Andhra HC (Pre-Telangana)
Bhadrachalam Paper Boards Limited, ... vs Union Of India (Uoi), Through ... on 13 November, 1995
Equivalent citations: 1996(2)ALT614
Author: B. Subhashan Reddy
Bench: B. Subhashan Reddy
ORDER B. Subhashan Reddy, J.
1. Who is an 'Occupier under the Factories Act of 1948? Should he be necessarily an owner? Or can any other person be entrusted with such functions? - are the serious questions falling for adjudication in these batch of Writ Petitions.
2. An 'Occupier' is one defined under the Factories Act, 1948 (hereinafter referred to as 'the Act'). Section 2(n) of the Act defines as to who is the Occupier. Hitherto, it read as follows:
"2(n): Occupier of the factory means the person who has ulitmate control over the affairs of the factory and where the said affairs are entrusted to the managing agent such agent shall be deemed to be the Occupier of the factory."
(remaining portion is not relevant here)
3. There are catena of decisions interpreting the above word 'Occupier' and I need not state all those decisions as it was a settled law that Occupier is one nominated for that purpose and who had ultimate control over the affairs of the factory. There was no imposition that only a partner or a director could be the Occupier and none else. Any person, who had ultimate control over the affairs of the Factory, could be nominated as an Occupier.
4. The Act underwent changes by periodical amendments thereto; the latest one being Amending Act 20 of 1987, by which certain new provisions have been added, certain provisions have been amended and certain provisions have been deleted. Provisions contained under Chapter IV-A are entirely a new incorporation not existent before, They relate to hazardous processes in a factory and the safety measures to be taken in connection with the same. Sections 41-B and 41-C thereof deal with the duties of an Occupier. Section 7-A was newly added by enumerating the duties of an Occupier. Section 100 related to prosecution of partner of a firm or a director of a company. Any one of the partners or directors were liable to be prosecuted for any offence for which the occupier of the factory is punishable, if notice to the Inspector concerned nominating one of its members residing within India to be the Occupier for the purpose of the said Chapter was not issued. The said provision is deleted and the effect of the same is discussed infra.
5. Section 2(n) of the Act has been amended deleting the words "......and where the said affairs are entrusted o the managing agent, such agent shall be deemed to be the Occupier of the factory". After the said deletion, now the present definition of Occupier Under Section 2(n) reads:
"Section 2(n):- "Occupier of a factory" means the person who has ultimate control over the affairs of the factory provided that:-
(i) in the case of a firm or other association of individuals, any one of the individual partners or members there of shall be deemed to be the Occupier;
(ii) in the case of a company, any one of the directors shall be deemed to be the Occupier;
(iii) in the case of a factory ownerd or controlled by the Central Government or any State Government, or any local authority, the person or persons appointed to manage the affairs of the factory by the Central Government, the State Government or the local authority, as the case may be, shall be deemed to be the Occupier."
(remaining portion is not relevant here).
While the main provision has been kept intact deleting the words mentioned above which relates to the entrustment of the functions of the Occupier to the 'managing agent' proviso has been added with 3 Sub-clauses. Sub-clause (iii) is not concerned in these cases. Because of this amendment, now a legal battle has ensued regarding the true interpretation of the said provision contained Under Section 2(n) of the Act as amended by Act 20/87. While the petitioners interpret that an 'Occupier' need not be a partner or a director, but he can be one of the officers of the factory having ultimate control over the affairs of the factory, the latter control over the affairs of the factory, the latter construe and contend that if the factory is run by a firm or a company, the 'Occupier' necessarily should be either a partner or a director thereof.
6. While the petitioners contend that a partner or a director need not be a person wellversed with technical and other aspects and in the real sense, he may not be having ultimate control over the affairs of the factory, the Factories Act provides for the various benefits to the workmen and apart from that most of the provisions of the Factories Act deal with the steps which the establishment should take for the purpose of maintaining the standards of health and safety of workmen, who work in the factories, welfare of the workmen apart from other facilities which are given to the employees who work therein, take steps like, fencing of machinery, work on or near machinery in motion, various devices to be adopted like self-acting machines, casing of new machinery, hoists and lifts, revolving machinery, pressure plant, means of access, protection of eyes, precautions against dangerous fumes, fires and safety of building, machinery etc. According to the petitioners, they are all very important steps which a person who has got ultimate control over the affairs of the factory should taked and it is only possible for an experienced person with full knowledge of working of factory and only such person will be deemed to be a person having ultimate control over the affairs of the factory in that sense of making the factory safer vis-a-vis the employees working therein and nomination of such a person as Occupier, has to be accepted. It is the contention of the petitioners that there may be factories for the same firm or company at several places and partners or directors, apart from the fact that they are not equipped with the technical knowledge and day-to-day working, will not be staying at the place where the factory runs and will be staying at a different place and may be, in some cases, it is the foreign country and then it is absolutely impossible for such partners or directors to be called as Occupier as they cannot perform the functions which are contemplated under the Factories Act.
7. Learned counsel appearing for the respondents cited the decision rendered by the Supreme Court in M.C. Mehta v. Union of India, for persuading this court that the amending Act 20/87 is the result of the pronouncement of the Supreme Court in that case (M.C. Mehta v. Union of India, ) that as such, no person other than a partner in case of a firm or a director in case of a company can be an Occupier and that necessarily one of the partners of the firm or one of the directors of the company could be an Occupier and none-else. The contention advanced on behalf of the Government, be it Central of State, is that the ultimate control and management of the affairs of a firm vests in the firm and of a company in the Board of Directors and while the firm or company is engaged in running the business of a factory for its own profit, it cannot be said that the partners of a firm or directors of a company do not have ultimate control over its own factory and projection of a Manager or an Engineer or another executive of the company as an Occupier only amounts to an illegal effort of trying to delegate non-delegable and onerous duties to the servants of the firm or company, who are never involved in the process of decision taking or policy making. It is also further argued that the provisions contained under Chapter-IV of the Act, as also the newly incorporated Chapter-FV-A of the Act and the functions enumerated therein, need decision taking or policy making, that such a thing can only be done by the partners or Board of Directors and not by a servant of the firm or company, that it is incomprehensible that Occupier can be a servant, that necessarily he should be either a partner or a director and that the amendment brought-forth was in the interest of not only the employees, but also the general public. On behalf of the respondents, the Bhopal Gas Tragedy is quoted as being the immediately cause for incorporating the amendment. They also cited Section 7-A of the Act and new Chapter IV-A and introduction of Section 104-A of the Act and contend that those provisions have been brought-forth only to see that the power is exercised by the partner or a director, that only a partner or director can be made liable for the acts and omissions of a factory, that the Parliament intended while enacting amendment, to make the partner or director as Occupier responsible for the acts and omissions of the firm or company and not one of its employees and that the amendments were brought-forth either deleting Section 100 of the Act or inserting new provisions and also making the penalties more harsher to see that the factory runs efficiently without any hazards to the health of either its workers or the general public. The respondents cited Bhopal Gas Tragedy as an example and particularly multi-nationals were projecting a low paid employee not responsible, as an Occupier, leading to disastrous consequences causing health hazards to employees and also the negihbours of the factory and ultimately the owner of the Board of Directors of a Company getting out of the clutches of law and to plug that loophole, the amendment was brought forth.
8. Judicial precedents have been cited on either side. While the learned counsel for the petitioners cite the judgments rendered by the Karnataka High Court in W.S. Industries Ltd. v. Inspector of Factories, 1991(2) LLJ 480, Bombay High Court in Kirloskar Pneumatic Co. Ltd. v. V. A.More, 1993 (1) LLJ 805, Orissa High Court in Indo Flogates Ltd. v. Chief Inspector of Factories & Boilers, 1994 LLR 44, Gauhati High Court in Wimco Ltd. v. Union of India, 1994 LLR 989 and Madras High Court in Ion Exchange Ltd. v. Deputy Chief Inspector, 1995 (1) LLN 1174 the learned Standing Counsel for the Central Government and the learned Government Pleader for the State of Andhra Pradesh relied upon the decisions rendered by the Allahabad High Court in Bhatia Metal Containers Ltd. v. State of U.P., 1990(1) LLJ 534 and of Rajasthan High Court in Syntex Ltd. v. State of Rajasthan, 1991 LLR 380. The above judicial precedents interpreted Section 2(n) of the Act as amended by Act 20/87. The line of decisions cited on behalf of the petitioners stuck to the reasoning that in spite of the amendment, Section 2(n) remains same and that overall effect did not change and that any person other than a partner or a director can be nominated even under the amended Section 2(n) of the Act as an 'Occupier' who has got the ultimate control over the affairs of the factory, the two judicial precedents cited on behalf of the respondents referred to above, ruled to the contra.
9. In W.S. Industries Ltd. Inspector of Factories (2 supra), the Karnataka High Court held that the definition of 'Occupier' after amending Act of 20/87 did not undergo any change and repelled the argument that after the said amendment, no person other than a partner of a firm or a director of a company can be nominated as an Occupier. The Karnataka High Court also held that the principal provision contained Under Section 2(n) of the Act is the main provision where the stress is on the person having ultimate control over the affairs of the factory and such a person need not be a director of a company or a partner of a firm and necessarily director or partner need not have ultimate control over the affairs of the factory as there can be sleeping partner also. It further held that if in the main Section the Occupier is not nominated, then the proviso comes into play empowering the officals to construe one of the partners of a firm or directors of a company as an Occupier and that the proviso does not come into play when the requirement under the main Section is complied with. The said view of the Karnataka High Court was upheld by a Division Bench of the Bombay High court in Kirloskar Pneumatic Co. Ltd. v. V.A. More (3 supra). The Bombay High Court also dealt with a similar argument advanced by the Government that the provocation for amendment in Act 20/87 was the Supreme Court judgment in M.C. Mehta v. Union of India (1 supra), but, repelled the said argument and held that the amendment was not the consequence of the said judgment of the Supreme Court. The Karnataka High Court's view, which was approved by another Division Bench of Orissa High Court in Indo Flogates Ltd. v. Chief Inspector of Factories & Boilers (4 supra), in which was further approved by a single Judge of Gauhati High Court in Wimco Ltd. v. Union of India (5 supra) and the latest one upholding the view first taken by the Karnataka High Court in W.S. Indsutries Ltd. v. Inspector of Factories (2 supra), is the decision of a Division Bench of the Madras High Court in Ion Exchange Ltd. v. Deputy Chief Inspector (6 supra).
10. The view of the Allahabad high Court in Bhatia Metal Containers Ltd. v. State of U.P. (7 supra) is not based on any judicial precedents. It has barely construed the word 'Occupier'. There is also no discussion with regard to interpretation of Section 2(n) of the Act and effect of the same after amendment and held that the amendment was brought-forth with the intention that in the case of a company, one of the directors has to be deemed to be an Occupier and does not permit a company to nominate anybody else for the purpose of the Act, other than a Director. In Jaipur Syntex Ltd. v. State of Rajasthan (8 supra), of course, the matter was considered in detail by the Rajasthan High Court, case law was discussed and reasons are given to base its judgment (2 supra). The Allahabad high Court's judgment was not cited before the Rajasthan High Court. But, similar view as that of Allahabad High Court was taken by Rajasthan High court.
11. Any word employed in a statute has to be read and understood in the context in which it is used. The pith and substance of the Factories Act is the regulation of labour in factories in ensuring of good working conditions to secure welfare of workmen. The conception of company or firm registered under the Companies Act and the Partnership Act is entirely different from that of Factories. They deal in diverse subjects and the objects are altogether different. While the Companies Act deals with working of companies, be it public or private, partnership Act deals with working of firms and a company or a firm can never be called a factory. For establishing and running a factor, constituting a company or a firm is not a must, as the ownership conception is no-way concerned with the factory. A factory belonging to individual, joint family, a company or a firm can be leased out to another, be it individual, company or a firm and can also be run on licence. For instance, if a company or firm set up factory or factories after obtaining loan from a financial corporation under the State Finance Corporations Act, 1951 and if there is default in payment of loan and for the default committed, the Finance Corporation takes over the management Under Section 29 of the said Act and on becoming the owner by operation of the said Act, if it leases the factory or factories to another person, company or firm, can it be said that the said Finance Corporation is liable to discharge the functions under the Factories Act. The answer should be in the negative. As such, for running a factory, the owner ship is not the criterion. Even the legislative subjects are different as while the company and firm fall under list I of Schedule 7, the factory and welfare of labour is in the Concurrent Dist. While a factory need not be owned by a company or a firm, a company or a firm can own a factory or several factories and run the same at one place or at different places. A factory is one where there is a manufacturing process carried on in a premises with or without the aid of power and with such or more number of persons as specified in the Statute, premises is one which need only a fixed place and it can be a bare land, it can be a land with fencing or a wall, building with appertaining land, or only a building without any appertaining land. The definition of manufacturing process is inexhaustive and enumeration made in the definition clause of the statute is only illustrative and concisely speaking, manufacturing process is one which transforms one object into another. A factory needs a controller to look after the affairs of a factory and whether he is a director or a partneris no-way concerned. What the factories Act concerns is a person who has ultimate control over the affairs of the factory. While the ultimate control over a company or a firm vests in the Board of Directors or the partners, the said factor, cannot as a necessary corollary make them liable to be an Occupier, as, for discharging the functions attached to Occupier, it is necessary that a person daily attending to the affairs of the factory and is in physical and immediate control of day to day running of the factory and for performing the said functions, a company or a firm can always appoint such a person so as to make the intendment of the Factories Act, a reality. The Act deliberately omits the words "ultimate control over the affairs of the company' or 'ultimate control over the affairs of the company' or 'ultimate control over the affairs of the firm' for the reason that they are alien to the conception of the factory and no-way concerned with the objects contained thereunder. This is what the main Section 2(n) says and means even after amendment. By amending Act 20 of 1987, the only change brought-forth into the definition of 'Occupier' Under Section 2(n) is that Occupier should be a definite person having ultimate control over the affairs of a factory so as to discharge the functions entrusted to him under the Act and it has purposely omitted the words relating to managing agent, as by amendment, the Parliament did not want to recognise any managing agent to be the Occupier of the factory as the said managing agent need not be a part and parcel of a factory, but can be an individual, company or a firm either by mentioning in the Memorandum of Association or Articles of Association, or can be appointed by an agreement including a General Power of Attorney and the said definition of managing agent is only adopted as defined in the Companies Act and having regard to the divergent opinions expressed with regard to the definiton of managing agent and also to avoid dichotomy, the Parliament deleted the said powers of the managing agent to be an Occupier and excepting this, there is no material change in Section 2(n) by amending Act 20 of 1987. This is more clear because of the deletion of Section 2(o) from the Act. Now, it is crystal clear that by amendment, what the Parliament intended was to retain the word 'Occupier' with a dear definition of a person having ultimate control over the affaris of factory by not recognising a managing agent which is an alien conception to the Factories Act and was borrowed from the Companies Act. Section 100 of the Act was deleted. But, it appears in a condensed and compact form in the shape of provisos (i), (ii) and (iii) to Section 2(n) in the Amending Act 20 of 1987. For the welfare of labour, some more relief measures are added by incorporating a new Chapter IV-a and also the defintion of 'hazardous process' by including Section 2(cb) into definition clause and the same if read in conjunction with the Environment (Protection) Act, 1986, and more so, Section 2(f) thereof the obligation to inform about the dangers in handling hazardous substances and the measures to be taken therefore as contained Under Section 41-B and C, are fastened to the Occupier. It is pertinenet ot mention that Under Section 2(f) of Environment (Protection) Act, 1986, an 'Occupier' is defined as a person who has control over the affaris of the factory or the premises and in relaion to any substance, the person in possession of the substance. The Factories Act being regulatory in nature, there should be a person physically controlling the affairs of factory and such a person need not be a director or a partner. The same can be delegated to another person entrusting the ultimate control over the affairs of the factory to the said controller who fits in the definition of 'Occupier' Under Section 2(n) of the Act. Health, safety and welfare measures were already stated in the original Act. But, having regard to the circumstances occuring from time to time, periodical amendments were made. In addition to the existing obligations contained under the Original Act, as amended from time to time, some more obligations and precautionary measures are imposed upon occupier. The Parliament in its wisdom thought that apart from the obligations mentioned in Section 7 of the orginal Act, some more obligations have to be fastened and they are enumerated by the incorporating a new provisions i.e. Section 7-A. It cannot be said that by mere incorporation of Section 7-A or Chapter IV-A the Parliament wanted to make a director or a partner per se and perforce an 'Occupier' and if Parliament wanted to do so, it would have certainly changed the words occurring in the main Section 2(n) of the original Act. But, that is not to be, as main Section is retained as it is without any change and the effect of the amendment is only to do away with the managing agent and now after amendment, the change brought-forth is that managing agent cannot perform the functions of the Occupier and under the main Section, an Officer of factory (not a low paid employee) should be entrusted with the ultimate control over the affairs of the factory by an authorisation or a resolution and if such action is not taken appointing the Occupier under the main Section 2(n), then under Clauses (i) and (ii) of proviso, the concerned Inspector of Factories shall be entitled to deem any director of a company or any partner of a firm to be the Occupier for the purpose of mulcting the obligations and the liabilities under the Act. To make it more clear, Section 2(n) of the Factories Act, even after Amending Act 20 of 1987, recognises any person who is entrusted with the ultimate affairs of a factory as an Occupier and the provisos under Clauses (i) and (ii) thereof come into play only if there is a default of written authorisation or resolution appointing a person as an Occupier under the main Section 2(n) and when such an authorisation or resolution is forwarded to the Inspector of Factories, he can verify as to whether such person is entrusted with the ultimate control over the affairs of the factory in order to saddle him with the liabilities under the Factories Act and he cannot insist that only a director of a company or a partner of a firm should be such an Occupier. Another important and salient feature is that while a person of the choice of the company or the firm, who should necessarily be an officer of the said company or the firm, can be nominated as an Occupier and if there is default in doing so, a director or a partner without even any proof of such entrustment of ultimate control over the affairs of a factory, can be deemed to be the Occupier.
12. In view of what is stated supra, I accept the views expressed by the High Courts of Karnataka, Bombay, Orissa, Gauhati and Madras in the decisions mentioned supra and differ with the views expressed by the High Courts of Allahabad and Rajasthan to the contrary.
13. In the result, all the writ petitions are allowed holding that:
(i) The petitioners shall be entitled to nominate a responsible officer, by passing a resolution, to perform the functions of Occupier under the Factories Act, 1948;
(ii) When such a nomination is made by the petitioners, the concerned Inspectors of Factories shall verify the same and issue licences in accordance with the provisions of the Factories Act and the rules made thereunder;
(iii) If the petitioners do not nominate any officer as the Occupier as directed above, then the concerned Inspector of Factories shall be entitled to choose any of the directors or partners of the petitioners as Occupier and consequently, the said director or partner shall be liable for the commissions and omissions as an Occupier; and
(iv) All the prosecutions so far launched against the petitioners, or some of them, as the case may be, shall stand quashed, if the prosecutions were launched on account of the construction of the word 'Occupier' as meaning a director or a partner.
14. Each party shall bear his own costs.