This appeal is directed against a judgment and order dated 10.3.2000 passed by a learned single Judge of this Court, whereby and whereunder the writ application filed by the appellants herein was dismissed.
2. The fact of the matter shorn of all unnecessary details is as follows.
A partnership business was started, wherefor a deed of partnership was executed in the year 1984. The partnership business related to printing and composing work. Admittedly, a statement of number of employees, workers and labourers from January 1986 to July 1998 had been filed, from a perusal whereof it appears that during all the periods, the number of employees was less than 20. However, the five partners of the partnership firm were also getting salary.
3. On or about 23.8.95, the said partnership business was converted into a private limited company. A proceeding under the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 (hereinafter for the sake of brevity referred to as the said Act) was initiated against the said company, and an assessment was made for the period 1984-95, inter alia, holding that there were 16 employees on the roll of the establishment, and keeping in view the fact that 5 partners had also been getting salary, the number of employees having exceeded 20, they were liable to pay provident fund in terms of the provisions of the said Act. The writ application was filed questioning the said order dated 28.5.99
4. The learned trial Judge, inter alia, noticed that 5 partners had been getting salary, and proceeded to hold that the partners were also employees.
5. Mr Sanyal, learned counsel appearing on behalf of the appellants, inter alia, submitted that a distinction has to be drawn between partners of a partnership firm and directors of a private limited company. According to the learned counsel, whereas keeping in view the fact that a partnership firm is not a juristic person, but merely a conglomeration of partners over which each partner has a share in the profit thereof to the extent of his share in terms of the deed of partnership, a company incorporated and registered under the Companies Act, is a juristic person and can sue and be sued in its own name. Such a juristic person being a body corporate can own property in respect whereof the directors cannot claim any right, title and interest. Mr. Sanyal submitted that if a partner, who is getting salary in terms of the deed of partnership, is treated to be an employee, the same would lead to an absurdity, in as much as, in such a case there would not exist any relationship of employer and employee, as all the partners are employers in relation to the employees who had been employed by them. In support of the aforementioned contention, strong reliance has been placed by Mr. Sanyal upon a decision of the Supreme Court in Regional Director, Employees' State Insurance Corporation v. Ramanuja Match Industries, reported in AIR 1985 SC 278.
6. Mr. Gupta, learned counsel appearing on behalf of the respondents, on the other hand, submitted that the writ application was not maintainable, in as much as, the appellants had a remedy by way of appeal in terms of section 7(1) of the said Act. In support of the said contention, reliance has been placed in Bengal Ingot Company Ltd. v. The Regional Provident Fund Commissioner, reported in 1995 (11) CHN 457. Mr. Gupta would urge that in view of the fact that now the appellant has been converted into a limited company, and the erstwhile partners have become directors and are being paid their salaries, they would come within the purview of the definition ‘employee’ as contained in section 2(9) of the said Act. In support of the said contention, reliance has been placed on Employees' State Insurance Corporation v. Apex Engineering Pvt. Ltd., reported in 1998 (I) LLJ 274.
7. In the instant case, the basic fact of the matter is not in dispute. As noticed hereinbefore, admittedly the respondent authority had proceeded on the basis that at all relevant point of time, the establishment had 16 employees on its roll besides 5 partners who were getting salaries. The only question which, therefore, arises for consideration in this appeal is as to whether such partners who were getting salaries would be employees within the meaning of section 2(9) of the said Act, section 13(a) of the Indian Partnership Act, 1932, inter alia, provides that subject to contract between the partners, a partner is not entitled to receive remuneration for taking part in the conduct of the business. Thus, although in the absence of an agreement to that effect, one partner cannot charge his co-partners with an sum for compensation, whether in the shape of salary, commission, or otherwise, on account of his own trouble in conducting the partnership business; but there can be an agreement to the contrary. There are several decisions of different High Courts wherein this aspect of this matters had been taken into consideration. In the context of the personal labour put in by one partner in comparison to the other, apart from the fact that a deed of partnership may, keeping in view the nature of the business, provide for the duties and functions of the partners, it may also provide for payment of such remuneration, keeping in view the duties to be performed by each partner, as may mutually be agreed upon. This principle proceeds on the basis that in terms of the deed of partnership as also under the provisions of the Indian Partnership Act, each partner has a duty to attend to the partnership business. This aspect of the matter albeit in a different context has been considered by the Appex Court in V.D Dhanwatey, reported in AIR 1968 SC 683 as also a Division Bench decision of Allahabad High Court in Laxman Das v. Commissioner of Income Tax, reported in 1982 Tax LR 2070.
8. We, in view of the aforementioned settled principles of law, agree with the contention of Mr. Sanyal that for the purpose of the provisions of the said Act, or otherwise, a partner cannot be said to be an employee of the partnership firm having regard to the provisions of the Indian Partnership Act, in as much as, it is a well settled principles of service jurisprudence that a person cannot both be an employer and employee at the same time. In Regional Director Employees' State Insurance Corporation (supra), it has been held :
“The position of a partner qua the firm is thus not that of a master and a servant or employer and employee which concept involves an element of subordination but that of equality. The partnership business belongs to the partners each one of them is an owner thereof. In common parlance the status of a partner qua the firm is thus different from employees working under the firm, it may be that a partner is being paid some remuneration for any special attention which the devotes but that would not involve any change of status and bring him within the definition of employee.”
9. The decision of the apex Court in Employees' State Insurance Corporation (supra) stands absolutely on a different footing. There, a Managing Director was being paid salary. A question arose as to whether the Managing Director of the company would be employee within the meaning of section 2(17) of the Employees' State Insurance Act vis-a-vis section 2(9) of the said Act. The apex Court upon taking into consideration various decisions, inter alia, held that a Managing Director of a company having limited liability, would be employee within the meaning of the said Act. In that case, the apex Court clearly held in the facts and circumstances thereof, that all the requisite conditions for applicability of the term ‘employee’ as defined by the Act stood satisfied in the case of the Managing Director, holding that a Managing Director of a company could not be treated at part with partner of a partnership firm who has been given some remuneration for his extra work. The decision cited by Mr. Gupta, therefore, cannot be said to have any application whatsoever and in fact, runs counter to his own contention.
10. The only question which, therefore, remains for consideration is as to whether in the peculiar facts and circumstances, the writ application was entertainable or not. The learned trial Judge has not refused to entertain the writ application. In fact, the learned trial Judge held that the writ petition was maintainable. No appeal against the said order has been filed by the respondents, and in that view of the matter, it is not permissible for the respondents to contend that the writ application was not maintainable. It is a well settled principles of law that the writ Court exercises only Judicial restraint in the matter of entertaining writ application, when an alternative remedy is available, but the Court usually does not throw out a writ application on the ground of availability of an alternative remedy when a question arises as regards jurisdiction of the authority to pass an order which is impugned before the writ Court or there has been a violation of the principles of natural Justice and/or fundamental rights of the petitioner. This aspect of the matter has been considered by the apex Court in Whirlpool Corporation v. Registrar of Trade Marks, Bombay, reported in (1998) 8 SCC 1 in the following term :
“Under Article 226 of the Constitution, the High Court, having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. But the High Court has imposed upon itself certain restrictions one of which is that if an effective and efficacious remedy is available, the High Court would not normally exercise its Jurisdiction. But the alternative remedy has been consistently held by this Court not to operate as a bar in at least three contingencies, namely, where the writ petition has been filed for the enforcement of any of the Fundamental Rights or where there has been a violation of the principle of natural Justice or where the order or proceedings are wholly without jurisdiction or the vires of an Act challenged. These is a plethora of case-law on this point but to cut down this circle of forensic whirlpool, we would rely on sole old decisions of the evolutionary era of the constitutional law as they still hold the field.”
11. For the reasons aforementioned, we are of the opinion that the judgment and order passed by the learned trial Judge cannot be sustained. It is set aside accordingly. However, there cannot be any doubt whatsoever that keeping in view the admitted fact that a private limited company has come into being with effect from 23.8.95, the liability of the company vis-a-vis the question as to whether the directors of the company have become employees thereof, or not, must be decided by the Regional Provident Commissioner himself. For the aforementioned purpose, we direct that the proceedings be reopened, and a decision afresh be taken upon giving an opportunity of hearing to the parties in the light of this judgment.
The appeal, which is treated on day's list as also the application are, therefore, allowed.
Xerox certified copy, if applied for, be supplied on priority basis.
Appeal allowed
A.K.G