# J.K. INDUSTRIES LTD. ETC. ETC v. THE CHIEF INSPECTOR OF FACTORIES AND BOILERS AND ORS. ETC. ETC

- **Citation:** [1996] Supp. 6 S.C.R. 798
- **Court:** Supreme Court of India
- **Decided:** 1996-09-25
- **Case number:** Civil Appeal Nos. 40144015 of 1993
- **Bench:** Dr. As. Anand, K.T. Thomas
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/j-k-industries-ltd-etc-etc-v-the-chief-inspector-of-factories-and-boilers-and-14806
- **Pages:** 41

## Headnote

Labour Laws-Factories Act 1948-Sections 2(n) proviso (ii) (as
amended in1987); 6(1)(e); 7; 7-A and 100(2) (omitted in 1987)-Factory
c owned and run by a company-Occupier-Person in ultimate control of the
affairs of the factory or only a director-Application for renewal or grant of
factory licence-Direction by the Chief Inspector of factories-Only a director
of the company is responsible and not any employee even otherwise
nominated by the Boa1:d of Directors-Held, is a valid direction-In the case
D of a. company, which owns a factory, it is only one of the directors of the
company who can be notified as the occupier of the factory for the purposes
of the Factories Act and the company cannot nominate any other employee
to be the occupier of the factory-When the company fails to do so notify the
Inspector off actories shall be at liberty to proceed against any one of the
Directors of the company, treating him as the deemed occupier of the factory
E for prosecution and punishment in case of any breach or contravention of the
provisions of the factories Act or fo; offences committed under it-Proviso
(ii) to Section 2(n) of the Factories Act is intravires the substanti~e provision
of Section 2(n) of the factories Act.
F
Words & Phrases :
'Occupier'-Meaning of-In the context of Factories Act 1948-l'erson
who is in the ultimate control of the affairs of the factory--Held, person could
be a company or a partnership or an association of persons or an individual.
G
b1te1pretation of Statute :
Statute Law-f'roviw-Proper mode of interpretation of-Held, a Sec-
~.;
tion and the proviso thereto must b.e construed as a whole each throwing light
on the rest-Proviso (ii) is no ultra-vires the main provision of Section (2) of
the Fact01ies Act-171ere is not conflict at all between the main provision of
H Section 2(n) and proviso (ii) thereto.
798
J.K.INDS.LTD.v.CHIEFINSPECTOROFFACTORIESANDBOILERS 799
Strict liability-The perJons punishable under the provision of Section A
92 of the Factories Act are occupiers and managers-Held, Section 92 contemplated a joint liability of the occupier and the manager for any offence
committed irrespective· of the fact as to who is directly responsible for the
offence-The offence under the factories Act are strict statutory offences for
which establishment of mens rea is not an essential ingredient-The omission B
or commission of the statutory breach is itself an offence.
Constitution of India-Articles 14, 19(1)(g); 21 and 141-Constitutionality of Proviso (ii) to Section 2(n) of the Factories Act-Held, valid
and not ultravires of Articles 14, 19( l)(g) and 21-lt is not fair and proper to
read a sentence from Supreme Cowt's judgment divorced from its context and C
to build up a case treating that sentence to be completed law on the subject.
The petitioners/appellants desirous of renewal of the registration of
licence of their factories filed applications with the Chief Inspector of
Factories, (the respondent). The respondent rejecting the applications of
the appellants directed them to make an application duly signed by the D
director of the company in his capacity as the occupier of the factory and
that a nominee of the Board of Director, other than a Director, of the
Company could not make such an application us an occupier. According
to the respondent, section 2(n) with its proviso (ii) of the factories Act,
1948 as amended by Amending Act of 1987, provides that in case of a E
company, which owns the factory, the company cannot nominate any one
of its employees or officers, except a director of the company, as the
occupier of the factory.
The appellants challenged the correctness of that direction in the
High Court by way of a Writ Petition. The High Court d.ismissed the Writ F
.Petition and held that the nomination of an occupier to be made by the
company under proviso (ii) to Section 2(n) of the Factories Act, 1948 as
amended by Amending Act of 1987 can only be that of director and of no
other officers or em

## Text

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A
J.K. INDUSTRIES LTD. ETC. ETC.
v.
THE CHIEF INSPECTOR OF FACTORIES AND BOILERS AND
ORS. ETC. ETC.
B
SEPTEMBER 25, 1996
. ........._
[DR. AS. ANAND AND K.T. THOMAS, JJ.]
Labour Laws-Factories Act 1948-Sections 2(n) proviso (ii) (as
amended in1987); 6(1)(e); 7; 7-A and 100(2) (omitted in 1987)-Factory
c owned and run by a company-Occupier-Person in ultimate control of the
affairs of the factory or only a director-Application for renewal or grant of
factory licence-Direction by the Chief Inspector of factories-Only a director
of the company is responsible and not any employee even otherwise
nominated by the Boa1:d of Directors-Held, is a valid direction-In the case
D of a. company, which owns a factory, it is only one of the directors of the
company who can be notified as the occupier of the factory for the purposes
of the Factories Act and the company cannot nominate any other employee
to be the occupier of the factory-When the company fails to do so notify the
Inspector off actories shall be at liberty to proceed against any one of the
Directors of the company, treating him as the deemed occupier of the factory
E for prosecution and punishment in case of any breach or contravention of the
provisions of the factories Act or fo; offences committed under it-Proviso
(ii) to Section 2(n) of the Factories Act is intravires the substanti~e provision
of Section 2(n) of the factories Act.
F
Words & Phrases :
'Occupier'-Meaning of-In the context of Factories Act 1948-l'erson
who is in the ultimate control of the affairs of the factory--Held, person could
be a company or a partnership or an association of persons or an individual.
G
b1te1pretation of Statute :
Statute Law-f'roviw-Proper mode of interpretation of-Held, a Sec-
~.;
tion and the proviso thereto must b.e construed as a whole each throwing light
on the rest-Proviso (ii) is no ultra-vires the main provision of Section (2) of
the Fact01ies Act-171ere is not conflict at all between the main provision of
H Section 2(n) and proviso (ii) thereto.
798
J.K.INDS.LTD.v.CHIEFINSPECTOROFFACTORIESANDBOILERS 799
Strict liability-The perJons punishable under the provision of Section A
92 of the Factories Act are occupiers and managers-Held, Section 92 contemplated a joint liability of the occupier and the manager for any offence
committed irrespective· of the fact as to who is directly responsible for the
offence-The offence under the factories Act are strict statutory offences for
which establishment of mens rea is not an essential ingredient-The omission B
or commission of the statutory breach is itself an offence.
Constitution of India-Articles 14, 19(1)(g); 21 and 141-Constitutionality of Proviso (ii) to Section 2(n) of the Factories Act-Held, valid
and not ultravires of Articles 14, 19( l)(g) and 21-lt is not fair and proper to
read a sentence from Supreme Cowt's judgment divorced from its context and C
to build up a case treating that sentence to be completed law on the subject.
The petitioners/appellants desirous of renewal of the registration of
licence of their factories filed applications with the Chief Inspector of
Factories, (the respondent). The respondent rejecting the applications of
the appellants directed them to make an application duly signed by the D
director of the company in his capacity as the occupier of the factory and
that a nominee of the Board of Director, other than a Director, of the
Company could not make such an application us an occupier. According
to the respondent, section 2(n) with its proviso (ii) of the factories Act,
1948 as amended by Amending Act of 1987, provides that in case of a E
company, which owns the factory, the company cannot nominate any one
of its employees or officers, except a director of the company, as the
occupier of the factory.
The appellants challenged the correctness of that direction in the
High Court by way of a Writ Petition. The High Court d.ismissed the Writ F
.Petition and held that the nomination of an occupier to be made by the
company under proviso (ii) to Section 2(n) of the Factories Act, 1948 as
amended by Amending Act of 1987 can only be that of director and of no
other officers or employee of the factory or the company which owns the
factory. Hence these appeals.
G
Dismissing the appeals, this court
HELD : 1.1. There is nothing unreasonable in fixing the liability of
a director of the company and making him responsible for compliance with
.the provisions of the Act and the rules made thereunder and laying down H
~r800
SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.
A that it there is contravention of the provisions of the Act or an offence is
committed under the Act, the notified director, and in the absence of the
notification, any one of the directors of the company, shall be liable to ·be
prosecuted and shall be liable to be punished as the deemed occupier. "A
law has to be judged (Br its constitutionality by the generality of cases it
B covers and not by the freaks and exception'i it martyres." [836-G-H]
·-'-...
R.S. Joshi v. Ajit Mills, AIR (1977) SC 2279, relied upon.
MIS. Bhatia Metal Containers Pvt. Ltd. and Anr. v. The State of Uttar
'
.
Pradesh, (1990) II LLJ 534; Standard Industries Ltd. and Anr. Etc. Etc. v.
c The State of Madhya Pradesh & Others, (decided on 15.11.1995); Ashok
Leyland Ltd. v. The State of Rajasthan, (decided on 1.11.1991 by Rajasthan
High Court); Jaipur Syntex Ltd. and Others. v. State of Rajasthan and Others,
(1991) LLR 380; Champaran Sugar Co. Ltd. v. Union of India & Ors.,
(decided on 3.5.1988 by Patna High Court), approved.
D
W.S. Industries (India) Ltd. and Another v. The Inspector of Factories,
Bangalore & Ors., (1991) II LLJ 480; Kirloskar Pneumatic Company Ltd. v.
VA. More and Others, (1993) I, LLJ 805; Indo Flaglabes Ltd. and Anr. and
Straw Products Ltd. and Anr. v. Chief Inspector of factories and Boilers and
Others, (1993) 66FLR171; WimocLtd. and Others v. The Union of India &
E Others, (1995) FLJ 552; Ion Exchange India Ltd. Hosur v. Deputy Chief
Inspector of Factories, Salem, (1995) LLR 756; Greaves Ltd. andAnr. v. State
of West Bengal & Anr., (1996) LLR 638, disapproved and overruled.
1.2. Where it is the company which owns or runs such a factory, it is
the company which has the ultimate control over the affairs of the factory,
F and therefore, it would be the company which would be the occupier of that
factory. However, since a company is a legal abstraction, it can act only
through jts agents who in fact control a~d determine the management and
are the centre of its personality. Such agents are generally called the
directions being ~e "directing mind and will" of the company. The deeming
G
fiction under proviso (ii), therefore, only clarifies the position where company is the occupier of the factory. The legislature by providing the
deeming fiction under proviso (ii) did not detract from the generality .of the
main provision under Section 2(n), but only clarified it. The directors are
._
not the employees or servants of the company. They manage, control and
direct the business of the company as "owners". Th~ Directors are often
H referred to as the "alter ego" of the company. An el!Iployee or officer ofthe
J .K. INDS. LTD. v. CHIEF INSPECTOR OFF ACIORIES AND BOILERS 801
factory or of the company, even it authorised by the board 11f directors by A
a resolution to be a person "in the ultimate control of the affairs of the
factory" cannot be so. Such an employee only carries out orders from above
and it makes no difference that he has given some measures of discretion
..
also and has supervisory control. He can at best be treated to be in the
immediate (control) of the affairs of the factory or having day to day control B
over the affairs of the factory, the ultimate control being retained by the
company itself. The legislature did not designedly use the expression
immediate or day to day or supervisory control instead of ultimate control
in the main provision of section 2(n). [817,·A-E]
John Donald Mackenzie and Another v. The Chief Inspector of Fae- c
tories, Bihar, AIR (1962) SC 1351, held applicable.
Oxford advanced Leamer's Dictionary of current English Encyclopedic Edition (1992); Collins Dictionary of the English Language;
Black's Law Dictionary (Sixth Edition), relied upon.
D
1.3. The provisions of Sections 7 and 7 A when considered in the light
of proviso (ii) to Section 2(n), leave no manner of doubt that it is a
statutory obligation under section 7 of the Act after 1987 to nominate the
occupier before the occupier occupies or beings to use the premises to run
the factory and in the case of an existing factory seek the renewal of the E
licence to continue to operate the factory. It is only when this statutory
requiremen~ is fulfilled that the factory would be given the licence or its
licence shall be renewed in the case of existing factories.
The option to 'Select' the director who would be the "occupier" vests
in the Board of Directors and once they notify the name and particulars of F
a director the Inspector of Factories is left with no discretion to 'pick and
choose" any other director for prosecution etc. for the breaches committed
in the factory or for contravention of any of the provisions of the Act. It is
only when the company fails to perform its statutory obligation to notify
the name of the director under section 7 of the Factories Act, that the G
Inspector of Factories may "Choose" any one of the directors as the deemed
..
occupier and proceed against him. The area for mischief can, thus, be
totally blocked by the company by notifying one of its directors as the
occupier in discharge of its statutory obligations enumerated in Section 7
of the Factories Act. The reasonableness of the restriction depends upon
the urgency of the evil sought to be controlled. The possibility of the power H
802
SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.
A being abused is no ground for declaring the provision unconstitutional.
B
c
Proviso (ii) to Section 2(n) of the Factories Act, there fore, does not offend
Article 14 of the Constitution of India. [827-A]
1.4. A proviso to provision in a statute has several functions and while
interpreting a provision of the Statute, the Court is required to carefully
scrutinise and find out the real object of the proviso appended to that
provision. It is not a proper rule of interpretation of a proviso that the
enacting part or the main part of the Section be construed first without
reference to the proviso and if the same is found to be ambigous only then
recourse may be had to examine the proviso. [824-B-C]
An accepted rule of interpretation is that a section and proviso thereto must be construed as a whole each portion throwirtg light, if need be, on
the rest. A proviso is normally used to remove special cases from the
general enactment and provide for them specially. Proviso (ii) to section
2(n) of the Act is intra- vires the substantive provision of section 2(n) of the
D Act. The restriction imposed by proviso (ii) if at all, it may be called a
restriction, has, a direct nexus with the object sought to be achieved and is,
therefore, a reasonable restriction within the meaning of clause (6) of
Article 19. Proviso (ii) to Section 2(n) is thus, not ultra-vires Article 19(1)(g)
of the Constitution. Proviso (ii) was introduced by the Amending Act,
E couched in a mandatory form - 'any one of the directors shall be deemed to
the occupier' - keeping in view the experience gained over the years as to
how the directors of a company managed to es~pe their liability, for
various breaches and defaults coinmitted in the factory by putting up
another employee as a shield and nominating him as an 'occupier' who
would willingly suffer penalty and punishment. Proviso (ii) now makes it
F
possible to reach out to a director of the company itself, who shall be
prosecuted and punished for breach of the provisions of the Act, apart from
prosecution and punishment of the Manager and of the actual offender.
There is no conflict at all between the main provision of Section 2(n) and
proviso (ii) thereto. Both can be read harmoniously and when so ready in
the case a company, the occupier of a factory owned by a company would
G mean 'any one of the directors of the company who has been notified/identified
by the company to have ultimate control over the affairs of the factory and
where no such director has been so identified, for the purposes of prosecution
and punishment under the Act, the Impector off actories may initiate proceedings against any one of the Directors as the deemed occupier . .
H
{824-C-D; 825-E-H; 826-A-D]
...
J.KINDS.LTD.v.CHIEFINSPECTOROFFACTORIESANDBOILERS 803
Reserve Bank of India Etc. Etc. v. Peerless General Finance and A
Investment Co. Ltd. and Others Etc. Etc., [1987) 1 SCC 424; S. Gopal Reddy
v. State of Andhra Pradesh, JT (1996) 6 SC 268; The Commissioner of
Income Tax, Mysore and Ors. v. The Indo Mercantile Bank Ltd. & Ors., AIR
(1959) SC 713, referred to.
2.1. The offences under the Factories Act are not a part of general
penal ·1aw but arise from the breach of a duty provided in a special
beneficial social defence legislation, which creates absolute or strict
liability without proof of any mens rea. The offence are strict statutory
offences for which establishment ofinens rea is not an essential ingredient.
The omission or commission of the statutory breach is itself the offence.
'Absolute offences' are not criminal offences in any real sense but acts
which are prohibited in the interest of welfare of the public and the
prohibition is backed by sanction of penalty. Such offences are generally
known as public welfare offences. The rule of strict liability is attracted to
B
c
the offences committed under the Act and the occupier is held vicariously D
liable alongwith the Manager and the actual offender, as the case my be.
Penalty follows Actus reus, mens-rea being irrelevant. The legislature has
itself taken care to ,dilute the rigour of Section 92 of Factories Act, by
providing an exception to the strict liability rule by lying down a third party
procedure in section 101 of the Act Section 101 of the Act lays down "third
part procedure" as a defence and is in a way an exception to the general E
I
rule and enables the occupier or the manager or the factory, to extricate
himself from punishment by establishing that the actual offender is someone else and giving satisfactory proof of facts as are contemplated by
Section 101 (a) and (b). The 'passing on' defence provided in Section 101
of the Act is an accepted form of an exception to the principle of strict F
liability but its benefit would be available only when the requirements of
that section are fully complied with and the court is satisfied about the
proof of facts as are contemplated by clauses (a) and (b) of Section 101.
The Scheme on Section 101 being that the occupier or manager should be
relieved from liability only if the actual offender could be brought to court, G
the presence of the actual offender on whom the burden has been shifted
by the occupier or the manager would be necessary at the time to trial and
a period of three months has been prescribed by the Legislature within
which the actual offender should or<Jinarily be brought before the court by
the process of law. If that cannot be done, the trial against the occupier or
the manager as the case may be, cannot be allowed to be protracted H
804
SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.
A
indefinitely and no fault can be found with this provision. Thus, proviso
(ii) to Section 2(n) when considered in relation to section 92 of the Act
does not offend Article 21 of the Constitution of India. [835-C-E]
R.S. Joshi v. Ajit Mills, AIR (1977) SC 2279; Tesco Supemiarkets Ltd.
v. Nattrass, (1972) AC, 153; Lennards's Canying Company Ltd. v. Asiatic
B Petroleum Company Ltd., (1915) Ac 705; M.C. Mehta & Anr. v. Union of
India and Ors., [1986] 2 SCC 325.
2.2; Maneklal Jinabhai Kot v. State of Gujarat & Ors., [1967] 2 SCR,
507; Ward v. Smith, (1913) 3 KB 154; State of Gujarat v. Kansara Manila/,
C AIR (1964) SC 1893, "Text Book on Criminal Law" (1978) Edn.) - by Prof.
Glanville Williams, referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 40144015 of 1993 Etc. Etc.
D
From the Judgment and Order dated 6.4.93 of the Rajasthan High
Court in D.B.C.W.P. No. 1895 of 1989.
Ashok H. Desai, Attorney General, R.K. Jain, R.F. Nariman, V.A.
Mohta, Raj Birbal, P.P. Malhotra, S.S. Javali, K.N. Shukla, H.L. Agrawal,
Raju Ramachandran, K.K. Lahiri, Ejaz Maqbool, Braj K. Mishra, Ravindra
E Kumar, Jaideep Gupta, A.T. Patra, Gautam Khaitan for O.P. Khaitan &
Co., P.P. Tripathi, Rajesh Kumar Singh, S. Sukumaran, O.C. Mathur, P.N.
Misra, S. Misra, P. Pattnaik, A. Mahapatra, Rajeev Sharma, Anand
Chandra Swain, Rajiv Tyagi, U.A. Rana, M.K. Mohan, MJ.S. Rupal,
Mukul Mudgal, W.A. Qadr~ C.V. Subba Rao, R.C. Verma, R.B. Misra,
· F
Aruneshwar Gupta, Jaideep Gupta, Ms. Radha Rangaswamy, Mrs. Kirti
Mishra, S.K. Agnihotri and B.B. Singh for the appearing parties.
The Judgment of the Court was delivered by
G
DR. ANAND, J. Leave granted in C.A. :No.12552/96 SLP (C) No.
12498/96.
In this batch of cases, both in the writ petitions and in appeals by
special leave, short facts, which are not in dispute and are relevant for the
discussion hereinafter, are that the chief Inspector of Factories called upon
H the petitioners/appellants to fil applications seeking renewal of the registra-
J.KINDS.LTD.v.CHIEFINSPECTOROFFACTORIESANDBOILERS[DRANAND,J.) 805
tion of licence of their respective factories, signed by a director of the A
company in his capacity as the occupier of the factory and stated that a
nominee of the Board of Directors, other than a Director, could not make
such an application as an occupier. The correctness of that direction/opinion has been put in issue in all these cases. The petitioners/appel-
.. ~
lants have also called in question the constitutional validity of proviso (ii) B
to Section 2(n) of the Factories Act, 1948 (hereinafter referred to as 'the
Act') as amended by Act 20 of 1987, as violative of Articles 14, 19(1)(g)
and 21 of the Constitution of India.
The basic question which requires our consideration is whether in c
the case of a company which owns or runs the factory, is it only a director
of the company who can be notified as the occupier of the factory within
the meaning of proviso (ii) to Section 2(n) of the Act, or whether the
company can nominate any other employee to be the occupier by passing
a resolution to the effect that the said employee shall have 'ultimate control
over the affairs of the factory'. If the answer to the question is that in the D
case of a company, only a director can be notified as an occupier under the
Act, the next question which would require our consideration is about the
constitutional validity of proviso (ii) to Section 2(n) of the Act as introduced by the Amending Act of 1987. The answer to these questions would
depend upon the interpretation of amended Section 2(n) of the Act. It E
would, therefore, be appropriate to first notice the provisions of Section
2(n) as it stood prior to the amendment and as it stands today.
Section 2(n) as it stood prior to Amendment of 1987.
"2(n) "occupier" of a factory means the person who has ultimate F
control over the affairs of the factory, and where the said affairs
are entrusted to a managing agent, such agent shall be deemed to
be the occupier of the factory;
Section 2(n) as it is after Amendment of 1987.
G
"2(n) "Occupier" of a factory means the person, who has ultimate
-' ...-
control over the affairs of the factory,
J
Provided that
(i) in the case of a firm or other association of individuals any H
806
A
B
c
SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.
one of the individual partners or members thereof shall be deemeq
to be the occupier;
(ii) in the case of a company, any one of the directors shall be
deemed to be occupier;
(iii) in the case of factory owned or controlled by the Central
Government or any State Govt. or any local authority, the person
or persons appointed to manage the affairs of the affairs of the
factory by the Central Government, the State Government or the
local authority, as the case may be, shall be deemed be the occupier
xxx
xxx
xxx
xxx
xxx
xxx
Section 2(n) of the Act prior to its Amendment was required to be
read along with Section 100 of the Act with a view to determine an occupier
D under different situations.
E
F
G
H
Section 100 as it stood prior to the Amendment of 1987.
"100. Determination of occupier in certain cases - (1) Where
the occupier of a factory is a firm or other association of individuals, any one of the individual partners or members thereof
may be prosecuted and punished under this Chapter for any
offence for which the occupier of the factory is punishable :
Provided that the furn or association may give notice to the
Inspector that it has nominated one of its members residing within
India to be the occupier of the factory for the purposes of this
Chapter and such individual shall so long as he is so resident be
deemed to be the occupier of the factory for the purposes of this
Chapter until further notice cancelling his nomination is received
by the Inspector or until he ceases to be a partner or member of
the firm or association.
(2) where the occupier of a factory is a company, any one of the
directors thereof may be prosecuted and punished under this
Chapter for any offence for which the occupier of the factory is
punishable :
...
J.K INDS. LTD. v. CHIEF INSPEGfOR OF FACTORIES AND BOILERS [DR. ANAND,J.] 807
Provided that the company may give notice to the Inspector that A
it has nominated a director, who is resident within in India, to be
the occupier of the factory for the purposes of this Chapter and
such director shall so long as he is so resident be deemed to be
the occupier of the factory, for the purposes of this Chapter until
further notice cancelling his nomination is received by the Inspector or until he ceases to be a director.
B
Provided further that in the case of a factory belonging to the
Central Government or any State Government or any local
authority the person or persons appointed to manage the affairs
of the factory shall be deemed to be the occupier of that factory C
for the purposes of this Chapter.
(3) Where the owner of any premises or building referred to in
Section 93 is not an individual, the provisions of this Section shall
apply to such owner as they apply to occupiers of factories who
are not individuals."
Section 100 has since been omitted by Amendment Act 20of1987.
There is divergence of opinion between various High Court in the
country with regard to the interpretation and scope of proviso (ii) to
Section 2(n) of the Act. That conflict also needs to be resolved.
The High Court of Karnataka in W.S. Industries (India) Ltd. and
Another v. The Inspector of Factories, Bangalore & Others., (1991) II LLJ,
480 opined that it is not necessary that the occupier must be necessarily
the owner or the director of the company and if by a resolution some other
person is nominated to be the occupier who is declared to be in the
ultimate control of the affairs of the factory then that person or officer
would be treated as the occupier for the purposes of the Act. The Court
said:
E
F
"But the main clause provides that occupier shall be one who has
ultimate control of the affairs of the company. This clause read with G
the operative provisions of the Act makes it clear that the occupier of a factory could be a person nominated by the board
or by the firm notwithstanding the fact .that such a partner or
director could also be liable and the liability in respect of the
operative provisions in respect of such director or partner will
have to be established." (Emphasis ours)
H
_
808
SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.
A
However, the constitutional validity of Section 2(n) was, not dealt
with in the above case and it was observed that "it is unnecessary to go into
the constitutional validity of the provisions of the Act".
The Bombay High Court in the case of Kirloskar Pneumatic Company
Ltd. v. VA. More & Others, (1993) I LLJ 805 was also not called upon to
B decide the constitutional validity of Section 2(n) of the Act. The question
debated before the High Court was whether one of the Directors only
should be treated to be an occupier within the meaning of Section 2(n) or
not. The High Court noticed the deletion of Section 100 by the Amending
Act of 1987 and observed that the legislature had carved out an exception
C to the main provision by adding second proviso to Section 2(n) of the Act.
The learned Judges noticed the judgment of this Court in John Donald
Mackenzie and Another v. The Chief Inspector of Factories, Bihar, AIR
(1992) SC, 1351 and opined that the said decision lays down that an
occupier of a factory need not necessarily be a Director and that he can be
any other person or employee nominated, as an occupier, by the Board of
D Directors.
The Orissa High Court in Indo Floglabes Limited & Anr. and Strew
Products Ltd. and Anr. v. Chief Inspector of Fact01ies and Boilers and
Others, (1993) 66 FLR, 171 dealt extensively with the provisions of the
Factories Act before and after the 1987 amendment. It relied upon the
E judgments of the Kamataka and Bombay High Courts and went on to hold
that an occupier need not necessarily be a director of the company and that
the only requirement is that the person to be nominated as an occupier
must have the "ultimate control" over the affairs of the factory.
F
H
The High Court of Guwahati in Wimco Ltd. & Others v. The Union
of India & Others, (1995) FLl, 552 has followed the judgments of Karnataka, Bombay and Olissa High Courts. The Court observed :
"This being the position of law as enunciated by the Karnataka and
Bombay High Courts, now let us see whether this is good law as
laid down by these two High Courts a bare reading of Section 2(n)
as amended will show that the material part of the section defining
an occupier remains unaltered and so a person who has the
ultimate control of the factory can be nominated as the occupier,
and it also must be borne in mind that always a director may not
be in the ultimate control of the factory. It is ultimate control of
the factory which is the touch-stone and not the ultimate control
J.K INDS. LTD. v. CHIEFINSPECIDROF FACTORIES AND BOILERS(DRANAND,J.) 809
of the company. A director may live at distance. But the ultimate A
control of the factory may be left to his Manager as in such case
it is the manager who will be deemed to be occupier of factory
and advisedly such a person can be nominated as the occupier.
Because of certain difficulties, an occupier only would be depend-
-..,
able as such, an occupier of a factory assumes control and responB
sibility and the legislature enunciated that the occupier should be
the person who would be the person responsible to ensure that the
provisions of the Act are complied with. The proviso to S. 2{(n)
is only added to carve out an exception to the Rules that a person
who has ultimate control over the affairs of the factory as an
occupier. The legislature wanted to have "a say that in case of a c
company, being the owner of the factory, the director would be
deemed to be an occupier ..... "
The Madras High Court in ION Exchange India Ltd. (represented by
as Manager) Hosur v. Deputy Chief Inspector .of Factolies, Salem (1995)
LLR, 756 and the Calcutta High Cowt in Greaves Ltd. and Another v. State D
of West Bengal and Another, {1996) LLR, 638, have also, following, the
judgments of Bombay and Kamataka High Court opined that a company
which owns or runs a factory can nominate a person other than a director
of the company to be an occupier of the factory within the meaning of
Section 2(n) read with proviso (ii) thereto. None of these High Courts has, E
however, dealt with the constitutional validity of the provision under consideration.
On the other hand, the High Court of Allahabad in Mis. Bhatia Metal
Containers Pvt. Ltd. and Another v. The State of U.P., (1990) II LU, 534,
the High Court of Madhya Pradesh in Standard Industries Ltd. and Another F
Etc. Etc. v. The State of Madhya Pradesh and Others, (Misc. Petition No.
3130/91 and Writ petition No. 4419/94 etc. decided on 15.11.95), High
Court of Rajasthan in Asliok Leyland Ltd. v. The State of Rajasthan and
Others, (Civil Writ Petition No. 4195/89 decided on 1.11.91) and in Jaipur
Syntex Ltd. and Others v. State of Rajasthan and Others, (1991) LLR, 380 G
...
and the High Court of Patna in Oiamparan Sugar C. Ltd. v. The Union of
India and Ors., (C.W J.C. No. 2254/88 decided on 3.5.88) have held that
the nomination of an occupier to be ma<le by the company under proviso
(ii) to Section 2(n) of the Act can only be that of a director and of no other
officer or employee of the factory or the .company which owns the factory. H
810
SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.
A
Prior to the enactment of the Factories Act, 1948, regulation of
labour in factories was governed by the Factories Act, 1934 but as the
statement of objects and reasons of the Act of 1948 shows there were
various defects and weaknesses in the 1934 Act which came in the way of
its effective administration. The provisions of the 1934 Act regarding safety,
B health and welfare of workers were found to be inadequate and unsatisfactory. In view of large and growing industrial activity in the country, an
overhauling of the factories law became necessary. The Factories Act of
1948 which came into force with effect from 1st of April, 1949 was, enacted
to remove some of the shortcomings noticed in the 1934 Act. The 1948 Act
is an act to consolidate the law regulating factories. It is a piece of social
C welfare legislation enacted primarily with the object of protecting workmen
employed in factories against industrial and occupational hazards. It seeks
not only to ensure that workers would not be subjected to long hours of
strain but also that employees should work in safe, healthy and sanitary
conditions and that adequate precautions are taken for their welfare and
D safety. The stringent provisions relating to the obligations of the occupiers
or managers with a view to protect workers and to secure to them employment in conditions conducive to their health and safety indicate the broad
purpose of the Act. The Act and the Rules made thereunder impose
numerous restrictions upon the occupier or manager or the factory to
E ensure to workers adequate safeguards for their health and physical well
being and to secure to them safe and health conditions at the place of work.
The 1948 Act was amended by Act 94 of 1976, with a view to remove some
lacunae relating to the definition of 'workers' and for improvement of the
provisions in regard to safety of workers and appointment of safety officers
and to provide for an enquiry in every case of a fatal accident. Some
F
difficulties experienced in the administration of the 1948 Act even after the
1976 amendment specially those relating to hours of employment, safety
conditions and development of appropriate work culture conducive to
safety and health of workers particularly in case of factories which deal
with hazardous materials and the escape routes which the employers had
G found to shift their responsibilities on some employee or the other and
escape punishment and penalty, which were also noticed on certain judgments of this Court, led the Parliament to amend the Act in 1987 which
inter alia amended Section 2(n), deleted Section 100 and incorporated
Section 7, 7A, Chapter IV-A, Section 104 A and Section 106 A, besides
H certain other provisions.
J.K INDS.LTD. v. CHIEF INSPECIDROFFACTORIESANDBOILERS[DRANAND,J.) 811
Prior to 1987, Section 2(n) of the Act which defined "occupier of a A
factory" had necessarily to be read alongwith Section 100 of the Act to find
out an occupier under different situations. Sub-section (2) of Section 100
provided that where the occupier of a fact01y was a company, any one of
the Directors thereof may be . prosecuted and punished for any offence
under Chapter X for which the occupier of the factory was punishable. B
Under the proviso to section 100(2), the Company had an option to
nominate one of its Directors, resident in India, who on such nomination
would be deemed to be an occupier for purposes of prosecution and
punishment under the Act. There was, thus, no compulsion under Section
100(2) that only a director should be nominated as an occupier, even C
though in the definition of an occupier under Section 2(n). it was provided
that an occupier means the person who has the ultimate control over the
affairs of the factory and where such affairs are entrusted to a managing
agent, such agent shall be deemed to be an occupier. Some of the companies, taking advantage of the option as contained in the proviso to D
Section 100(2) of the Act and noticing the stringent provisions for punishment for breach of some of the provisions of the Act, instead of nominating
a Director, as the occupier, used to nominate some other employee or
officer as an occupier of the factory and, thus, whenever any violation of
the Act was committed, it was that employee or officer, who was subjected
to penalty and punishment and not the Directors or any one of them. Thus, E
by nominating an employee or an officer as the occupier, the directors of
the company who are primarily responsible for ensuring safety measures in
the factory and taken care of health, hygiene and welfare of the workers ·
being in ultimate control of the management of the company which owns
the factory, were able to escape prosecution and punishment even if they F
were found to be negligent or indifferent to the welfare of the workmen or
had failed to provide adequate and proper safety measures in the factory
as well as in cases where the breach was found to have been committed
with their consent or connivance, or due to lack of diligence on their part.
After a tragedy occurred in Delhi by the leakage of chlorine gas, this. Court G
noticed the "escape route" which had been carved out by the Directors of
the Company, which own or runs the factory, and voiced its concern and
opined that if their was negligence in looking after the safety requirements,
in a hazardous industry, in particular, even the Chairman and the Managing
Director besides the Board of Directors must be held responsible and H
812
SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.
A
liable (even when they are not the actual offenders) as that alone could
ensure, reduction of, if not altogether eliminations of, risk and hazard to
workmen. In M.C. Mehta & Anr. v .. Union of India & Ors., [1986) 2 SCC,
325 it was obse!"Ved :
B
"So far as the undertaking to be obtained from the Chairman and
Managing Director of Shriram is concerned it was pointed out by Shriram
that Delhi Cloth Mills Ltd. which is the owner of Shriram has several units
manufacturing different products and each of these units is headed and
managed by competent and professionally qualified persons who are
responsible for the day to day management of its affairs and the Chairman.
C and Managing Director is not concerned with day to day functioning off
the units and it would not therefore be fair and just to require the
Chairman and Managing Director to give an undertaking that in case of
death or injury resulting on account of escape of chlorine gas, the Chairman and Managing Director would be personally liable to pay compensaD tion. We find it difficult to accept this contention urged on behalf of
Shriram. We do not see any reason why the Chairman and/or Managing
Director should not be required to give an undertaking to be personally
liable for payment ·of compensation in case of death or injury resulting on
account of escape of chlorine gas, particularly when we find that according
E to the reports of various expert committees which examined the working
of caustic chlorine plant, there was considerable negligence in looking after
its safety r~quirements and in fact, considerable repair and renovation with.
and installation of safety devices had to be carried out at a fairly heavy cost
in order to reduce the element of risk or hazard to the community. We
F
may however make it clear that the undertaking to be given by the Chairman and/or Managing Director may provide that no liability shall attach to
the Chairman and/or Managing Director if he can show that the escape of
chlorine gas was due to an Act of God or vis major or sabotage. But in all
pther cases the Chaimian or Managing Director must hold himself liable to
pay compensation. 17tat alone in our opinion would ensure proper and
,G adequate maintenance of safety devices and inst1Uments and operation of the
caustic chlorine plant in a manner which would considerably reduce, if not
eliminate, risk or hazard to the workmen and to the people living in the
vicinity"~
H
(Emphasis ours)
-
•1'1
J.K. INDS. LTD. v. CHIEF INSPECIDR OF FACTORIES AND BOILERS {DR ANAND, J.J 813
It was, thereafter, that the Parliament stepped in and passed the A
Amendment Act 20 of 1987 which as already noticed, besides amending
the definition of an occupier under Section 2(n) of the Act by addition of
various provisos thereto also made some more significant changes in the
Act. The statement of objects and reasons of Amendment Act 20 of 1987,
reads:
"Statement of Objects and Reasons"
(1) The Factories Act, 1948, provides for the health, safety, welfare
and other aspects of workers in factories. The Act is enforced by
B
the State Governments through their Factory Inspectorates. The C
Act also empowers the State Governments to frame rules, so that
the local conditions prevailing in the State are appropriately
reflected in the enforcement. The Act was last amended in 1976
for strengthening the provisions relating to safety and health at
work, extending the scope of the definition of "workers", providing
for statutory health surveys, and requiring appointment of safety D
officers in large factories.
(2) After the last amendment to the Act, there has been substantial
modernization and innovation in the industrial field. Several
Chemical Industries have been come up which deal with hazardous E
and toxic substances. This has brought in its strain problems of
industrial safety and occupational health hazards. It is, therefore,
considered necessary that the Act may be appropriately amended,
among other things to provide specifically for the safeguards to be
adopted against use and handling of hazardous substances by the
occupiers of factories and the laying down of emergency standards F
and measures. The amendments would also include procedures for
siting of hazardous polluting industries to ensure that hazardous
and polluting industries are not set up in areas where they can
cause adverse affects on the general public. Provision has also been
made for the workers' participation in safety management.
G
(3) Opportunity has been availed of to make the punishments
provided in the Act stricter and certain other amendments found
necessary in the implementation of the Act."
It is in this background that we shall consider the scope and validity H
814
SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.
A of Section 2(n) of the Act as amended in 1987. According to the definition
of the 'occupier' under Section 2(n), an occupier means a person who is in
'ultimate control of the affairs of the factory'. Though the word 'person'
has not been defined under the Act, but under Section 3( 42) of the general
Clauses Act, a person has been defined to include a company or association
B or body of individuals, whether incorporated or not. Such a person, under
Clause 2(n) of the Act, therefore, could be a company or a partnership or
an association of persons or an individual.