L. Narasimha Reddy, J.

1.This appeal is filed under Section 82 of the Employees State Insurance Act, 1948 (for short 'the Act'.) The appellant is a chit fund company. The officials of the Employees State Insurance Corporation, the respondents herein, caused inspection of the office of the appellant on 28-7-2002 and on subsequent dates. Show cause notices were issued, directing the appellant to explain as to why it shall not be brought under the purview of the Act. Ultimately, vide proceedings, dated 7-7-2003, the appellant was brought under the purview of the Act. The appellant filed E.I. Case No. 56 of 2003 before the Employees Insurance Court and Chairman, Industrial Tribunal-I, Hyderabad (for short 'the Tribunal').

2. The appellant pleaded that it had '16' employees on its rolls and since the number did not exceed '20', it is not liable to be brought under the purview of the Act. It was also pleaded that the respondents have erroneously treated the '8' Directors of the company, as employees, on the sole ground that they are receiving their shares of profit.

3. The plea of the appellant was resisted by the respondents. According to them, the Directors were being paid remuneration, almost as employees and since they too were working for the benefit of the company, they are liable to be treated as employees. On this premise, it was contended that the total number of employees of the appellant is '24' and in that view of the matter, no exception can be taken to the proceedings, bringing the appellant under the purview of the Act.

4. The Tribunal dismissed E.I Case No. 56 of 2003, through its judgment, dated 28-11-2006, Hence, this appeal.

5. Sri A.K. Jaya Prakash Rao, the learned Counsel for the appellant submits that there is nothing on record to disclose that the Directors were being paid any fixed monthly remuneration and that the fact that they were sharing the profits cannot be a ground to treat them as employees. He further submits that no definite finding was recorded by the respondents as regards the alleged remuneration drawn by the Directors or to treat them as employees.

6. Smt. Pushpinder Kaur, the learned Counsel for the respondents, who took notice at the stage of admission, submits that the appellant did not dispute that the Directors of the appellant company were also being paid amounts, and despite service of notices, the appellant did not furnish the relevant records. She contends that the respondents were left with no alternative, except to draw an inference that the Directors were also being paid fixed monthly remuneration. Placing reliance upon the judgment of the Supreme Court in Employees' State Insurance Corporation v. Apex Engineering Private Limited 1998-1 LLJ 274 (SC) learned Counsel submits that the order under appeal does not warrant interference.

7. The appellant is sought to be brought under the purview of the Act, for the first time. The Act prescribes a detailed procedure, to be followed, before an undertaking is brought under its purview. The number of employees working in the undertaking, assumes significance in this context. Since no manufacturing activity is carried out by the appellant, it could have been brought under the purview of the Act, if only, the number of employees exceeded '20'.

8. It is a matter of record that the register of the employees contained the names of '16'. The dispute was as to whether its '8' Directors must be treated as employees. If they were to be so treated, the number of employees would become '24' and the appellant is liable to pay the contribution.

9. The question as to whether a Director of a company can be treated as an employee, if he was being paid a fixed amount of salary, is no longer res integra. In the judgment cited supra, the Supreme Court held that in case the Managing Director or other Director of a company or a firm is paid monthly remuneration to carry out extra duties, he is liable to be treated as an employee and he can be added to the number, in the context of bringing the unit under the purview of the Act.

10. The appellant pleaded that except that the Directors were being paid their share from the profit and loss account, no fixed monthly remuneration was paid to them and in that view of the matter, they ought not to have been treated as employees. This contention could have been repelled, if only, there existed any material to show that:

(a) fixed monthly remuneration was being paid to the Directors; and

(b) the remuneration is less than Rs. 6,500/-.

Unless the findings on these two crucial facts are recorded, the appellant could not have been brought under the purview of the Act.

11. The learned standing Counsel for the respondents submits that despite notices to the appellant, the latter did not furnish the relevant information as to the nature of payment made to the Directors and in that view of the matter, the respondents were left with no alternative except to draw inferences.

12. The Tribunal did not record any finding that any fixed remuneration was being paid to the Directors. On the other hand, the fact that they were sharing the profits from the profit and loss account was taken note of. This Court is of the view that on the basis of such uncertain observations, the liability under the Act cannot be fastened upon the appellant. The matter needs to be examined afresh by the respondents from the proper angle. The appellant must also co-operate and non-co-operation must entail in the steps indicated in the Act.

13. For the foregoing reasons, the appeal is allowed and the order under appeal is set aside. The matter is remitted to the authority concerned under the Act, for fresh adjudication and disposal. It shall be open to the authority concerned, to issue a notice calling upon the appellant to produce the records indicated in the notice, within 15 days from the date of service. On receiving such notice, the appellant shall produce the concerned records and if it has any explanation to offer for noncompliance with any of them, the same must be furnished within the stipulated date. In default, it shall be open to the authority concerned to initiate action against the appellant in accordance with the Act. There shall be no order as to costs.