February 06, 2019:

On Tuesday, Justices Abhay Manohar Sapre and  Dinesh Maheshwari of Hon'ble Supreme Court, enunciates that Director of a Company, who had been receiving remuneration for discharge of duties assigned to him, falls within the definition of an 'employee' for the purpose of the ESI Act.

The question for consideration in the present case is whether the Directors of respondent-Company, who are receiving remuneration, come within the purview of “employee” under sub-section (9) of Section 2 of the Employees' State Insurance Act, 1948.

In the present case, the Appellant-Corporation in its impugned order dated 06.04.2005 specifically asserted that the Directors of the Company were paid remuneration at the rate of Rs. 3,000/- p.m. and they were falling within the definition of "employee" under the ESI Act and hence, contribution was payable in regard to the amount paid to them.

The order dated 06.04.2005 had been questioned by the respondent-Company only on the contention that the Directors do not fall within the category of "employee" but no attempt was made to show as to how and why the remuneration paid to its Directors would not fall within the purview of "wages" as per the meaning assigned by sub-section (22) of Section 2 of the ESI Act.

Supreme Court concludes by asserting that "the High Court in the present case has been in error in assuming that the Director of a Company, who had been receiving remuneration for discharge of duties assigned to him, may not fall within the definition of an employee for the purpose of the ESI Act. There had been no reason to interfere with the order dated 06.04.2005 as issued by the Appellant Corporation."

The SC while allowing the appeal holds that the application filed by the respondent-Company under Section 75 of the ESI Act is dismissed.

Read Judgment @ LatestLaws.com

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