The main legal point established in the judgment is that a Managing Director can have a dual capacity as both an employee and a principal employer under the Employees State Insurance Act, 1948.

TEJINDER SINGH DHINDSA, J.

1. Present appeal assailing the judgment dated 16.12.1992 passed by the Employees Insurance Court, Chandigarh has come up before us pursuant to reference made by learned Single Judge vide order dated 12.7.2017 and which reads as under:-

“In the present appeal, the issue is “as to whether the Managing Director of the Company can be included in the definition of an employee so as to force the employer to contribute towards employees' insurance”.

In the impugned order, it has been held that a Managing Director is not covered under the definition of employee under the Employees State Insurance Act, 1948, by relying upon a judgment rendered by a Division Bench of this Court reported as M/s Shibbu Metal Works, Jagadhri Vs. Regional Director, Employees' State Insurance Corporation, Chandigarh and another, 1982 Lab. I.C. 755.

Learned counsel for the appellant inter alia has cited a Division Bench judgment of Karnataka High Court reported as Regional Director, Employees' State Insurance Corpn Vs. M/s Margarine & Refined Oils Co. (P) Ltd, Bangalore, 1984 Lab. I.C 844, taking a converse view.

Keeping in view the importance of the issue as well as divergent views of two Division Bench judgments, this Court feels it necessary to place the matter before Hon'ble the Chief Justice for constituting a Larger Bench.

Ordered accordingly.”

2. Facts of the present case lie in a narrow compass.

3. Respondent is a private limited company duly registered under the Factories Act. A survey was conducted by the competent authority under the Employees State Insurance Corporation (in short the Corporation) in the month of September, 1987 and the respondent was found to have employed 18 persons for wages besides its two Directors. Directors were drawing salary @ Rs.2000/- per month w.e.f. July, 1987. Accordingly, orders dated 20.9.1988 and 21.4.1989 were issued by the Corporation making the provisions of the Employees State Insurance Corporation Act, 1948 (for short the Act) applicable upon the respondent and for claiming contribution for the period October, 1987 to July, 1988 amounting to Rs.12760/- and interest of Rs.926/-. Aggrieved of the two afore-noticed orders issued by the Corporation, respondent filed an application under Section 75 of the Act before the E.S.I Court, Chandigarh. Vide impugned judgment dated 16.12.1992 the orders dated 20.9.1988 making the respondents amenable to the provisions under the Act as also the order dated 21.4.1989 claiming contribution for the period October, 1987 to July, 1988, have been set aside. View taken by the E.S.I Court is that the work of a Limited Company is carried out by the Directors and Managing Director and therefore they would come within the definition of “Principal Employer” under Section 2 (9) of the Act. Accordingly, payment made to the Directors/Managing Director cannot form the basis for assessing the contribution provided for under the Act. It was further held by the E.S.I Court that the two Directors under the respondent and who were found working and drawing salary could not be treated as “employees” under Section 2(9) of the Act.

4. We have heard learned counsel for the appellant at length and have perused the case paper book.

Section 2 sub section(9), Section 2 sub section (17) and Section 2 sub section (22) of the Act defining “Employee”, “Principal Employer” and “Wages” would be relevant for the issue at hand and are reproduced hereunder:-

“2(9). 'employee' means by person employed for wages in or in connection with the work of a factory or establishment to which this Act applies and-

(1) 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 in the factory or establishment or elsewhere; or (11) who is employed by or through an immediate employer on the premises of the factory or establishment or under the supervision of the