S.N. Phukan, J.
1. The appellant herein is a company doing its business for servicing and repairing of automobiles and supplying of motor parts with a small workshop without the use of power. Being aggrieved by the judgment and order of the Presiding Officer, Employees' State Insurance Court, Dibrugarh, the present appeal has been filed under Section 82 of the Employees' State Insurance Act, 1948, for short 'the Act'.
2. The Regional Director of Employees' State Insurance Corporation issued a notice intimating the appellant that the company is covered by the Act and accordingly demanded contribution. Under mistaken notion and in absence of correct legal advice, the appellant complied with the notice and deposited its contribution from time to time. Thereafter, appellant put in a claim that the company was not covered by the Act and as such refused to pay its contribution which was rejected. The respondent sent a letter to the Collector for recovery of a sum of Rs. 570/- and Rs. 193/- for which a recovery proceeding was started. The learned Presiding Officer by the impugned judgment and order rejected the petition and hence this appeal.
3. There is no dispute that the Act did not apply to the company, as under sub- section (4) of Section 1 of the Act, the Act was made applicable in the first instance to all factories other than seasonal factories. Factory has been defined in clause (12) of the Act which, inter alia, provides that 'it means any premises where 20 or more persons were employed on any day of the preceding 12 months and in any part of which a manufacturing process is being carried on with the aid of power'. The expression 'manufacturing process' defined in the Factories Act, 1948 shall apply to the Act in question. Sub-section (5) of the Section 1 of the Act empowers the appropriate Government to extend the provisions of the Act to any other establishment or class of establishments, Industrial, Commercial, Agricultural or otherwise after following the procedure laid down in the said sub-section. In exercise of the aforesaid powers, the Government of Assam issued a Notification on July 26, 1975 applying provisions of the Act from mid-night of August 16, 1975 to the classes of establishments mentioned in the schedule. There is no dispute that in view of the above Notification, the appellant company comes within the purview of the Act provided they were employing 20 or more persons on any day of the preceding 12 months.
4. The only dispute in this appeal is that the appellant company was not employing 20 or more persons. On perusal of the impugned judgment, I find that while calculating the number of employees, the learned Court also took into count, the Managing Director and another Director of the company as an employee.
5. The appellant company examined one Pradyut Dutta, who was the Managing Director of the Company. He has stated in examination in chief that he received honorarium. In cross-examination he has stated that there was another Director who was also appointed as a purchase officer. He has further stated in cross- examination, that the Manager of the company was a Director, but he was no longer in service. If it is accepted that legally the Managing Director and the Director come under the definition of 'employee' under clause (9) of Section 2 of the Act, the company at the relevant time was employing 20 persons. If it is decided otherwise, the company did not come under the purview of the Act.
6. Mr. Goswami, learned counsel for the respondent, has placed reliance in a single bench decision of Madras High Court in Non Ferrous Rotting Mills (P) Ltd. v. Regional Director, Employees' State Insurance Corporation, 1977 LIC 1706. In that case, the question that came up for consideration is whether the Manager in a factory though a director would come under the definition of 'employee'. From the facts of the case it appears that while electing the Manager to the Board of Directors a specific resolution was taken appointing him as a Manager at a remuneration of Rs.500/- per month. The Court held that, the Manager through a Director fulfills the character of principal employer as defined in Section 2 of the Act. The Court also took note of the ratio laid down by the Apex Court in Ram Prasad v. Commissioner of Income Tax (AIR) 1973 SC 637 which was an income tax case and wherein it was held that a Managing Director may have a dual capacity, he may both be a Director as well as an employer. It was further held that where he was so employed, the relation between him as Managing Director of the company may be similar as a servant or an agent. Considering the above ratio and other decisions it was held that the Manager was also an employee.
7. In the case in hand, as stated earlier, the Manager of the company who was a Director left the job and as such he cannot be included while assessing the number of employees. Regarding the Managing Director, there is nothing on record to show that there was any contract of employment between the company and the Managing Director and as such, in my opinion, he will not come within the definition of 'employe' of the Act. On the other hand, from the definition of principal employer vide Section 2(17), I am of the opinion that Board of Directors of the company shall include the Managing Director, being the Chief Executive and the said Board is the principal employer.
8. Now the only question remains is regarding the other director who was a purchase officer.
9. From the ratio laid down in Madras High Court in Non-Ferrous Rolling Mills (P) Ltd. (supra) and also from the definition of 'employee' and 'principal employer' of the Act, I hold that a person can both be a principal employer, as well as an employee. Whether he will be an employee or not for the purpose of the Act would depend on the contract of employment, whether implied or written. I have already stated that regarding Managing Director, there was no contract of employment with the company. Regarding other director, I find from the evidence of the Managing Director that he was also a purchase officer and in other words, he was an employee of the company, as he was employed for the work of the company and for which he received remuneration. The witness Pradyut Dutta, the Managing Director has stated that the said Director who was a purchase officer was taking some honorarium. Mr. Senapati has urged that taking of honorarium will not come within the definition of wages as defined in Section 2(22) of the Act. The term 'wages' is very wide and it means all remuneration paid or payable in cash to an employee, if the term of the contract of employment express or implied were fulfilled and includes any payment in respect of any period of authorised leave, lockout, strike which is not illegal or lay-off and other additional remuneration. I am, therefore, constrained, to say that the honorarium was regularly paid and it can be termed as wages,
10. Coming to the case in hand, even if this Director-cum-Purchase Officer was taken as an employee for the relevant period it cannot be held that the company was employing 20 or more persons, as Managing Director has been excluded from the definition of employee and at the relevant time the company was employing only 19 persons.
11. Situated thus, I hold that the Act would operate in case of the company only from the mid-night of August, 16, 1975 and prior to that the company was not covered by the Act. For the period in question the company was not liable to pay its contribution under the Act as the persons employed were only 19. It is made clear that if for subsequent period or periods, it is found that the persons employed by the Company are 20 or more then the company shall be liable under the Act.
12. With the above direction, appeal is allowed by setting aside the impugned judgment and order.