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IN THE HIGH COURT OF BOMBAY
M.L. Dudhat, J.
Manisnh L. Bhakta ... Petitioner.
Versus
State of Maharashtra and others ... Respondents.
Writ Petition Nos. 19, 20, 21, 22 and 228 of 1985, decided on 26-10-1990.
Advocates appeared :
R.A. Dada with Milind Sathe i/by Kanga and Company, for all petitioners.
Sukhtankar, for respondent Nos. 1 to 3.
H.V. Mehta, for respondent No. 4.
Salil Shah, for respondent No. 5.
Held-Company is principal employer and owns and runs factory Proceedings for recovery of said amount due from company ought to have been taken against company alone-Directors not personally responsible.
From the facts contained in writ petitions, it is clear that the Company owns and runs the factory and therefore, as per the ratio decided by the Division Bench of this High Court, the Company is the principal employer and therefore as per the principle laid down, the only proceedings which could have been taken by the respondent No.4 for the recovery of the said amount due from the Company towards employers contribution ought to have been taken against the company alone and not the Directors of the Company personally. It appears that in the present case, the respondent No. 1 through respondent No.3 started recovery proceedings of the amount due under the E.S.L Act, only on the basis that the petitioners in all these writ petitions were the Directors of the Company at the relevant period. In the light of the observations and the decision of the Division Bench, such a recovery is liable to be quashed as the same is without jurisdiction and without authority.
After going through the aforesaid definitions, more particularly the second proviso to Section 2 sub-section (26), it is clear that the Managing Director cannot be the principal employer under Section 2 (17) read with Section 2 (n) of the Factories Act, 1948. As per Section 2 (n) of the Factories Act, 1948, occupier of a factory means the person who bas 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 the factory, while the definition of Managing Director, under Section 2 (26) of the Companies Act, specially second proviso puts embargo on the power of the Managing Director and the power of the Managing Director is made subject to the superintendence, control and direction of the Board of Directors. In view of this definition of Managing Director as given under the Companies Act, even it the petitioner in Writ Petition No. 20 of 1985 is a Managing Director. be cannot be an occupier in view of the definition under Section 2 (n) of the Factories Act, 1948.
2. The petitioners were the Directors of the Elphinstone Spinning and Weaving Mills Co.. Ltd., registered under the Companies Act of 1956. It appears that prior to 1981, The said company was in financial difficulties due to the position in the Textiles Industry for various reasons such as recession in the market, increase in prices of raw materials and the said position further deteriorated because of the strike which commenced from 18th January, 1982 and is not called off even today. Thereafter the management of the said Textile Mill run by the Company was taken over by the National Textile Corporation (South Maharashtra) Limited, the respondent No. 5 herein in this petition by the Textile Undertaking (Taking Over of Management) Act, 1983. Incidently, I may mention that the Ordinance and the said Act was challenged in the Writ Petition No. 2401 of 1983 by the Elphinstone Spinning and Weaving Mills Co. Ltd., before the High Court of Bombay and the High Court by its decision dated 13th June, 1984 struck down the said Ordinance and the Act. Against the said decision, special leave petition was filed by the Union of India and the respondent No. 5 before the Supreme Court and the same is still pending. On 28th November, 1984, the petitioners received notices from Tahsildar, respondent No. 3 demanding amount of Rs. 9,48,805.50 ps. as Employer's Contribution to the Employees State Insurance fund. It was also stated in the said Notices that the failure on the part of the petitioners, to pay the said amount within 20 days the said amount was to be recovered from the petitioners' personal assets as arrears towards land revenue. All the petitioners filed the present writ petitions against the said orders of recovery, which are at Ex. B to F, before this High Court. After the receipt of the aforesaid notices, the petitioner in Writ Petition No. 19 replied the same on 18th December, 1984, the petitioner in Writ Petition No. 20 of 1985, Writ Petition No. 21 of 1985 and Writ Petition No. 22 of 1985 replied on 27th December, 1984 while the petitioner in Writ Petition No. 228 of 1985 replied on 7th January, 1985. Though the said reply was given on the various dates, the stand taken by the petitioners more or less was that in view of the decision in (Suresh Tulsidas v. Collector of Bombay and others)1, reported in 1984 Mh. L.J. 117, the respondents are not entitled to recover the said amount from the petitioners personally as the Directors of the company. The petitioners therefore, requested the respondent No. 4 to withdraw or cancel the aforesaid recovery notices. I may further point out that in para 7 of the said reply, the petitioner in Writ Petition No. 19 of 1985 had also sought personal hearing in the matter. Since there was no response from the respondent No. 4 t
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