IMPORTANT POINT
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 occupiers of the factory for the purposes of the Factories Act and the company cannot nominate any other employee to be the occupier of the factory.

Headnote:Factories Act, 1948 as amended by Act 20 of 1987-Section 2(n), proviso (ii)-Interpretation and scope of- Occupier of a factory -Definition-Word ultimate -In case of a company, which owns factory-An occupier of factory must necessarily be one of its directors who shall be so notified-Such an occupier cannot be any other employee of the company or factory-Where no such director has been identified-For purposes of prosecution and punishment under the Act, proceedings may be initiated against any one of directors as deemed occupier-Occupier is held vicariously liable alongwith Manager and actual offender-Penalty follows actus reus, mens-rea being irrelevant- Third party procedure as an exception to strict liability rule-Proviso (ii) to Section 2(n) does not offend Article 14, 19(l1)(g) and 21 of the Constitution-Proviso (ii) to Section 2(n) is inter vires substantive provision of Section 2(n).
       Held 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 purposes 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. (Para 17)
       Further held, 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. (Para 25)
       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. (Para 26)
       What is made punishable under the Act is the blame worthy 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. (Para 30)
       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. (Para 38)
       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. (Para 41)
       INTERPRETATION OF STATUTES -Proviso to a provision in a statute-Interpretation of-Accepted rule is that a Section and proviso thereto must be construed as a whole. (Para 23)

Judgement Key Points

How to determine the occupier of a factory in a company when Section 2(n) is amended by proviso (ii)?

What is the constitutional validity of proviso (ii) to Section 2(n) in relation to Articles 14, 19(1)(g) and 21?

What are the consequences when a company fails to nominate a director as occupier under Section 7 and how is liability determined under Section 92?

JUDGMENT

Dr. Anand, J.-Leave granted in C.A. No. 12552/96 SLP (C) No. 12498/96.

2. 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.

3. 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 stood 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 the 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 or any local authority, the person or persons appointed to manage 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.

xxx xxx xxx xxx.

4. 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, any one 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 Cha

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1996 Supreme(SC) 1547

IMPORTANT POINTIn 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 occupiers of the factory for the purposes of the Factories Act and the company cannot nominate any other employee to be the occupier of the factory.

How to determine the occupier of a factory in a company when Section 2(n) is amended by proviso (ii)?

What is the constitutional validity of proviso (ii) to Section 2(n) in relation to Articles 14, 19(1)(g) and 21?

What are the consequences when a company fails to nominate a director as occupier under Section 7 and how is liability determined under Section 92?

Cases Referred (8)

IMPORTANT POINT
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 occupiers of the factory for the purposes of the Factories Act and the company cannot nominate any other employee to be the occupier of the factory.