which have been indicated, there w as no su....
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....f the High Court of Kerala in the case of Employees' State Insurance Corporation, Ernakulam v. Victory Tile Works [44 Indian Factories Journal 304] had to consider whether a person who satisfies the definition of 'principal employer' under Section 2 (17) of the Act could simultaneously satisfy the requirements of the definition of the term 'employee' under Section 2(9) of the Act. Subramonian Poti, J. (as the then was), speaking for the court observed that Employees' State Insurance Act, 1946 is intended to cover all wage-earners whether they are manager, supervisors, clerks, workmen or any other class of employees provided they fall within the definition of 'employee' under Section 2(9) of the Act. It is order from the scheme of the Act that there is no apparent conflict of interest between the principal employer and the employee and there is no reason why if a person falls within the definition of 'principal employer' he cannot in certain cases be also an 'employee' he cannot in certain cases be also an 'employee'. In our view, the aforesaid decision squarely falls in line with the scheme of the Act and the decisions of other High Courts on the point to which we have made a refer....