- (1.) Employees' State Insurance Corporation has brought in challenge judgment and order rendered by a Division Bench of the High Court of Bombay, Nagpur Bench in Letters Patent Appeal whereunder the Division Bench confirmed the order of the learned Single Judge holding that the Managing Director of the respondent-company is not an employee as defined in section 2(9) of the Employees' State Insurance Act, 1948 (hereinafter referred to as 'the Act'). The present appeal on grant of special leave to appeal under Article 136 of the Constitution of India reached final hearing before us. We have heard learned advocate for the appellant-Corporation as well as learned Advocate Shri S. Wasim, A. Qadri, who was requested by us to assist the Court as amicus curiae, as respondent-company being served has not thought it 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.
(2.) 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 MIDC, Nagpur. It also had a branch factory at Nagpur. On or about 9th 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 regular remuneration was to be included along with other 19 employees engaged for wages by the company for the purpose of coverage of the company as a factory under section 2, sub-section (12) of the Act. After considering all the facts and circumstances the appellant-Corporation by its order dated 1st July, 1974 directed that the company be covered as a factory under section 2, sub-section (12) of the Act and hence it was directed to comply with the provisions of the Act.
(3.) Being aggrieved by the appellant's decision the respondent-company moved an application under section 75 read with section 76 of the Act before the Employees' State Insurance Court. The Insurance Court by its judgment dated 5th September, 1975 allowed the application of the respondent-company and held that the company is not covered by section 2, sub-section (12) of the Act as it had only 19 employees and Shri Dhanwate cannot be treated to be an employee within the meaning of section 2, sub-section (9) of the Act and hence the company cannot be said to have employed 20 employees so as to be covered as a factory under section 2, sub-section (12) of the Act. The said decision of the ESI Court was challenged before the High Court in appeal. Learned Single Judge of the High Court agreed with the ESI Court and dismissed the appeal. The appellant-Corporation thereafter carried the matter in Letters Patent Appeal under Clause 15 thereof. The Division Bench of the High Court by the impugned judgment dismissed the said appeal and concurred with the view of the learned Single Judge that the Managing Director Shri Dhanwate could not be held to be an employee within the meaning of section 2, sub-section (9) of the Act.;