J.K.
Industries Limited Vs. The Chief Inspector of Factories and Boilers & Ors
[1996] INSC 1208 (25
September 1996)
Anand,
A.S. (J) Anand, A.S. (J) Thomas K.T. (J) Dr. Anand. J.
ACT:
HEAD NOTE:
WITH (W.P
(C) 1129/91. C.A. NOS. 245-256/96, W.P. (C) 134/93. W.P.
(C) 657/91. C.A. NOS. 244/96, 1238, 4499-4500/96, 4501/96, W.P. (C) NOS.
165/96, 187/96 AND C.A.NO.12552/96 (Arising out of S.L.P. (C) No. 12498/96) C.A.
No. 12552/96
Leave
granted in SLP (C) No. 12498/96.
In
this batch of cases, both in the writ petitions and in the 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
the petitioners/appellants to file applications seeking renewal of the
registration of licence of their respective factories, signed by a director of
the 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/appellants have also
called in question the constitutional validity of proviso (ii) 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 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 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 would, therefore, be appropriate to first
notice the provisions of Section 2 (n) as it sited 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 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 thee factory;
Section
2(n) as it is after Amendment of 1987 "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 thereof shall be deemed 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 a factory owned or controlled by the Central Government or any
State Government of any local authority, the person or persons appointed to
mange 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:
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 under different
situations.
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 of
other association of individuals, anyone 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 firm 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:
Provided
that the company may give notice to the Inspector that 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.
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 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 20 of 1987.
There
is divergence of opinion between various High Courts 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. Others [(1991) II LLJ, 480] opined that it is not necessary that
the occupier must be necessarily the owner or the director of thee 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:
But
the main clause provides that occupier shall be one who has ultimate control of
the affairs of the company. This clause read with 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) 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. vs. V.A. More & Others [(1993) LLJ 805] was also not
called upon to 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 to the main
provision by adding second proviso to Section 2(n) of the Act. The learned
Judges noticed the judgment of this Court of Factories. Bihar [ 1962 (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 persons or
employee nominated, as an occupier, by the Board of Directors.
The Orissa
High Court in Indo Floglabes Limited & Anr. Factories 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 judgments
of the Karnataka 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.
The
Union of India & Others [1995 FLJ, 552] has followed the judgments of
Karnataka, Bombay and Orissa 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 a laid down by these two
High Courts. A bare reading of S. 2(n) as amended will show that the material
part of the section defining an occupier remains 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 of the company. A director may live at a distance. But the ultimate
control of the factory may be left to his Manager as in such a 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 dependable as such, an occupier of a factory assumes
control and responsibility 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 provisio 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 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. of Factories, Salem [1995 LLR, 776] and the Calcutta High
and Another [1996 LLR, 638], have also, following, the judgments of Bombay and
Karnataka 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, however, dealt with the constitutional validity of
the provision under consideration.
On the
other hand, the High Court of Allahabad in M/s. of U.P. [1990 (II) LLJ, 534],
the High Court of Madhya Pradesh in Standard Industries Ltd. and another etc.
etc.3130/91 and Writ Petition No. 4419/94 etc. decided on The State of
Rajasthan and Others [Civil Writ Petition No. 4195/89 decided on 1.11.91] and
in Jaipur Syntex Ltd. and 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 made 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.
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, 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 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
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 board purpose of
the Act. The Act and the Rules made there under impose numerous restrictions
upon the occupier or manager of the factory to ensure to workers adequate
safeguards for their health and physical well being and to secure to them safe
and healthy 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 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 or workers particularly in case of factories
which deal with hazardous materials and the escape routes which the employers
had found to shift their responsibilities on some employee or the other and
escape punishment and penalty, which were also noticed in 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 Sections 7, 7A,
Chapter IV-A, Section 104 A and Section 106A, besides certain other provisions.
Prior
to 1987, Section 2(n) of the Act which defined "occupier of a
factory" had necessarily to be read along with 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 factory 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. Under the proviso to
Section 100(2), the Company had an option to nominate one of its Directors,
resident in India, who on such 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
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 Section 100(2) of the
Act and noticing the stringent provisions for punishment for breach of some of
the 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, 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 take care of health, hygiene and welfare of the workers being in
ultimate control of the management of the company which owns the factory, where
able to escape prosecution and punishment even if they 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 noticed the "escape route"
which had been carved out by the Directors of the Company, which owns or runs
the factory, and voiced its concern and opined that if there 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 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 1986 (2) SCC, 325 ] it was observed:
"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 and Managing Director is not concerned with day to day
functioning of 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 compensation. 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 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 to
the reports of various expert committees which examined the working of caustic
chlorine plant, there was considerable negligence in looking after its safety
requirements 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 of hazard to the community. We 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 of sabotage. But in all other cases the Chairman in all
other cases the Chairman or Managing Director must hold himself liable to pay
compensation. That alone in our opinion would ensure proper and adequate
maintenance of safety devices and instruments and operation of the caustic
chlorine pant in a manner which would considerably reduce, if not eliminate,
risk or hazard to the workmen and to the people living in the vicinity"
[Emphasis ours] It was, thereafter, that the Parliament stepped in and passed
the 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 the State Governments through their Factory Inspectorates. The 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 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 come up
which deal with hazardous 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 and measures. The amendments would
also include procedures for siting of hazardous 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.
(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 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 affaires 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 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. Where
the factory is owned or run by a company, it would be that company which would
be the occupier of the factory. Under Section 100, as it stood originally,
where the occupier of the factory was a company, any one of the directors may
be prosecuted and punished and the company could give a notice identifying such
a director. It was, therefore, as already noticed, optional for the company to
notify a director as the occupier. The company could nominate any other officer
or employee also as an occupier.
The
Amending Act of 1987 eliminated altogether section 100 and instead introduced
into Section 2(n) various provisos and in proviso (ii) provided a deeming
fiction, as to what would happen if the occupier was a company. Criminal
liability in case of a default would primarily attach to the company, as the
occupier of the factory and, therefore, it has been provided that in the case of
a company, any one of the directors of the company shall be deemed to be the
occupier. To remove the ambiguity and ensure that a mere 'authorisation' by the
Board of Directors of any of its employees or officers, by a resolution, to be
the occupier was not allowed the object of the Act, particularly in matters of
punishment and penalty the Parliament also enacted Sections 7 and 7A of the Act
by the Amending Act of 1987.
Section
7(1) of the Act reads as under:
7(1) The
occupier shall, at least fifteen days before he begins to occupy or use any
premises as a factory, send to the Chief Inspector a written notice containing.
(a) the
name and situation of the factory;
(b) the
name and address of the occupier;
(bb)
the name and address of the owner of the premises or building (including the
precincts thereof) referred to in section 93:
(c) the
address to which communication relating to the factory may be sent:
(d) the
nature of the manufacturing process:
(i)
carried on in the factory during the last twelve months in the case of
factories in exist of commencement of this Act, and (ii) to be carried on in
the factory during the next twelve months in the case of all factories;
(e)
the total rated horse power installed or to be installed in the factory, which
shall not include the rated horse power of any separate stand-by plant;] (f)
the name of the manager of the factory for the purposes of this Act;:
(g) the
number of workers likely to be employed in the factory:
(h) the
average number of workers per employed during the last twelve months in the
case of a factory in existence on the date of the commencement of this Act:
(i) such
other particulars as may be prescribed.
7A.
General duties of the occupier.
(1)
Every occupier shall ensure, so far as is reasonably practicable, the health,
safety and welfare of all workers while they are at work in the factory.
(2)
Without prejudice to the generality of the provisions of sub-section (1), the
matters to which such duty extends, shall include-
(a) the
provision and maintenance of plant and systems of work in the factory that are
safe and without risk of health;
(b) the
arrangements in that factory for ensuring safety and absence of risks to health
in connection with the use, handling, storage and transport of articles and substances;
(c) the
provision of such information, instruction, training and supervision as are
necessary to ensure the health and safety of all workers at work;
(d)
the maintenance of all places of work in the factory in a condition that is
safe and without risks to health and the provision and maintenance of such
means of access to and egress from, such places as are safe and without such
risks;
(e)
the provision, maintenance or monitoring of such working environment in the
factory for the workers that is safe, without risks to health and adequate as
regards facilities and arrangements for their welfare at work.
(3)
Except in such cases as may be prescribed, every occupier shall prepare, and,
as often as may be appropriate, revise, a written statement of his generally
policy with respect to the health and safety of the workers as work and the organisation
and arrangements for the time being in force for carrying out that policy; and
to bring the statement and any revision thereof to the notice of all the workers
in such manner as may be prescribed." Under Section 7, a notice is
required to be given to the Chief Inspector, disclosing the name of the
occupier at least fifteen days before he occupies or begins to use any premises
as a factory. It also requires the disclosure of the name of the owner of the
premises or building and the name and particulars of the Manager. Section 7A
prescribes the duties of the occupier. The provisions of Section 7 and 7A 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 begins to use the
premises to run the factory and in the case of an existing factory seek the
renewal of the licence to continue to operate the factory. It is only when this
statutory requirement is fulfilled that the factory would be given the licence
or its licence shall be renewed in the case of existing factories. The argument
of the learned counsel for the appellants/petitioners that the expression
"person" in Section 2(n) implies only an individual does not bear
scrutiny, when construed in the case of a company, a firm of partners or an
association of persons. Where it is the company which owns or runs such a
factory, 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, and, therefore
it would be the company would be the occupier of that factory. However, since a
company is a legal abstraction, it can act only through its agents who in fact
control and determine the management and are the centre of its personality.
Such agents are generally called the directors being the "directing mind
and will" of the company. The deeming 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" (Section 291 of the Companies Act). The Directors are often
referred to as the "alter ego" of the company. Where the company owns
or runs a factory, it is the company which is in the ultimate control of the
affairs of the factory through its Directors. An employee or officer of the
factory or of the company, even if authorised by the board of directors by 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 been given some measure 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
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).
The
word 'ultimate' in common parlance means last or final. The Oxford Advanced
learner's Dictionary of Current English Encyclopedic Edition (1992), defines
the word 'ultimate' to mean :
"beyond
which no other exists or is possible; last or final; from which every thing is
derived; basic or fundamental; that cannot be surpassed or improved upon; greatest
etc." According to Collins Dictionary of the English Language the word
'ultimate' has been defined as: "last; final; elemental; fundamental;
basic or essential; highest; furthest or greatest thing." According to
Black's Law Dictionary (Sixth Edition), the word 'ultimate means: "at
last, finally or at the end....." There is a vast difference between a
person having the ultimate control of the affairs of a factory and the one who
has immediate or day to day control over the affairs of the factory. In the
case of a company, the ultimate control of the factory, where the company is
the owner of the factory, always vests in the company, through its Board of
Directors.
The
Manager or any other employee, of whatever status, can be nominated by the
Board of Directors of the owner company to have immediate or day to day or even
supervisory control over the affairs of the factory. Even where the resolution
of the Board of Directors says that an officer or employee, other than one of
the directors, shall have the 'ultimate' control over the affairs of the
factory, it would only be a camaflouge or an artful circumvention because the
ultimate control cannot be transferred from that of the company, to one of its
employees or officers, except where there is a complete transfer of the control
of the affairs of the factory. Mechanical recitation of the words of Section
2(n), as a Mantra, in a resolution nominating an employee or an officer as the
occupier by stating that he shall have "ultimate control over the affairs
of the factory", cannot be permitted to defeat the object of the
amendment. The provisions of the Act have to be construed in a manner which
would promote its object, prevent its subtle evasion and foil its artful
circumvention to suppress the mischief.
Though,
the expression ultimate control was used in Section 2(n) even prior to the 1987
amendment also but read with the proviso to Section 100(2), it gave an
opportunity to the companies owning the factory to dilute the rigor of the
provision by not notifying one of its directors to be the occupier and instead
nominating some employee or the other to be the ''occupier'' for purposes of
punishment and penalty. The ultimate control which vests in an owner and in the
case of a company in the Board of Directors cannot be vested in anyone else
without completely transferring the control over the factory to that other
person. The law does not countenance duality of ultimate control. If the
transfer of the control to another person is not complete, meaning thereby that
the transferor retains its control over the affairs of the factory, the
transferee, whosoever he may be, (except a director of the company, or a
partner in a partnership firm) cannot be considered to be the person having
ultimate control over the affairs of the factory notwithstanding what the
resolution of the Board states. The litmus test, therefore, is who has the
'ultimate' control over the affairs of the factory.
The
observations of this Court in Mackenzie's case (supra) that the "ultimate
control over the factory must necessarily be with an owner unless the owner has
completely transferred that control to another person" are significant.
Where,
a company has "completely transferred" that control to another
person, it would be that other person, who would have the ultimate control over
the affairs of the factory to the exclusion of the transferor -company and
would be its occupier. The High Courts taking the view that in the case of a
company, any person nominated by the Board of Directors to be in the ultimate
control of the affairs of the factory would be an occupier, whether or not he
is a Director of the company, have relied upon the following observations of
this Court in John Donald Mackenzie and another vs. The Chief Inspector of
Factories, Bihar (supra) :
"Undoubtedly
the expression 'occupier' is not to be equated with owner. But it must be borne
in mind that the ultimate control over the factory must necessarily be with an
owner unless the owner has completely transferred that control to another
person. Whether that was done in the present case would be a question of fact.
It was for the petitioners to contend that petitioner No.1 was the manager of
the factory and had the ultimate control thereof to lay before the Chief
Inspector of Factories the necessary material for showing that the company had
in some manner transferred the entire control of the factory to petitioner No.
1".
(Emphasis
supplied) and from these observations, those High Courts have concluded that
the law laid down by this Court in John Donald Mackenzie's case (supra) is that
the occupier of the factory need not necessarily be a Director and that any
person to whom control has been transferred and who has been given the entire
control over the affairs of the factory by the company through a resolution can
be the occupier, even if he is not a director. In our opinion, this is not a
correct reading of that judgment, which even otherwise was concerned with the
pre-amendment provisions. A brief reference to the facts of that case is,
therefore, necessary at this stage. Mackenzie, who was petitioner No. 1 in the
writ petition, had described himself as the Manager and occupier of Bata while
seeking renewal of the licence of the factory. The Chief Inspector of Factories
enquired from the factory whether Mackenzie was one of the Directors of the
company and pointed out that if he was not a Director, then a fresh application
seeking renewal of the factory's licence signed by the occupier should be
submitted. The Chief Secretary of Bata Shoe Company sent a reply to the Chief
Inspector of Factories stating therein that Mackenzie was the person who had
been nominated to have the ultimate control of the affairs of the factory and
therefore he was an occupier within the meaning of Section 2(n) of the Act and,
thus, competent to make an application for seeking renewal of the licence. The
Chief Inspector, however, returned the application stating that if Mackenzie
was not a Director, then a fresh application signed by the Director is required
to be submitted. The Company, thereupon, moved the High Court at Patna for
quashing the direction of the Chief Inspector of Factories requiring a director
only to make the application for renewal of the licence. That petition was,
dismissed by the High Court. The company then filed an appeal by special leave
to this court. The Court after setting out the definition of an occupier under
Section 2(n) of the Factories Act went on to consider the correspondence that
had been exchanged between the company and the Chief Inspector of Factories, which
revealed that Mackenzie had been declared to be an occupier without his being a
director of the company and held:
"In
the circumstances, therefore, the Chief Inspector of Factories was perfectly
right in refusing to act on the application signed by Mackenzie and in
requiring the factory to file a proper application for renewal of the licence."
(Emphasis ours) The appeal was consequently dismissed and the direction of the
Chief Inspector of factories was maintained. This Court, thus, did not hold
that a company can nominate any of its employee as an occupier of the factory,
even if he is not a Director of the company. The judgment in Mackenzie's case,
therefore, has to be understood in the context in which it was given as
otherwise the decision of the Chief Inspector of Factories calling upon
Mackenzie (who had been nominated as the occupier having 'ultimate control over
the affairs of the factory') but was not himself a director, to have a fresh
application signed by the Director submitted for renewal of the license, would
not have been sustained by this Court. It is not fair or proper to read a
sentence from the judgment of this Court, divorced from the complete context in
which it was given and to build up a case treating as if that sentence is the complete
law on the subject. Judgments of this Court are not to be read in that manner.
Mr.
Jain, learned senior advocated drew our attention to an order of a three Judges
Bench of this Court in special leave petition No. 4141 of 1979 dated 14.3.1980
to support his submission that the occupier of the factory owned by a company
need not necessarily be one of the directors of the company. Their Lordships
while dismissing special leave petition No. 4141 of 1979 filed by the State of Orissa
against the judgment of that High Court observed:
"We
are of the view that the judgment of the High Court of Orissa in the instant
case and that of the Gujarat High Court in Jyoti Factories (34), Indian
Factories and labour Reports 354, "that the occupier of a factory need not
necessarily be either a Director or an owner of the factory is correct".
In other words it is open to a Company to nominate a person other than a
Director of the company as an "occupier" of the Company for the
purpose of the Factories Act." The above order, was concerned with the
provisions of Section 2(n) as they stood prior to the 1987 amendment, where
under there was an option available to the company, to nominate a person other
than a director of the company as an 'occupier' of the company. This order, therefore,
cannot advance the case of the appellants/petitioners herein, who are governed
by the provisions of Section 2(n) as amended by the Amending Act of 1987.
Thus,
we find that after the 1987 amendment, the true import of proviso (ii) to
Section 2(n) would be that in the case of a 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.
In
other words, an occupier of the factory in the case of a company must
necessarily be any one of its directors who shall be so notified for the
proposes of the Factories Act.
Such
an occupier cannot be any other employee of the company or the factory. This
interpretation of an "occupier" would apply to all provisions of the
Act wherever the expression occupier is used and not merely for the purposes of
Section 7 or 7A of the Act.
Learned
counsel for the appellants/petitioners, then, vehemently argued that proviso
(ii) to Section 2(n) of the Act is beyond the scope of the main Section.
Learned counsel urged that since the principal provision contained in Section
2(n) of the Act is clear, recourse cannot be had to proviso (ii) with a view to
expand the ambit of the principal provision. Learned counsel further argued that
proviso (ii) confers absolute, unfettered and unguided powers upon the
Inspector of Factories to pick and choose any one of the directors of a company
for prosecution and punishment in connection with the breach of any of the
provisions of the Act by a deeming fiction when that director is himself not
responsible for the contravention and proviso (ii) is, therefore, violative of
Article 14 of the Constitution also. It is submitted that there is potential
for abuse of power by the Inspector of Factories, both in selecting and in not
selecting a director, as an occupier for prosecution, punishment and penalty
under the Act:
The
learned Attorney General and learned counsel appearing for different States, on
the other hand submitted that proviso (ii) to Section 2(n) of the Act does not
run counter to the substantive provision and that it is an exception to the
main Section and has been enacted with a view to advance the object of the Act
and the intention of the legislature and it does not travel beyond the scope of
the main section. It is submitted that the proviso neither offends Article 14
nor the main provision of Section 2(n) of the Act. Mr. Ashok Desai, the learned
Attorney General, further submitted that the second proviso to Section 2(n), by
making any one of the Directors to be a deemed occupier of the factory owned or
run by a company, does not in any manner make the substantive part of the
definition clause otiose and that the proviso and the main provision can be
harmoniously construed. He submitted that in the case of a company, the main
provision of Section 2(n) may be incapable of proper working without the aid of
proviso (ii) to the said Section because the company itself may not be possible
to be prosecuted and sentenced to any term of imprisonment, and hence the
necessity of the deeming fiction. The learned Attorney General submitted that
the apprehension expressed by the learned counsel for the petitioners that the
Inspector of Factories can pick and choose any director at his whims is not well
founded because Section 7 as introduced by the 1987 Amendment Act casts a duty
on the company to notify, the name of a director who would be the occupier and
once that statutory obligation is discharged, the Inspector of Factories has no
choice but to prosecute that notified director only.
Does
proviso (ii) to Section 2(n) travel beyond the scope of the main provision or
is otherwise violative of Article 14 of the Constitution India? Finance And
Investment Co. Ltd. & Others Etc. Etc. [1987 (1) SCC, 424] dealing with the
principles for interpretation of statutes this Court observed:
"Interpretation
must depend on the text and the context. They are the basis of interpretation.
One may well say if the text is the texture, context is what gives the colour.
Neither can be ignored.
Both
are important. That interpretation is best which makes the textual
interpretation match the contextual. A statute is best interpreted when we know
why it was enacted. With this knowledge, the statute must be read, first as a
whole and then section by section, clause by clause, phrase by phrase and word
by word. If a statute is looked at, in the context of its enactment, with the
glasses of the statute-maker, provided by such context, its scheme, the
sections, clauses, phrases and words may take colour and appear different than
when the statute is looked at without the glasses provided by the context. With
these glasses we must look at the Act as a whole and discover what each
section. each clause, each phrase and each word is meant and designed to say as
to fit into the scheme of the entire Act. No part of a statute and no word of a
statute can be construed in isolation. Statutes have to be construed so that
every word has a place and everything is its place." (Emphasis supplied)
1996(6) 268], to which one of us (Anand,J.) was a party it was observed:
"It
is well known rule of interpretation of statutes that the text and the context
of the entire Act must be looked into while interpreting any of the expressions
used in a statute. The courts must look to the object which the statute seeks
to achieve while interpreting any of the provisions of the Act. A purposive
approach for interpreting the Act is necessary." {Emphasis supplied} It is
in the light of the above settled principles that we shall consider the true
scope and intent of Section 2(n) with reference to proviso (ii) thereto within
the scheme of the Act. Can Section 2(n) stand without proviso (ii) in the case
of a company? What is the true function of proviso (ii) to Section 2(n)? A
proviso to a 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 ambiguous only then recourse may be had to
examine the proviso as has been canvassed before us. On the other hand an
accepted rule of interpretation is that a Section and the proviso thereto must
be construed as a whole each portion throwing 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.
A
proviso qualifies the generality of the main enactment by providing an
exception and taking out from the main provision, a portion, which, but for the
proviso would be a part of the main provision. A proviso must, therefore, be
considered in relation to the principal matter to which it stands as a proviso.
A proviso should not be read as if providing something by way of addition to
the main provision which is foreign to the main provision itself.
Indeed,
in some cases, a proviso, may be an exception to the main provision though it
cannot be inconsistent with what is expressed in the main provision and if it
is so, it would be ultra-vires of the main provision and struck down.
As a
general rule in construing an enactment containing a proviso, it is proper to
construe the provisions together without making either of them redundant or
otiose. Even where the enacting part is clear, it is desirable to make an
effort to give meaning to the proviso with a view to justify its necessity.
While
dealing with proper function of a proviso, this The Indo Mercantile Bank Ltd.
& Ors. [AIR 1959 (SC), 713] opined:
"The
proper function of a proviso is that it qualifies the generality of the main
enactment by providing an exception and taking out as it were, from the main
enactment, a portion which, but for the proviso would fall within the main
enactment. Ordinarily it is foreign to the proper function of a proviso to read
it as providing something by way of an addendum or dealing with a subject which
is foreign to the main enactment." This view has held the field till date.
Let us
now examine Proviso (ii) to Section 2(n) to determine whether it is
inconsistent with or beyond the main provision of Section 2(n).
By the
Amending Act of 1987 it appears that the legislature wanted to bring in a sense
of responsibility in the minds of those who have the ultimate control over the
affairs of the factory, so that they take proper care for maintenance of the
factories and the safety measures therein. The fear of penalty and punishment
is bound to make the Board of Directors of the company, more vigilant and
responsive to the need to carry out various obligations and duties under the
Act, particularly in regard to the safety and welfare of the workers. Proviso
(ii) was introduced by the Amending Act, couched in a mandatory form - 'any one
of the directors shall be deemed to be the occupier'- keeping in view the
experience gained over the years as to how the directors of a company managed
to escape their liability, for various breaches and defaults committed in the
Factory by putting up another employee as a shield and nominating him as the
'occupier' who would willingly suffer penalty and punishment. The state of
unemployment in the country being what it is, it is not difficult to
"hire" the services of someone only for this "job". Proviso
(ii) now makes it 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. The proviso, by making one of the directors of the company
responsible for proper implementation of the provisions of the Act, to a great
extent ensures that more care is taken for the maintenance of the factory and
various safety measures prescribed under the Act for the health, welfare and
safety of the workers are not neglected. In the case of a company, the main
part of Section 2(n) would not be workable unless that provision is read alongwith
proviso (ii). The definition of an occupier under Section 2(n) is of general
application and different situations have been covered by the legislature only
in different provisos appended to Section 2(n). These situations were, to a
large extent earlier covered by Section 100 of the Act and with the deletion of
Section 100, it became imperative to take care of different situations dealt
therein, by enacting various provisos to Section 2(n). Of course, the
expression "shall be deemed to be an occupier" in second proviso to
Section 2(n) indicates the creation of a legal fiction but it is wrong to
presume that such legal fiction can come into play only where the substantive
provision of Section 2(n) is not attracted. As already observed, the substantive
provision of Section 2(n) can become workable only in the case of a company,
when the same is read alongwith proviso (ii). The deeming provision does not
override the substantive provision of Section 2(n) but clarifies it. In our
opinion, proviso (ii) is not ultra-vires the main provision of Section 2(n) and
as a matter of fact 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 read in the case of a company, the occupier of a factory owned by a company
would 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 identified. then for the purposes
of prosecution and punishment under the Act, the Inspector of Factories may
initiate proceedings against any one of the directors as the deemed occupier.
The
apprehension that on account of Proviso (ii), the Inspector of Factories has
acquired 'unguided, unfettered or absolute powers' to pick and choose any
director of the company for prosecution and punishment is not well founded.
Section
7 lays down a mandatory obligation on the factory to notify the name of the
'occupier' for obtaining the licence or seeking renewal of the licence of the
factory and, therefore, 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 that 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 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 Act, that the
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 Act. That apart, the reasonableness of the restriction depends upon the
circumstances obtaining at a particular time and the urgency of the evil sought
to be controlled.
The
possibility of the power being abused is no ground for declaring the provision
unconstitutional. Proviso (ii) to Section 2(n), therefore, does not offend
Article 14 of the Constitution.
In
keeping with the aim and object of the Act which is essentially to safeguard
the interests of workers, stop their exploitation, and take care of their
safety, hygiene and welfare at their place of work, numerous restrictions have
been enacted in public interest in the Act. Providing restrictions in a Statute
would be a meaningless formality unless the statute also contains a provision
for penalty for the breach of the same. No restriction can be effective unless
there is some sanction compelling its observance and a provision for imposition
of penalty for breach of the obligations under the Act or the rules made thereunder
is a concomitant and necessary incidence of the restrictions.
Such a
provision is contained in Section 92 of the Act, which contains a general
provision for penalties for offences under the Act for which no express
provision has been made elsewhere and seeks to lay down uniform penalty for all
or any of the offences committed under the Act. The offences under the Act
consist of contravention of (1) any provision of the Act; (2) any rules framed thereunder;
and (3) any order in writing made thereunder. It comprises both acts of
omission and commission. The persons punishable under the Section are occupiers
and managers, irrespective of the question as to who the actual offender is. The
provision, is in consonance with the scheme of the Act to reach out to those
who have the ultimate control over the affairs of the factory to see that the
requirements for safety and welfare of the employees are fully and properly
carried out besides carrying out various duties and obligations under the Act.
Section 92 contemplates 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 fact that the notified/identified director is
ignorant about the 'management' of the factory which has been entrusted to a
manager or some other employee and is himself not responsible for the
contravention cannot absolve him of his liability. The identified / notified
director is held vicariously liable for the contravention of the provisions of
the Act, the rules made thereunder or of any order made in writing under it for
the offender company, which is the occupier of the factory.
Mr.
Jain, Mr. Nariman and Mr. Tripathi, appearing for the appellants, however,
argued that since Section 92 imposes a liability for imprisonment and/or fine,
both on the occupier (the notified director) and the manager of the factory,
jointly and severally, for the contravention of any of the provisions of the
Act or any rule made thereunder or of any order in writing given thereunder,
irrespective of the fact whether the occupier (the notified director) or
manager, had any mens-rea in respect of that contravention or that the
contravention was not committed by him or was committed by any other person in
the factory without his knowledge, consent or connivance, it is an unreasonable
restriction. Learned counsel argued that in criminal law, the doctrine of
vicarious liability is unknown and if a director is to be punished for some
thing of which he is not actually guilty, it would violate his fundamental
right as enshrined in Article 21 of the Constitution. It was urged that on
account of advancement in science and technology, most of the companies, appoint
professionally qualified men to run the factories and nominate such a person to
be the 'occupier' of the factory and make him responsible for proper
implementation of the provisions of the Act and it would, therefore, be harsh
and unreasonable to hold any director of the company, who may be wholly
innocent, liable for the contraventions committed under the Act etc. when he
may be totally ignorant of what was going on in the factory, having vested the
control of the affairs of the factory to such an officer or employee, by
ignoring the liability of that officer or employee. The argument is emotional
and attractive but not sound.
The
offences under the Act are not a part of general penal law 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 mensrea.
The
offences are strict statutory offences for which establishment of mens rea is
not an essential ingredient.
The
omission or commission of the statutory breach is itself the offence. Similar
type of offences based on the principle of strict liability, which means
liability without fault or mensrea, exist in many statutes relating to economic
crimes as well as in laws concerning the industry, food adulteration,
prevention of pollution etc. In India and abroad. '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 knows as public welfare offences. A seven Judge Bench of this Court
2287] observed :
"Even
here we may reject the notion that a penalty or a punishment cannot be cast in
the form of an absolute or no-fault liability but must be proceeded by mens rea.
The classical view that ' no mens rea no crime' has long ago been eroded and
several laws in India and abroad, especially regarding economic crimes and
departmental penalties, have created severe punishments even where the offences
have been defined to exclude mens rea. Therefore, the contention that Section
37(1) fastens a heavy liability regardless or fault has no force......"
What is made punishable under the Act is the 'blameworthy' conduct of the
occupier which resulted in the commission of the statutory offence and not his
criminal intent to commit that offence. The rule of strict liability is
attracted to the offences committed under the Act and the occupier is held
vicariously liable alongwith the Manager and the actual offender, as the case
may be. Penalty follows actus reus, mens-rea
being irrelevant.
As
already noticed, where the company owns a factory it is the company which is
the occupier, but, since company is a legal abstraction without a real mind of
its own, it is those who in fact control and determine the management of the
company, who are held vicariously liable for commission of statutory offences.
The directors of the company are, therefore, rightly called upon to answer the
charge, being the directing mind of the company. Dealing with the question of
vicarious liability of the directors for offences committed by a company, the
following observations of Lord Diplock in Tesco Supermarkets Ltd. V. Nattrass
[(1972) AC, 153], are useful :
"In
my view, therefore, the question: what natural persons are to be treated in law
as being the company for the purpose of acts done in the course of its
business, including the taking of precautions and the exercise of due diligence
to avoid the commission of a criminal offence, is to be found by identifying
those natural persons who by the memorandum and articles of association or as a
result of action taken by the directors, or by the company in general meeting
pursuant to the articles, are entrusted with the exercise of the powers of the
company. This text is in conformity with the classic statement of Viscount Haldane,
Lord Chancellor, in Lennard's Carrying Company Ltd." {Emphasis supplied}
The passage of Viscount Haldane, Lord Chancellor, in Lennard's Carrying Company
Ltd. v. Asiatic Petroleum Company Ltd. [(1915) AC 705], referred to by Lord Diplock,
is as follows :
My
Lords, a corporation is an abstraction. It has no mind of its own any more than
it has a body of its own; its active and directing will must consequently be
sought in the person of somebody who for some purposes may be called an agent,
but who is really the directing mind and will of the corporation, the very ego
and centre of the personality of the corporation.
That
person may be under the direction of the shareholders in general meeting; that
person may be the board of directors itself, or it may be, and in some
companies it is so, that person has an authority co-ordinate with the board of
directors given to him under the articles of association......" We are in
complete agreement with the above view propounded by Lord Diplock and Viscount Haldane,
Lord Chancellor and hold that under the Act only one of the directors, the
directing mind and will of the company, its alter ego, can be nominated as an
occupier for the purposes of the Act.
The
object of the Act would stand defeated if for the commission of strict
offences, the identified director, as the deemed occupier of the factory, is
not held vicariously liable. An argument similar to the one raised before us
regarding the harshness of the provision insofar as an "innocent"
director is concerned, was also canvassed in M.C. Mehta's case (supra). We may
excerpt that portion which formulates the question and furnishes the answer :
"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 and Managing Director is not concerned with day to day
functioning of 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 compensation. 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." We,
therefore, find no hesitation in rejecting the argument of learned counsel for
the appellants.
It
deserves a notice that under the Act, the legislature has itself taken care to
dilute the rigor of Section 92 by providing an exception to the strict
liability rule by laying down a third party procedure in Section 101 of the Act
which reads :
101.
Exemption of occupier of manager from liability in certain cases.- Where the
occupier or manager of a factory is charged with an offence punishable under
this Act, he shall be entitled, upon complaint duly made by him and on giving
to the prosecutor not less than three clear days notice in writing of his
intention so to do, to have any other person whom he charges as the actual
offender brought before the Court at the time appointed for hearing the charge;
and if, after the commission of the offence has been proved, the occupier or
manager of the factory, as the case may be, proves to the satisfaction of the
court- (a) that he has used due diligence to enforce the execution of this Act,
and (b) that the said other person committed the offence in question without
his knowledge, consent or connivance,- that other person shall be convicted of
the offence and shall be liable to the like punishment as if he were the
occupier or manager of the factory, and the occupier or manager, as the case
may be, shall be discharged from any liability under this Act in respect of
such offence :
Provided
that in seeking to prove as aforesaid, the occupier or manager of the factory,
as the case may be, may be examined on oath, and his evidence and that of any
witness whom he calls in his support shall be subject to cross- examination on
behalf of the person he charges as the actual offender and by the prosecutor :
Provided
further that, if the person charged as the actual offender by the occupier or
manager cannot be brought before the Court at the time appointed for hearing
the charge, the Court shall adjourn the hearing from time to time for a period
not exceeding three months and if by the end of the said period the person
charged as the actual offender cannot still be brought before the Court, the
Court shall proceed to hear the charge against the occupier or manager and
shall, if the offence be proved, convict the occupier or manager." This
section which lays down "third party procedure" as a defence, is in a
way an exception to the general rule and enables the occupier or the manager of
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) & (b).
The
principle underlying Section 101 may well be gathered from the following
observations of Phillimore J. in Ward v. Smith [1913(3)K.B. 154], while dealing
with a somewhat similar provision in England, the learned Judged said :
A
prima facie liability is imposed upon the occupier or manager from which
however he can extricate himself; otherwise he remains liable. The scheme of
the Act is first to find the de facto employer. An information may be laid
against the occupier. His way of escape is provided for by this section. He may
set up a defence not unlike the defence of warranty which the seller of food
may set up under the English Sale of Food and Drugs Act. He may show that the
offence was not committed by his fault. To do this he must bring the real
offender before the court." Prof. Glanville Williams in his "Text
Book on Criminal Law" (1978 Edn.), while dealing with exceptions to the
strict liability rule opined that the principle of strict liability may be
modified by the statute itself and further that the statutes, generally
speaking, contain two main types of excuses (i) the third party procedure and
(ii) the no-negligence defence. Prof. Williams observes at page 954 :
"As
to the first, some penal statutes provide that when a charge is brought under
them the defendant may bring in any other person (e.g. a supplier) to whose act
or default he alleges that the contravention was due, and shift the blame to
him. The defence is sometimes called a "passing on" defence. The most
important examples are in the Shops Act 1950 (s.113), the Medicines Act 1968
(s.121) (this Act replacing the provisions of the 1955 Act with regard to
drugs), the Weights and Measures Act 1963 (s.27), and the Factories Act 1961
(s. 161).
The
'passing on' defence provided in Section 101 of the Act is an accepted form of
an exception to the principle of strict 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
provisions of Section 101 are almost identical to the provisions of Section 71
of the Factories Act prior to its amendment, with the difference that under
Section 101, a provision for 3 days advance notice to the prosecutor has been
added. Under Section 101, after a complaint is made by the Inspector of
Factories against the manager or occupier under Section 92 of the Act for
contravention of any of the provisions of the Act, the manager or occupier is
entitled to complain against the actual offender before the Court and if he
does so, the actual offender is given a notice and brought before the court and
the trial then proceeds against both the persons complained against, because
the Section contemplates both sets of complaints (one filed by the Inspector of
Factories and the other by the manager or the occupier) and both the accused
(one as named by the Inspector of Factories and the other as named by the
Manager or occupier) being brought before the Court at the same time. The
carriage of proceedings is with the original complainant (Inspector of
Factories) and the onus also lies on him of proving that an offence has been
committed. Both the parties complained against (one by the Inspector and the
other by the Manger or occupier) are entitled to cross- examine the prosecution
witnesses at this stage and also lead evidence to disprove the charge. If the
prosecution fails to prove the offence, both of them would be acquitted.
However,
if the offence is proved then the trial court shall record an order to that
effect and the occupier or manager shall be afforded an opportunity to
extricate himself from the liability provided he can give satisfactory proof of
the facts required by Section 101 (a) and (b). The onus of proof, at that
stage, is shifted to the manager or the occupier. He is entitled to call
evidence as well as to give evidence himself. The alleged actual offender would
have a right to cross-examine the manager or the occupier as the case may be.
He would also be entitled to call evidence.
Even
where the occupier establishes that the actual offender is the person named by
him, he must still prove to the satisfaction of the Court, that he had used due
diligence to enforce the execution of the act and that the said other person
committed the offence in question without his knowledge, consent or connivance.
1893
at 1897] while dealing with the provisions of Section 101 of the Act, this
Court opined :
"Where
an occupier or a manager is charged with an offence he is entitled to make a
complaint in his own turn against any person who was the actual offender and on
proof of the commission of the offence by such person the occupier of the
manager is absolved from liability.
This
shows that compliance with the preemptory provisions of the Act is essential
and unless the occupier or manager brings the real offender to book he must
bear the responsibility. Such a provision largely excludes the operation of S.
117 in respect of persons guilty of a breach of the provisions of the Act. It
is not necessary that mens rea must always be established as has been said in
some of the cases above referred to. the responsibility exists without a guilty
mind. An adequate safeguard, however, exists in Section 101 analysed above and
the occupier and manager can save themselves if they prove that they are not
the real offenders but who, in fact is." This judgment has been noticed
with approval by a three of Gujarat & Ors. [ 1967 (2) SCR, 507]. We are in
respectful agreement with the view that an adequate safeguard has been provided
under Section 101, under which, for circumstances mentioned therein, the
occupier or manager can absolve himself from the liability if he can establish
to the satisfaction of the Court that he is not the real offender but it is the
other person charged by him who deserves to be punished and that he had been
diligent and further that the offence was not committed with his knowledge,
consent or connivance.
Mr.
Jain, learned senior counsel, however, argued that since Section 101 requires
that the actual offender must be brought before the Court at the time appointed
for hearing the charge or at the latest within a period of three months
thereafter and if by the end of that period the actual offender cannot be
brought before the Court, the Court would proceed to hear the charges against
the occupier or the manager and convict him if the offence is proved, renders
the benefit of Section 101 as illusory. We find ourselves unable to agree. The
scheme of Section 101 being that the occupier or manager should be relieved
from liability only if the actual offender could be brought to Court, 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 of trial and a period
of three months has been prescribed by the Legislature within which the actual
offender should ordinarily 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 indefinitely and we find it
difficult to see how any fault can be found with this provision.
Thus,
we are of the opinion that 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 either.
That
Section 92 is a perfectly valid piece of legislation insofar as it makes the
occupier or manager of a factory guilty of an offence for contravention of any
of the provisions of the Act or the rules made thereunder, even if the actual
contravention may not have been committed by the occupier or the manager. is
not disputed or doubted before us and, therefore, we are unable to appreciate
how the provision contained in proviso (ii) to Section 2(n) can render the said
proviso read with Section 92 invalid or unreasonable or how it offends Article
19(1)(g) of the Constitution by defining an occupier to be only the director of
the company.
Article
19(1)(g) of the constitution guarantees to a citizen the right to practice any
profession or to carry on any occupation, trade or business. This right,
however, is subject to Clause (6) of Article 19 which lays down that nothing in
sub-Clause (g) of Article 19(1) shall affect the operation of any existing law
insofar as it imposes or prevents the State from making any law imposing in the
interest of the general public reasonable restrictions on the exercise of the
right. Clause (6) of Article 19 is intended to strike a balance between
individual freedom and social control. Keeping in view the object of the Act,
we must look to the reasonableness of the provision requiring the nomination of
a director as the occupier of the factory under Section 7 of the Act, with a
view to determine whether proviso (ii) to Section 2(n) has a rational nexus
with the object which the legislature seeks to achieve. It was, as already
observed, with a view to secure proper and effective enforcement of the
provisions of the Act and the Rules made thereunder, that the legislature
considered it appropriate to fasten the liability for proper implementation of
the Act on one of the directors by insisting that in the case of a company,
which owns the factory, one of the directors shall be deemed to be the occupier
for all purposes, including prosecution and penalty in respect of offences
committed under the Act. The Legislature has attempted to plug the loopholes,
which existed earlier and enabled the directors to escape their liability by
passing on the buck, as they say, to an employee. It is much too obvious that
when top persons of the company are made conscious of their responsibilities
and duties for the implementation of the safety and welfare measures in a
factory and to carry out the duties prescribed under the Act, at the pain of
punishment in case they choose to overlook, there are much greater chances that
proper care would be taken for maintenance of the factory, particularly in
regard to the safety measures and welfare of workers.
There
is, therefore, nothing unreasonable in fixing the liability on a director of a
company and making him responsible for compliance with the provisions of the
Act and the rules made thereunder and laying down that if there is
contravention of any of the provision 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 prosecuted and shall be
liable to be punished as the deemed occupier. "A law has to be judged for
its constitutionality by the generality of cases it covers, not by the freaks
and exceptions it martyrs." [See AIR 1977 S.C. 2279 (supra)].
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.
Thus,
from the above discussion, it follows that the directions given by the Chief
Inspector of Factories to the writ petitioners and the appellants herein to the
effect that only a director of the company could file an application for
renewal of the factory licence (or for grant of factory licence), as occupier
of the factory and that no other employee could make such an application even
if nominated by the company as an occupier of the factory, suffers from no infirmity
whatsoever.
To sum
up our conclusions are :
(1) In
the case of a company, which owns a factory, it is only one of the director of
the company who can be notified as the occupier of the factory for the purposes
of the Act and the company cannot nominate any other employee to be the
occupier of the factory:
(2)
Where the company fails to nominate one of its directors as the occupier of the
factory, the Inspector of Factories shall be at liberty to proceed against any
one of the directors of the company, treating him as the deemed occupier of the
factory, for prosecution and punishment in case of any breach or contravention
of the provisions of the Act or for offences committed under the Act.
(3)
Proviso (ii) to Section 2(n) of the Act is intravires the substantive provision
of Section 2(n) of the Act;
(4)
Proviso (ii) to Section 2(n) is constitutionally valid and is not ultra-vires
Articles 14, 19(1)(g) and 21 of the Constitution of India;
(5)
The law laid down by the High Courts of Bombay, Orissa, Karnataka, Calcutta, Guwahati
and Madras is not the correct law and the contrary view expressed by the High
Courts of Allahabad, Madhya Pradesh, Rajasthan and Patna is the correct
enunciation of law in regard to the ambit and scope of proviso (ii) to Section
2(n) of the Act.
All
the writ petitions and the appeals by special leave consequently fail and are
hereby, dismissed. We, however, leave the parties to bear their own costs.
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