Case: Kirloskar Pneumatic Company Limited Vs. V.A. More &amp; Others

be acceded to. The submission confuses the responsibility of a company and responsibility of a factory. The directors of the company are responsible for carrying out the management and business of the company, but the company may have several factories situated at various places. It is impossible to expect the directors to be in-charge of day to day management of every factory. The ultimate control over the affairs of the factory cannot be equated with the ultimate control over the affairs of the company. The directors of the company are required to take policy decisions as to the manner in which the business of the company is to be conducted, while the affairs of the factory relate to only the manner in which the factory is to be run. The prosecution contemplated against the occupier of the factory under section 92 of the Factories Act is in respect of breaches or violations of provisions of the Act or Rules under the Factories Act and in respect of breaches of those breaches it is only the person who has ultimate control over the affairs of the factory who would be responsible. It is impossible to accede to the submission that all the directors of the Company irrespective of the fact whether they have ultimate control over the affairs of the factory should be made responsible for prosecution under section 92 of the Act. In our judgment, the amended provisions of the Factories Act do not make any departure from the settled position prior to the amendment that the occupier need not necessarily be a director of the company. The only requirement is that the person to be nominated as occupier must have the ultimate control over the affairs of the factory and that aspect will have to be determined by Inspector of Factories with reference to the facts and circumstances of each case.7.The reliance by Shri Rele on the decision dated December 18, 1991 of Division Bench of this Court in Writ Petition No. 4061 of 1991 is appropriate. While examining the identical question the Division Bench observed :"We are concerned in the present case, with an applicant who is a Company. Sub-Clause (ii) is therefore, the relevant provision. The statute mandates a fiction to be created in a situation where a company is the applicant. One of the Directors, is deemed to be the occupier. Actually, it may be otherwise."The Division Bench thereupon held that it is futile to claim that only a director can be an occupier after amendment of provisions of the Factories Act. We are in respectful agreement with the view taken by the Division Bench. A reference was also made to the decision of Single Judge of Karnataka High Court in Writ Petitions Nos. 22903 to 22905 of 1989 delivered on June 15, 1990. The learned Single Judge held that the proviso to section 2(n) prescribing that in the case of a company any one of the directors shall be deemed to be the occupier comes into play only in cases where an occupier, who is a person with ultimate control of the affairs of the factory is not nominated by the company. We are in agreement with the view taken by the learned Single Judge.8.The Government Pleader placed strong reliance upon the decision of the Supreme Court reported in 1961 Labour Law Journal 146, (Chief Inspector of Mines and another v. Lala karam Chand Thapar and others). The Supreme Court was examining the liability of the directors under provisions of the Mines Act, 1952. The expression "occupier" was not defined under the Mines Act. In the case before the Supreme Court as a result of tragic accident in a colliery in Manbhum District in the State of Bihar, the directors of the company who were working as managing agents were prosecuted. One of the question which arose before the Supreme Court was about interpretation of words "any one of the directors" in section 76 of the Mines Act. It was claimed on behalf of the directors that the expression "any one" in the section cannot be equated with "every one" and all the directors cannot be prosecuted. The Supreme Court did observe that taking into consideration the background in which the legislature has used the words "any one of the directors" the said words are capable of meaning , all the directors. The reliance was placed on this decision by the Government Pleader to contend that even if proviso prescribes that in the case of a company any one of the directors shall be deemed to be the occupier, it should be held that all the directors are the occupiers and are liable to prosecution. It is not necessary to examine this aspect in the present case as the contingency to hold any one of the directors as occupier has not arisen. The only question which requires determination is whether any person other than the director of the company can be an occupier under section 2(n) of the Factories Act and to that question our answer is in the affirmative. In our judgment, the Inspector of Factories was clearly in error in claiming that after amendment of section 2(n) of the Factories Act no one except a director of the company can be an occupier. Any person who has the ultimate control over the affairs of the factory is entitled to be treated as an occupier and such person need not necessarily be a director. The Inspector of Factories was therefore not justified in addressing letter dated November 4, 1988 calling upon the company to send fresh Form No. 3. The Inspector of Factories therefore shall not insist that only a director can be an occupier under section 2(n) of the Factories Act and whenever a company files application in Form No. 3 then the Inspector will examine whether the person nominated is one who has the ultimate control over the affairs of the factory and if so found will register him as the occupier.

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

Explanation:
1[ds]6.The learned Government Pleader did not dispute that in view of the decision of the Supreme Court and catena of other decisions prior to the amendment, it was not incumbent on the company to nominate only a director as occupier under section 2(n) of the Factories Act. It was claimed that the amendments were carried out in the Factories Act and these amendments were the result of the decision of the Supreme Court in the case reported in A.I.R. 1987 S.C. 982, (M.C. Mehta and another v. Union of India and others). In the Shriram Food, case the Supreme Court examined the issue as to what safety devices should be adopted by the factories for ensuring proper maintenance and enforcing liability in cases of death or injury on account of escape of chlorine gas. The Supreme Court observed that though the Chairman and the managing Directors of the company are not concerned with day to day functioning of the units, the Chairman and the Managing Director would be personally liable to pay compensation in case death or injury occurs on account of escape of gas from the factories. The Supreme Court observed that making the Chairman and Managing Director liable would ensure proper and adequate maintenance of safety devices and instruments and operation of the caustic chlorine plant in the manner which would considerably reduce, if not eliminate, risk or hazard to the workmen and the people living in the vicinity. The Government Pleader referred to the amended Chapter IV of the Factories Act to urge that the parliament has provided for constitution of Site Appraisal Committees, compulsory disclosure of information by the occupier, appointment of Inquiry Committees, emergency standards and right of workers to be warned about imminent danger. The Government Pleader claimed that all these responsibilities and liabilities created under the amended provisions of the Act cannot be left to a lowly paid employee or to some executive officer in the factory and the responsibility must be shouldered by the directors of the company, who exercise the ultimate control over the work of the company. The submission cannot be accepted to for more than one reason. In the first instance the plain reading of the amended provisions of section 2(n) of the Factories Act makes it clear that the Parliament never desired to wipe out the effect of the impact of decisions delivered prior to the amendment holding that the occupier need not necessarily be a director of the company. The amendment deleted the provisions of section 100 of the Factories Act, which inter alia, provided that where the occupier of the factory is a company, then any one of the directors thereof may be prosecuted and punished for any offence for which the occupier of the factory is punishable. The Legislature did not delete the entire provisions of section 2(n) but retained the portion which provided that occupier of a factory means the person who has ultimate control over the affairs of the factory. The Legislature then carved out exception by adding proviso to the substantive provisions of the definition. The proviso, inter alia, prescribes that in case of a company any one of the directors shall be deemed to be the occupier. The expression "shall be deemed to be the occupier" clearly indicates that the legal fiction is created and such legal fiction can come into play only in cases where the substantive provision is not attracted. In other words the legal fiction will make any one of the directors responsible as the occupier provided the Company has not nominated an occupier under section 2(n) of the Factories Act. Secondly, the contention of the learned Counsel that the decision of the Supreme Court in Shriram Foods case gave rise to the amendment is not borne out by the amending Act. Neither the preamble to the amending Act nor the Statement of Objects gives any clue to the claim that the amendment was carried out with an idea that all the directors of the company should be made responsible for prosecution under section 92 of the Factories Act. The contention of the Government Pleader that responsibilities which are foisted by the amending provisions are of extreme seriousness and such responsibilities can be carried out only by personof the company and, therefore, the directors can only be an occupier cannot be acceded to. The submission confuses the responsibility of a company and responsibility of a factory. The directors of the company are responsible for carrying out the management and business of the company, but the company may have several factories situated at various places. It is impossible to expect the directors to beof day to day management of every factory. The ultimate control over the affairs of the factory cannot be equated with the ultimate control over the affairs of the company. The directors of the company are required to take policy decisions as to the manner in which the business of the company is to be conducted, while the affairs of the factory relate to only the manner in which the factory is to be run. The prosecution contemplated against the occupier of the factory under section 92 of the Factories Act is in respect of breaches or violations of provisions of the Act or Rules under the Factories Act and in respect of breaches of those breaches it is only the person who has ultimate control over the affairs of the factory who would be responsible. It is impossible to accede to the submission that all the directors of the Company irrespective of the fact whether they have ultimate control over the affairs of the factory should be made responsible for prosecution under section 92 of the Act. In our judgment, the amended provisions of the Factories Act do not make any departure from the settled position prior to the amendment that the occupier need not necessarily be a director of the company. The only requirement is that the person to be nominated as occupier must have the ultimate control over the affairs of the factory and that aspect will have to be determined by Inspector of Factories with reference to the facts and circumstances of each case.7.The reliance by Shri Rele on the decision dated December 18, 1991 of Division Bench of this Court in Writ Petition No. 4061 of 1991 is appropriate. While examining the identical question the Division Bench observed :"We are concerned in the present case, with an applicant who is a Company.(ii) is therefore, the relevant provision. The statute mandates a fiction to be created in a situation where a company is the applicant. One of the Directors, is deemed to be the occupier. Actually, it may be otherwise."The Division Bench thereupon held that it is futile to claim that only a director can be an occupier after amendment of provisions of the Factories Act. We are in respectful agreement with the view taken by the Division Bench. A reference was also made to the decision of Single Judge of Karnataka High Court in Writ Petitions Nos. 22903 to 22905 of 1989 delivered on June 15, 1990. The learned Single Judge held that the proviso to section 2(n) prescribing that in the case of a company any one of the directors shall be deemed to be the occupier comes into play only in cases where an occupier, who is a person with ultimate control of the affairs of the factory is not nominated by the company. We are in agreement with the view taken by the learned Single Judge.8.The Government Pleader placed strong reliance upon the decision of the Supreme Court reported in 1961 Labour Law Journal 146, (Chief Inspector of Mines and another v. Lala karam Chand Thapar and others). The Supreme Court was examining the liability of the directors under provisions of the Mines Act, 1952. The expression "occupier" was not defined under the Mines Act. In the case before the Supreme Court as a result of tragic accident in a colliery in Manbhum District in the State of Bihar, the directors of the company who were working as managing agents were prosecuted. One of the question which arose before the Supreme Court was about interpretation of words "any one of the directors" in section 76 of the Mines Act. It was claimed on behalf of the directors that the expression "any one" in the section cannot be equated with "every one" and all the directors cannot be prosecuted. The Supreme Court did observe that taking into consideration the background in which the legislature has used the words "any one of the directors" the said words are capable of meaning , all the directors. The reliance was placed on this decision by the Government Pleader to contend that even if proviso prescribes that in the case of a company any one of the directors shall be deemed to be the occupier, it should be held that all the directors are the occupiers and are liable to prosecution. It is not necessary to examine this aspect in the present case as the contingency to hold any one of the directors as occupier has not arisen. The only question which requires determination is whether any person other than the director of the company can be an occupier under section 2(n) of the Factories Act and to that question our answer is in the affirmative. In our judgment, the Inspector of Factories was clearly in error in claiming that after amendment of section 2(n) of the Factories Act no one except a director of the company can be an occupier. Any person who has the ultimate control over the affairs of the factory is entitled to be treated as an occupier and such person need not necessarily be a director. The Inspector of Factories was therefore not justified in addressing letter dated November 4, 1988 calling upon the company to send fresh Form No. 3. The Inspector of Factories therefore shall not insist that only a director can be an occupier under section 2(n) of the Factories Act and whenever a company files application in Form No. 3 then the Inspector will examine whether the person nominated is one who has the ultimate control over the affairs of the factory and if so found will register him as the occupier.