The engagement of consultants did not create an employer-employee relationship, and therefore, the establishment was not brought under the purview of the Employees State Insurance Act.

Usha J.

This is an appeal at the instance of the E.S.I. Corporation challenging the judgment of Employees Insurance Court, Alleppey in I.C. No. 68/91. Substantial question of law raised in this appeal is whether persons employed for consultancy service will come under the definition of employee in the E.S.I. Act. The Employees Insurance Court took the view that they would not. It is contended on behalf of the appellant that those who are engaged for consultancy service also would come within the term 'employee as defined under the E.S.I. Act.

2. The short facts relevant for consideration of the above question are as follows:

The respondent is a private limited company engaged in clearing and forwarding business. According to the respondent, even though its establishment was covered by Employees State Insurance Act from May 1977 onwards, the employment strength dropped below 20 as on 1-4-1987. Intimation regarding the reduction in the strength of employees below the required minimum was sent to the E.S.I. Corporation only on 23-11-1988. By letter dated 7-2-89 respondent was directed to produce all records' before the E.S.I. Inspector for verification. The direction was complied with More than one year thereafter it received a communication dated 30-10-1990 informing that on verification of the records it was noted that the respondent was engaging more than 20 employees even after 1-4-1989 and therefore was liable to pay contribution from October, 1988 onwards. Respondent took objection to the above view taken by the

appellant. Ultimately it came to the question whether Krishna Menon and Sadasivan Pillai whose services are engaged as consultants on contract basis by the respondent could be treated as its employees and their names should find a place in the register. It was contended by the respondent that Krishna Menon retired from the service of the respondent in the year 1976 and he was aged 73 at the time of inspection. He was

engaged as consultant on contract basis from 1-9-1980 onwards. He was being paid only consultancy charges. It is not obligatory on his part to come to the establishment. After the year 1979 about 13 inspections were conducted by different officers and on no occasion they had found it necessary to register the names of those who were rendering consultancy service. The E.S.I. Court accepted the above contention and found that excluding two consultants there were no sufficient number of employees so as to cover the establishment by the Act.

3. It is contended on behalf of the appellant that a reading of the definition of the word 'employee' would clearly show that even those who are serving as consultants would come within the above term. Therefore, according to the appellant, the E.S.I. Court has committed a grave error of law in accepting the contention raised.

4. The word 'employee' is defined as follows under Section 2(9) of the Employees State Insurance Act, 1948:

"2(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:

i) who is directly employed by the principal employer on any work of, or incidental or preliminary to or connected with the work of, the factory or establishment, whether such work is done by the employee the factory or establishment or elsewhere; or

ii) who is employed by or through an immediate employer on the premises of the factory or establishment or under the supervision of the principal employer or his agent on work which is ordinarily part of the work of the factory or establishment or which is preliminary to the work carried on in or incidental to purpose of the factory or establishments; or

iii) whose services are temporarily lent or let on hire to the principal employer by the person with who the person whose services are so lent or let on hire has entered into a contract of service: and includes any person employed for wages on any work connected with the administration of the f