State of Maharashtra Vs. Jamnabhai
Purshottam Assar  INSC 126 (25 April 1967)
25/04/1967 HIDAYATULLAH, M.
CITATION: 1968 AIR 53 1967 SCR (3) 808
Factories Act, 1948, ss. 2(n), 85(1)(ii) anti
93-Owner of Premises giving on rent factory business and machinery to five
firms of ex-workers-Having no interest in or control over affairs of the
firms-Whether " occupier-"--Therefore whether liable to obtain
licences under Rule 3A, Bombay Factory Rules, 1950.
The respondent had established a factory in
Bombay which was closed in April 1957. In July 1957, the ex-workers of the
factory combined together to form five partnerships and by agreements of leave
and licence, the respondent gave in their use the factory premises and the
machinery in-stalled there. He himself did not join any of the five partnerships.
The licensees were to pay a fixed sum for the use of the premises and the machines.
By a notification on September 29, 1960, the
State Government specified the premises where the five partnerships were
working as a factory under s. 85 of the Factories Act, 1948, thus applying the
provision of the Act to the premises. On November 10, 1959 five separate complaints
were filed against the respondent, whereby it was alleged that he was the owner
and therefore an occupier under the Act of the Factory where the workmen were
working under an agreement with him within the meaning of s. 85(1)(ii) and that
he had failed to take out five licences under Rule 3A of the Bombay Factory
Rule, 1950. The respondent contended that the Act did not apply to him as he
had no control over the five firms and he was not in a position to enforce the
provisions of the Factories Act. The trial Court 'held that the respondent had
become an occupied by reason of the notification of September 29, 1960 so that
he was bound to obtain licences under Rule 3A, and he was fined for his failure
to do so. The High Court however, allowed an appeal against the order of the
On appeal to this Court,
HELD : The respondent was not an 'Occupier'
of a factory within the meaning the definition in s. 2(n) of the Act as he did
not have ultimate control over the affairs of the five firms running the
factory and the High Court had rightly held that s. 85(1)(ii) did not cover the
present case. [S 11 D-E] The condition precedent for a notification under s. 85(1)(ii)
is that the persons working in a factory (a) work with the permission of, or,
(b) under an agreement with the owner. The section does not contemplate a case
where the owner hands over the factory on rent and the workers work without his
permission and not under an agreement with him. The High Court had considered
the agreements between the respondent and the workers and come -to the
conclusion that the partnerships were independent of the control of the owner
and the workers could not be said to be working with his permission or under
agreement with him; they had formed themselves into partnerships, taken the
factory premises on 809 leave and licence and started their own business. In
these circumstance-,, the conditions for the notification under s.
85(1)(ii) did not exist. [811F81 --A] The
respondent was not liable as -,in owner under s. 93 (3) (ii) of the Act is the
machinery and plant had been specifically entrusted to the custody or use of
the five partnerships. [812F]
CRIMINAL APPELLATE JURISDICTION : Criminal
Appeal No. 234 of 1964.
Appeal by special leave from the judgment and
order dated November 8, 1963 of the Bombay High Court in Criminal Appeal No.
1135 of 1962.
D. R. Prem, S. P. Nayyar for R. N. Sachthey,
for the appellant.
P. A. Mehta, V. J. Taraporevala, P. C.
Bhartari and 0. C. Mathur, for the respondent.
The Judgment of the Court was delivered by
The State of Maharashtra appeals against the
judgment and order of the High Court of Bombay dated November 8, 1963 by which
the High Court set aside, the conviction of one Purshottamdas Ranchhoddas
(since deceased and represented by his widow) and the fine imposed on him,
under s. 92 of the Factories Act, 1948 read with r. 3-A of the Bombay Factories
Rules, 1950. Only one question arises in this appeal and it is the true
construction of S. 85 of the Factories Act on which different views have been
expressed by the High Court and the Court below.
Purshottamdas Ranchboddas was a lessee from
the Port Trust Bombay of an open plot of land. He established a factory called
the Sunderdas Saw Mills. He closed down the factory on April 1, 1957. In July
1957, the ex-workers of the factory combined to-ether to form five partnerships
and by agreements of leave and licence, Purshottamdas Ranchhoddas gave in their
use, the premises of the factory and the machinery installed there. He himself
did not join any of the five partnerships. The licensees were to pay a fixed
sum for the use of the premises and the machines. It appears that some of the
workers who were not taken in as partners complained that the closure of the
factory was a sham. No action was taken on this complaint and -there is no
finding in this case that the closure of the factory was unreal.
In the year 1959, a prosecution was started
under S. 92 of the Factories Act on the charge that the original licensee of
the factory had not given notice under s. 7(1) of the start of the factory and
had not renewed the licence under r. 4 of the Bombay Factories Rules, 1950.
This ended in an acquittal since Government had not declared these premises as
a factory under s. 85 of the 810 Act, as it could, if the workers (although not
employed by the owner were working with the permission of or under an agreement
with the owner. After such notification the premises are deemed to be a factory
and the owner of the premises is deemed to be an occupier.
On September 29, 1960, a notification was
issued under s. 85. That notification specified the places where the five partnerships
were working as factory. On November 10, 1959, five separate complaints were
filed for failure to take out five licences. The charge was that Purshottamdas
Ranchhoddas was the owner of the factory and hence an occupier and the workmen
were working under an agreement with him. The owner defended himself by stating
that he had no control over the five firms and he could not enforce the
provisions of the Factories Act. This defence was not accepted. Purshottamdas
Ranchhoddas was held to have become an occupier by reason of the notification
and, therefore, to, be compelled to take out a licence under r. 3-A of the
Bombay Factories Rules. He was fined Rs. 201/for the first offence and Rs. 25/for
the subsequent offences.
Purushottamdas Ranchhoddas appealed but died
during the pendency of the appeal. As the sentence was one of fine the appeal
was continued by his legal representative under s. 431 of the Coda of Criminal
Procedure. The Bombay High Court set aside the conviction and fine and now the
present appeal has been filed by the State of Maharashtra on special leave
granted by this Court.
Under r. 3 of the Bombay Factories Rules,
1950 an application has to be made for the approval of a factory. Under r. 3A
no occupier of a factory shall use any premises as a factory except under a
licence obtained or renewed in accordance with the provisions of the rules.
Section 85 grants -power to the State Government to apply the Factories Act to
certain premises which would otherwise not come within its purview. The section
S. 85 : "Power to apply the Act to
certain premises :-(1) The State Government may, by notification in the
Official Gazette, declare that all or any of the provisions of this Act shall
apply to any place wherein a manufacturing process is carried on with or
without the aid of power or is so ordinarily carried on notwithstanding that(i)
the number of persons employed therein is less than ten, if working with the
aid of power and less than twenty if working without the aid of power, or (ii)
the persons working therein are not employed by the owner thereof but are
working with the permission of, or under agreement with, such owner 811
Provided that the manufacturing process is not being carried on by the owner
only with the aid of his family.
(2) After a place is so declared, it shall be
deemed to be a factory for the, purposes of this Act, and the owner shall be
deemed to be the occupier, and any person working therein, a worker.
Explanation.-For the purposes of this
section, "owner" shalt include a lessee or mortgagee with possession
of the premises." The present matter is said to be governed by s. 8 5 ( 1
) (ii). It s contended that in as much as a notification had issued, the owner
of the pemises (the present lessee of the premises namely Purshottamdas
Ranchhoddas) became an occupier and thus liable for breach of the Factories Act
and the Bombay Factories Rules since the premises were not licensed. The High
Court, differing from the. Presidency Magistrate, Mazgaon, held that s. 8 5 (i)
(ii) did not cover the present case. We think the High Court was right.
Under s. 2(n) of the Act an 'occupier' of a
factory means the person who has the ultimate control over the affairs of the
factory. If one goes by this definition, Purshottamdas Ranchhoddas was not an
occupier if he had not the ultimate control over the affairs of the five
partnership firms running the factory. But here the Factories Act gives special
powers to the State Government under s. 85 quoted above. The notification of
Government makes applicable all or any of the provisions of the Act to a place
of manufacture notwithstanding that the persons working therein are not
employed by the owner of the place where in the manufacture is carried on
provided the workers work with the permission of or under agreement with the
owner. The condition precedent for the notification is that the persons working
therein (a) work with permission of or (b) under agreement with the owner. The
section does not contemplate a case where the owner hands over the factory on
rent and the workers work without his permission and not under agreement with
him. In other words, if there is no connection between the owner and the
workmen in the sense that they work without his permission and without an
agreement with him, there would be no question of the liability of the owner as
an occupier. In the, present case the agreements show that the, premises were
given over to partnership firms in return for a periodic payment. The
agreements show that the licensees of the premises bound themselves to carry on
the manufacturing process on their own and Purshottamdas Ranchhoddas had no
control over them.
The High Court has considered the clauses and
come to the conclusion that the partnerships were independent 812 of the
control of the owner and the workers cannot be said to be working with his
permission or under agreement with him. They had formed themselves into
partnerships, taken on leave and licence the factory premises and started their
own business. In these circumstances, the conditions for the notification
An attempt was made to prove from S. 93 that
the definition of an occupier cannot apply to circumstances arising under S. 85
because S. 93 makes special provision for the responsibility of the owner. A
glance at the provisions of S. 93 however discloses the opposite. It is not
necessary to consider all the clauses, some of which may bind the owner but a
clause like 93 (3) (ii) clearly shows that the owner is liable only when he has
control. The clause reads :
"(3) Where in any premises, independent
or self contained, floors or flats are leased to different occupiers for use as
separate factories, the owner of the premises shall be liable as if he were the
occupier or manager of a factory, of any contravention of the provisions of
this Act in respect of(i)..........
(ii) fencing of machinery and plant belonging
to the owner and not specifically entrusted to the custody or use of an
The difference between the owner of the
premises and the occupier is at once visible. The liability of the occupier is
patent but the liability of owner arises only when the machinery and plant is
not specifically entrusted to the custody or use of an occupier. In the present
case, for example, the machinery and plant has been so specifically entrusted
to the custody or use of the various partnerships and the owner of the premises
cannot be made liable.
As we said above the finding is not that the
owner had indulged in a sham transaction. If the transactions are genuine and
the five partnerships have -taken over the factory to work independently, no
question of the liability of the owner under s. 85(1)(ii) arises. It is
possible that some obligations are still on the owner under S. 93 but that is
another matter. Purshottamdas Ranchhoddas could not be made liable for not
taking out the licence. The matter has been correctly approached by the High
Court and we see no reason to interfere. The appeal fails and will be