The Bench of Justices Abhay Manohar Sapre and Dinesh Maheshwari delivered this judgment while considering the question of whether or not Directors who receive remuneration from a Company fall within the definition of “employee” under the ESI Act.
The company was covered under the ESI act and deposited regular contribution but they did not deposit contribution of remuneration paid to directors.
Case reached before MP High court. High court favored the company but ESI department was aggrieved the same and approached the Supreme Court.
Finally Supreme Court held that “employee” includes a person employed for work and paid wages, the term “wages” itself includes any remuneration paid in terms of an employment agreement.
So directors of a Company are employees under the provisions of the Employees State Insurance Act
This Judgment would affect the decisions of many companies not considering director as an employee. The case was between Venus alloys Pvt Ltd vs ESI and Judgment came on 05.02 2019.
(9) Employee means any person employed for wages in or in connection with the work of a factory or establishment to which this Act applies and
and includes any person employed for wages on any work connected with the administration of the factory or establishment or any part, department or branch thereof or with the purchase of raw materials for, or the distribution or sale of the products of, the factory or establishment] [or any person engaged as apprentice, not being an apprentice engaged under the Apprentices Act, 1961 (52 of 1961), [and includes such person engaged as apprentice whose training period is extended to any length of time] but does not include]
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 that period;]
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