Page 100 - GSTL_30th April 2020_Vol 35_Part 5

586 GST LAW TIMES [ Vol. 35
Director for such period and such terms as they think fit and subject to the
terms of any agreement, entered into in any particular case may revoke
such appointment. His appointment shall be automatically determined if
ceases to be a Director
44. The Managing Director may not be paid any remuneration or may be
paid such remuneration (whether by way of salary, commission or partici-
pation in profit of partly in one way and partly in another) as the Directors
may determine.
1.36 that more over the applicant rely in the case of Regional Director,
E.S.I. ... v. Sarathi Lines (P) Ltd. on 29 January, 1997 (1998) ILLJ 28 Ker the Hon’ble
High Court of Karnataka has held as under :
Para 4. We find, it not possible to agree with the wide proposition of law
put forward by the Employees Insurance Court that treating a person who
is a Managing Director of a company as an employee is not justified at all
under any circumstances. The question that has to be examined is whether,
in this particular case, the Managing Director who is admittedly receiving a
remuneration of Rs. 500/- p.m. would come within the definition of ‘em-
ployee’ under the Employees’ State Insurance Act, 1948 (hereinafter re-
ferred for short ‘the Act’). Unlike in the case of the partner receiving remu-
neration it cannot be said that a Director or Managing Director of a Compa-
ny owning the factory or establishment can never be an employee also. The
term employee is defined under Section 2(9) of the Act as “any person em-
ployed for wages in or in connection with the work of a factory or estab-
lishment to which the Act applies.” It is true in the case of a Director or
Managing Director of a Company he is not an employee of the Company
but an agent inasmuch as the Company cannot act in its own person but
has only to act through their Directors. Still it is possible that such a Direc-
tor or Managing Director can have a dual capacity of an agent as well as an
employee. It will depend on his work and the terms of his employment as
discernible from the articles of association or terms of agreement. This was
the view taken by the Supreme Court in AIR 1973 SC 637 (supra), even
though it was a case arising under the Income-tax Act. One of the tests laid
down to ascertain whether a person is a servant or an agent is to examine
whether under the terms of his employment, the employer exercises a su-
pervisory control in respect of the work entrusted to him. A servant acts
under the direct control and supervision of his master, whereas the agent in
exercise of his work is not subjected to the direct control or supervision of
the principal, though he is bound to exercise his authority in accordance
with all lawful orders and instructions which may be given to him from
time to time by his principal. After examining the articles of association of
the Company the Supreme Court came to the conclusion that powers of the
Managing Director had to be exercised within the terms and limitations
prescribed thereunder and subject to the control and supervision of the Di-
rectors, which, would indicate that he was employed as a servant of the
Company.
1.37 that the above view was also held by the Hon’ble Supreme Court
in the case of Ram Pershad v. Commissioner of Income-Tax, New ... on 24 August,
1972 - 1973 AIR 637, 1973 SCR (3) 985
The powers of the assessee have to be exercised within the terms and limi-
tations prescribed thereunder and subject to the control and supervision of
the Directors which in our view is indicative of his being employed as a
servant of the company. We would therefore hold that the remuneration
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