Case: Employees' State Insurance Corporation and Another Vs. G.N. Mathur and Others

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 unitil he (ceases to be a director).The plain reading of sub-section (2) makes it clear that the Company may nominate a director to be the occupier of the factory for the purpose of Chapter X and such nominee shall be deemed to be the occupier of the factory for the purpose of Chapter X only.5. Mr. Mehta submitted that respondent No. 1 was nominated as a Technical Director under sub-section (2) of section 100 of the Factories Act for the period commencing from May 1980 and ending with October 31, 1983. The learned Counsel urged that once respondent No. 1 was nominated as an occupier then respondent No. 1 becomes principal employer as defined under section 2(17)(i) of the Act and is liable to deposit employers contribution under section 40(1) of the Act. Mr. Talsania, learned Counsel appearing on behalf of respondent No. 1, on the other hand, submitted that respondent No. 1 was nominated as occupier under sub-section (2) of section 100 of the Factories Act and such nomination was only for the purpose of Chapter X of the Factories Act and such nominee cannot be treated as an occupier because respondent No. 1 is not established to be a person who has ultimate control over the affairs of the factory as required under section 2(n) of the Factories Act. In other words, the submission is that respondent No. 1 is not occupier under section 2(n) of the Factories Act but was only deemed to be an occupier for the purpose of Chapter X on nomination under sub-section (2) of section 100 of the Factories Act. Mr. Talsania also referred to the fact that the Corporation in the proceedings instituted by the directors to challenge service of notice for payment of employers contribution, has stated in affidavit that respondent No. 1 was not empowered to deal with financial matters. The learned Counsel urged that in these circumstances, respondent No. 1 cannot be held to be a principal employer under section 2(17)(i) of the Act and consequently declaration of the Employees State Insurance Court cannot be faulted.In our judgment, the contention urged on behalf of respondent No. 1 deserves acceptance. The plain reading of sub-section (2) of section 100 of the Factories Act makes it clear that the person nominated shall be deemed to be an occupier for the purpose of Chapter X only and this Chapter deals with the subject of penalties and procedure. In other words, a person nominated under sub-section (2) would be required to face prosecution and punishment in respect of any contravention of the provisions of the Factories Act or rules framed thereunder. Such nomination which treats the nominee as a deemed occupier and only for Chapter X can, by no stretch of imagination, be extended beyond the limited purpose for which the nomination was made. The person nominated as an occupier under sub-section (2) of section 100 cannot be treated as occupier under section 2(n) of the Factories Act, unless such nominee has ultimate control over the affairs of the factory. It is possible that a person having ultimate control over the affairs of the factory may be nominated under sub-section (2) of section 100 but it is not necessary that the nominee under sub-section (2) must necessarily have the ultimate control over the affairs of the factory. Once this aspect is clear then it is obvious that respondent No. 1 who was nominated under sub-section (2) of section 100 cannot be treated as an occupier unless it is established by the Corporation that respondent No. 1 had ultimate control over the affairs of the factory. Mr. Mehta found it extremely difficult to contend that respondent No. 1 had ultimate control over the affairs of Elphinstone Spinning and Weaving Mills. The learned Counsel conceded that respondent No. 1 was not empowered to deal with the financial matters and nothing was produced before the Employees State Insurance Court to indicate that respondent No. 1 had ultimate control over the affairs of the Mills.6. The expression `ultimate control connotes that the person must have right to take policy decision in respect of running of the Mills. Respondent No. 1 was an employee who was merely designated as Technical Director, obviously for the purpose of nomination under sub-section (2) of section 100 and consequently can never be considered as an occupier under section 2(n) of the Factories Act and, therefore, was not `principal employer as contemplated under section 2(17)(i) of the Act. It also cannot be overlooked that notice served upon respondent No. 1 demands employers contribution for the period commencing from January 1977 and ending with September 1983 and in any event, respondent No. 1 was not even a Technical Director for the entire period. Respondent No. 1 was Technical Director from May 1980 to October 31, 1983. The Employees State Insurance Court rightly pointed out the Corporations claim in the affidavit filed in petitions filed by Directors in this Court that Ashokkumar Jalan, Director of the Company was in over-all charge of the affairs of the Company and not respondent No. 1. The assertion of the Corporation clearly establishes that respondent No. 1 was not occupier under section 2(n) of the Factories Act and consequently not the principal employer under section 2(17)(i) of the Act. A faint effort was made by Mr. Mehta to suggest that respondent No. 1 can be treated as principal employer under section 2(17)(iii) of the Act but the submission is misconceived as the Corporation failed to produce any material to establish that respondent No. 1 was responsible for supervision and control over the establishment. In our judgment, the declaration given by the Employees State Insurance Court does not suffer from any infirmity and the learned Judge was right in dismissing the petition.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]In our judgment, the contention urged on behalf of respondent No. 1 deserves acceptance. The plain reading of(2) of section 100 of the Factories Act makes it clear that the person nominated shall be deemed to be an occupier for the purpose of Chapter X only and this Chapter deals with the subject of penalties and procedure. In other words, a person nominated under(2) would be required to face prosecution and punishment in respect of any contravention of the provisions of the Factories Act or rules framed thereunder. Such nomination which treats the nominee as a deemed occupier and only for Chapter X can, by no stretch of imagination, be extended beyond the limited purpose for which the nomination was made. The person nominated as an occupier under(2) of section 100 cannot be treated as occupier under section 2(n) of the Factories Act, unless such nominee has ultimate control over the affairs of the factory. It is possible that a person having ultimate control over the affairs of the factory may be nominated under(2) of section 100 but it is not necessary that the nominee under(2) must necessarily have the ultimate control over the affairs of the factory. Once this aspect is clear then it is obvious that respondent No. 1 who was nominated under(2) of section 100 cannot be treated as an occupier unless it is established by the Corporation that respondent No. 1 had ultimate control over the affairs of the factory. Mr. Mehta found it extremely difficult to contend that respondent No. 1 had ultimate control over the affairs of Elphinstone Spinning and Weaving Mills.The expression `ultimate control connotes that the person must have right to take policy decision in respect of running of the Mills. Respondent No. 1 was an employee who was merely designated as Technical Director, obviously for the purpose of nomination under(2) of section 100 and consequently can never be considered as an occupier under section 2(n) of the Factories Act and, therefore, was not `principal employer as contemplated under section 2(17)(i) of the Act. It also cannot be overlooked that notice served upon respondent No. 1 demands employers contribution for the period commencing from January 1977 and ending with September 1983 and in any event, respondent No. 1 was not even a Technical Director for the entire period. Respondent No. 1 was Technical Director from May 1980 to October 31, 1983. The Employees State Insurance Court rightly pointed out the Corporations claim in the affidavit filed in petitions filed by Directors in this Court that Ashokkumar Jalan, Director of the Company was incharge of the affairs of the Company and not respondent No. 1. The assertion of the Corporation clearly establishes that respondent No. 1 was not occupier under section 2(n) of the Factories Act and consequently not the principal employer under section 2(17)(i) of the Act. A faint effort was made by Mr. Mehta to suggest that respondent No. 1 can be treated as principal employer under section 2(17)(iii) of the Act but the submission is misconceived as the Corporation failed to produce any material to establish that respondent No. 1 was responsible for supervision and control over the establishment. In our judgment, the declaration given by the Employees State Insurance Court does not suffer from any infirmity and the learned Judge was right in dismissing the petition.