A Managing Director or Director of a Company cannot be held personally liable for payment of contributions as a 'principal employer' under Section 40 of the Employees' State Insurance Act, 1948, unless he is specifically notified as an occupier under the provisions of the Factories Act.

Dubey, J.

1. This appeal under Section 82 of the Employees' State insurance Act, 1948 (for short "the Act"), shall also govern the disposal of Misc. Appeal No. 36/83 (Employees State Insurance Corporation v. Shri Kailash Chandra S/o Shri Bhavarlalji and Ors.).

2-3. The short facts leading to these appeals: that M/s. Binod Steel Limited was a registered limited company incorporated under the Companies Act, 1956, which owned a factory situated at 68/77, Industrial Estate, Indore, engaged in manufacture and sale of steel. It employed about 52 employees. The principal employer did not pay the employees' and employer's contribution in respect of the employees employed by the factory for the period 29th July, 1972, 25th November 1972 to 27th September, 1975, and up to 28th January, 1976. A revenue recovery certificate was issued for recovery of Rs. 94,998.01 and interest up to 28th January, 1976 thereon amounting to Rs. 6684.05 against the principal employer, i.e. the respondent No. 1. The respondent No. 1, after the receipt of the notice of recovery, presented two applications under Section 75 of the Act on 15th April, 1977 before the Employees' Insurance Court at Indore (for short "E.I.Court"), wherein the respondent No. 1, who was the Managing Director up to 13-14th March, 1975, contended that he was not the principal employer' nor was an occupier of the factory. The employer was the Company. Hence, no personal liability of the Managing Director arises. The Company being the employer was and is liable and/or responsible for payment of contributions. Recovery cannot be made from his personal properties. The reason assigned for nonpayment was that the factory and/or Industrial Establishment had to undergo financial stringency and labour troubles.

4. The appellant, Employees' State Insurance Corporation (for short 'Corporation'), in its written statement contended that under Section 2(17) of the Act, at the relevant time as the respondent was the principal employer as Managing Director and as the employees' contribution was deducted by the employer but the employees' and employer's contributions were not deposited in time by the employer, hence, after issuing notices, the determination of contributions was arrived at by way of best judgment assessment under Section 45A of the Act and, thereafter under Section 45B of the Act, the amount of contributions and interest payable under the Act was being recovered as arrears of land revenue from the personal properties of the respondent, being the 'principal employer' at the relevant time.

5. After recording of parties' evidence, the E.I. Court held that at the relevant time the respondent was the Managing Director and was acting as an : agent of the Company, as such no personal liability can be fastened, and the recovery cannot be made from the personal properties of the respondent. Aggrieved of this order, the Corporation has come in appeal under Section 82 of the Act before this Court.

6. On behalf of the appellant Corporation, Shri N.C. Behal, learned counsel, raised an important and substantial question of law that definition of 'principal employer' under Section 2(17) of the Act is an inclusive definition, which includes a Director and/or Managing Director of the Company or the occupier, and in case employer makes default in deposit of the statutory contributions or dues, in respect of each employee, each such default is a distinct default and the 'principal employer' becomes liable for punishment. The default so made terminates only when the deposit is made. On the basis of the said analogy, and relying upon the definition of 'principal employer', the provisions of Section 39 and Section 40 of the Act and Regulations 10-B, 26 to 31 of the Employees' State Insurance (General) Regulations, 1950 (for short "Regulations") and the provisions of Section 100 of the Factories Act, 1948, Shri Behal contended that it is the principal employer, who is liable for deposit of the contributions