Holding

Proviso (ii) to Section 2(n) of the Factories Act, 1948 is intra‑vires, constitutionally valid, and limits the occupier of a company‑owned factory to a director, with the Inspector empowered to deem any director occupier if none is nominated.

Summary

The petitioners, J.K. Industries Ltd. and others, sought renewal of factory licences but were directed by the Chief Inspector of Factories to file applications signed only by a director, as the occupier, under Section 2(n) proviso (ii) of the Factories Act, 1948 (amended 1987). The Supreme Court examined whether a company may nominate any employee as occupier and whether the proviso restricting the occupier to a director is constitutionally valid. It held that "occupier" means the person with ultimate control, which in a company is the board of directors, and that the proviso validly deems any director as occupier when the company fails to nominate one. The Court found the provision does not violate Articles 14, 19(1)(g) or 21 of the Constitution and that the Inspector’s power to deem a director occupier is reasonable. Consequently, the directions of the Chief Inspector were upheld and the appeals were dismissed.

Issues considered

Whether, under Section 2(n) proviso (ii) of the Factories Act, only a director of a company can be notified as the occupier of a factory.
Whether the proviso (ii) to Section 2(n) is ultra‑vires or unconstitutional under Articles 14, 19(1)(g) and 21 of the Constitution.
Whether the Chief Inspector may deem any director as occupier when the company fails to nominate a director.
Interpretation of strict liability under Section 92 and the defence under Section 101 of the Factories Act.

Legislation cited

Companies Act, 1956s. 291
Constitution of Indias. Article 14, s. Article 141, s. Article 19(1)(g), s. Article 21
Factories Act, 1948s. 101, s. 2(n), s. 7, s. 7A, s. 92

Subjects

Factories ActOccupierDirector liabilityStrict liabilityConstitutional validityArticle 14Article 19(1)(g)Article 21Section 2(n) proviso (ii)Section 92Section 101Corporate governance

Judgment

A J.K. INDUSTRIES LTD. ETC. ETC.
v.
THE CHIEF INSPECTOR OF FACTORIES AND BOILERS AND
ORS. ETC. ETC.

SEPTEMBER 25, 1996 ........._
B .

[DR. AS. ANAND AND K.T. THOMAS, JJ.]

Labour Laws-Factories Act 1948-Sections 2(n) proviso (ii) (as
amended in1987); 6(1)(e); 7; 7-A and 100(2) (omitted in 1987)-Factory
c owned and run by a company-Occupier-Person in ultimate control of the
affairs of the factory or only a director-Application for renewal or grant of
factory licence-Direction by the Chief Inspector of factories-Only a director
of the company is responsible and not any employee even otherwise
nominated by the Boa1:d of Directors-Held, is a valid direction-In the case
of a. company, which owns a factory, it is only one of the directors of the
D
company who can be notified as the occupier 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-When the company fails to do so notify the
Inspector offactories shall be at liberty to proceed against any one of the
Directors of the company, treating him as the deemed occupier of the factory
E for prosecution and punishment in case of any breach or contravention of the
provisions of the factories Act or fo; offences committed under it-Proviso
(ii) to Section 2(n) of the Factories Act is intravires the substanti~e provision
of Section 2(n) of the factories Act.

Words & Phrases :
F
'Occupier'-Meaning of-In the context of Factories Act 1948-l'erson
who is in the ultimate control of the affairs of the factory--Held, person could
be a company or a partnership or an association of persons or an individual.

b1te1pretation of Statute :
G
Statute Law-f'roviw-Proper mode of interpretation of-Held, a Sec- ~.;

tion and the proviso thereto must b.e construed as a whole each throwing light
on the rest-Proviso (ii) is no ultra-vires the main provision of Section (2) of
the Fact01ies Act-171ere is not conflict at all between the main provision of
H Section 2(n) and proviso (ii) thereto.
798
J.K.INDS.LTD.v.CHIEFINSPECTOROFFACTORIESANDBOILERS 799

Strict liability-The perJons punishable under the provision of Section A
92 of the Factories Act are occupiers and managers-Held, Section 92 con-
templated 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 offence under the factories Act are strict statutory offences for
which establishment of mens rea is not an essential ingredient-The omission
B
or commission of the statutory breach is itself an offence.

Constitution of India-Articles 14, 19(1)(g); 21 and 141-Con-
stitutionality of Proviso (ii) to Section 2(n) of the Factories Act-Held, valid
and not ultravires of Articles 14, 19(l)(g) and 21-lt is not fair and proper to
read a sentence from Supreme Cowt's judgment divorced from its context and C
to build up a case treating that sentence to be completed law on the subject.

The petitioners/appellants desirous of renewal of the registration of
licence of their factories filed applications with the Chief Inspector of
Factories, (the respondent). The respondent rejecting the applications of
the appellants directed them to make an application duly signed by the D
director of the company in his capacity as the occupier of the factory and
that a nominee of the Board of Director, other than a Director, of the
Company could not make such an application us an occupier. According
to the respondent, section 2(n) with its proviso (ii) of the factories Act,
1948 as amended by Amending Act of 1987, provides that in case of a E
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.

The appellants challenged the correctness of that direction in the
High Court by way of a Writ Petition. The High Court d.ismissed the Writ F
.Petition and held that the nomination of an occupier to be made by the
company under proviso (ii) to Section 2(n) of the Factories Act, 1948 as
amended by Amending Act of 1987 can only be that of director and of no
other officers or employee of the factory or the company which owns the
factory. Hence these appeals. G
Dismissing the appeals, this court

HELD : 1.1. There is nothing unreasonable in fixing the liability of
a director of the company and making him responsible for compliance with
.the provisions of the Act and the rules made thereunder and laying down H
~
r-

800 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A that it there is contravention of the provisions 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 liable to ·be
prosecuted and shall be liable to be punished as the deemed occupier. "A
law has to be judged (Br its constitutionality by the generality of cases it
covers and not by the freaks and exception'i it martyres." [836-G-H]
B ·-'-...

R.S. Joshi v. Ajit Mills, AIR (1977) SC 2279, relied upon.

MIS. Bhatia Metal Containers Pvt. Ltd. and Anr. v. The State of Uttar
' .
Pradesh, (1990) II LLJ 534; Standard Industries Ltd. and Anr. Etc. Etc. v.
The State of Madhya Pradesh & Others, (decided on 15.11.1995); Ashok
c Leyland Ltd. v. The State of Rajasthan, (decided on 1.11.1991 by Rajasthan
High Court); Jaipur Syntex Ltd. and Others. v. State of Rajasthan and Others,
(1991) LLR 380; Champaran Sugar Co. Ltd. v. Union of India & Ors.,
(decided on 3.5.1988 by Patna High Court), approved.

D W.S. Industries (India) Ltd. and Another v. The Inspector of Factories,
Bangalore & Ors., (1991) II LLJ 480; Kirloskar Pneumatic Company Ltd. v.
VA. More and Others, (1993) I, LLJ 805; Indo Flaglabes Ltd. and Anr. and
Straw Products Ltd. and Anr. v. Chief Inspector of factories and Boilers and
Others, (1993) 66FLR171; WimocLtd. and Others v. The Union of India &
Others, (1995) FLJ 552; Ion Exchange India Ltd. Hosur v. Deputy Chief
E Inspector of Factories, Salem, (1995) LLR 756; Greaves Ltd. andAnr. v. State
of West Bengal & Anr., (1996) LLR 638, disapproved and overruled.

1.2. Where 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,
F and therefore, it would be the company which would be the occupier of that
factory. However, since a company is a legal abstraction, it can act only
through jts agents who in fact control a~d determine the management and
are the centre of its personality. Such agents are generally called the
directions being ~e "directing mind and will" of the company. The deeming
fiction under proviso (ii), therefore, only clarifies the position where com-
G pany 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". Th~ Directors are often
H referred to as the "alter ego" of the company. An el!Iployee or officer ofthe
J.K. INDS. LTD. v. CHIEF INSPECTOR OFFACIORIES AND BOILERS 801

factory or of the company, even it authorised by the board 11f directors by A
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 given some measures 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
B

immediate or day to day or supervisory control instead of ultimate control
in the main provision of section 2(n). [817,·A-E]

John Donald Mackenzie and Another v. The Chief Inspector of Fae- c
tories, Bihar, AIR (1962) SC 1351, held applicable.

Oxford advanced Leamer's Dictionary of current English En-
cyclopedic Edition (1992); Collins Dictionary of the English Language;
Black's Law Dictionary (Sixth Edition), relied upon.
D
1.3. The provisions of Sections 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 beings to use the premises to run
the factory and in the case of an existing factory seek the renewal of the E
licence to continue to operate the factory. It is only when this statutory
requiremen~ is fulfilled that the factory would be given the licence or its
licence shall be renewed in the case of existing factories.

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 F
a 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 any 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 Factories Act, that the
G
. 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 Factories Act. The reasonableness of the restriction depends upon
the urgency of the evil sought to be controlled. The possibility of the power H
802 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A being abused is no ground for declaring the provision unconstitutional.
Proviso (ii) to Section 2(n) of the Factories Act, there fore, does not offend
Article 14 of the Constitution of India. [827-A]

1.4. A proviso to provision in a statute has several functions and while
interpreting a provision of the Statute, the Court is required to carefully
B 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 ambigous only then
recourse may be had to examine the proviso. [824-B-C]
c An accepted rule of interpretation is that a section and proviso there-
to must be construed as a whole each portion throwirtg 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. Proviso (ii) to section
2(n) of the Act is intra- vires the substantive provision of section 2(n) of the
D Act. 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. Proviso (ii) was introduced by the Amending Act,
E couched in a mandatory form - 'any one of the directors shall be deemed to
the occupier' - keeping in view the experience gained over the years as to
how the directors of a company managed to es~pe their liability, for
various breaches and defaults coinmitted in the factory by putting up
another employee as a shield and nominating him as an 'occupier' who
would willingly suffer penalty and punishment. Proviso (ii) now makes it
F 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.
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 ready in
the case a company, the occupier of a factory owned by a company would
G 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 so identified, for the purposes ofprosecution
and punishment under the Act, the Impector offactories may initiate proceed-
ings against any one of the Directors as the deemed occupier. .
H {824-C-D; 825-E-H; 826-A-D]
J.KINDS.LTD.v.CHIEFINSPECTOROFFACTORIESANDBOILERS 803

Reserve Bank of India Etc. Etc. v. Peerless General Finance and A
Investment Co. Ltd. and Others Etc. Etc., [1987) 1 SCC 424; S. Gopal Reddy
v. State of Andhra Pradesh, JT (1996) 6 SC 268; The Commissioner of
Income Tax, Mysore and Ors. v. The Indo Mercantile Bank Ltd. & Ors., AIR
(1959) SC 713, referred to.
B
2.1. The offences under the Factories Act are not a part of general
penal ·1aw 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 mens rea. The offence are strict statutory
offences for which establishment ofinens rea is not an essential ingredient.
The omission or commission of the statutory breach is itself the offence. c
'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
known as public welfare offences. The rule of strict liability is attracted to
the offences committed under the Act and the occupier is held vicariously D
liable alongwith the Manager and the actual offender, as the case my be.
Penalty follows Actus reus, mens-rea being irrelevant. The legislature has
itself taken care to ,dilute the rigour of Section 92 of Factories Act, by
providing an exception to the strict liability rule by lying down a third party
procedure in section 101 of the Act Section 101 of the Act lays down "third
part procedure" as a defence and is in a way an exception to the general E
I
rule and enables the occupier or the manager or the factory, to extricate
himself from punishment by establishing that the actual offender is some-
one else and giving satisfactory proof of facts as are contemplated by
Section 101 (a) and (b). The 'passing on' defence provided in Section 101
of the Act is an accepted form of an exception to the principle of strict F
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 Scheme on Section 101 being that the occupier or manager should be
relieved from liability only if the actual offender could be brought to court, G
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 to trial and
a period of three months has been prescribed by the Legislature within
which the actual offender should or<Jinarily 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 H
804 SUPREME COURT REPORTS [1996] SUPP. 6 S.C.R.

A indefinitely and no fault can be found with this provision. Thus, 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. [835-C-E]

R.S. Joshi v. Ajit Mills, AIR (1977) SC 2279; Tesco Supemiarkets Ltd.
v. Nattrass, (1972) AC, 153; Lennards's Canying Company Ltd. v. Asiatic
B Petroleum Company Ltd., (1915) Ac 705; M.C. Mehta & Anr. v. Union of
India and Ors., [1986] 2 SCC 325.

2.2; Maneklal Jinabhai Kot v. State of Gujarat & Ors., [1967] 2 SCR,
507; Ward v. Smith, (1913) 3 KB 154; State of Gujarat v. Kansara Manila/,
C AIR (1964) SC 1893, "Text Book on Criminal Law" (1978) Edn.) - by Prof.
Glanville Williams, referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 4014-
4015 of 1993 Etc. Etc.

D From the Judgment and Order dated 6.4.93 of the Rajasthan High
Court in D.B.C.W.P. No. 1895 of 1989.

Ashok H. Desai, Attorney General, R.K. Jain, R.F. Nariman, V.A.
Mohta, Raj Birbal, P.P. Malhotra, S.S. Javali, K.N. Shukla, H.L. Agrawal,
Raju Ramachandran, K.K. Lahiri, Ejaz Maqbool, Braj K. Mishra, Ravindra
E Kumar, Jaideep Gupta, A.T. Patra, Gautam Khaitan for O.P. Khaitan &
Co., P.P. Tripathi, Rajesh Kumar Singh, S. Sukumaran, O.C. Mathur, P.N.
Misra, S. Misra, P. Pattnaik, A. Mahapatra, Rajeev Sharma, Anand
Chandra Swain, Rajiv Tyagi, U.A. Rana, M.K. Mohan, MJ.S. Rupal,
Mukul Mudgal, W.A. Qadr~ C.V. Subba Rao, R.C. Verma, R.B. Misra,
·F Aruneshwar Gupta, Jaideep Gupta, Ms. Radha Rangaswamy, Mrs. Kirti
Mishra, S.K. Agnihotri and B.B. Singh for the appearing parties.

The Judgment of the Court was delivered by

G DR. ANAND, J. Leave granted in C.A. :No.12552/96 SLP (C) No.
12498/96.

In this batch of cases, both in the writ petitions and in 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
H the petitioners/appellants to fil applications seeking renewal of the registra-
J.KINDS.LTD.v.CHIEFINSPECTOROFFACTORIESANDBOILERS[DRANAND,J.) 805

tion of licence of their respective factories, signed by a director of the A
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 direc-

. ~
tion/opinion has been put in issue in all these cases. The petitioners/appel-
lants have also called in question the constitutional validity of proviso (ii) B
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 c
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 D
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 intro-
duced 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 E
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
F
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.
G
"2(n) "Occupier" of a factory means the person, who has ultimate
-' ...-
control over the affairs of the factory,
J

Provided that

(i) in the case of a firm or other association of individuals any H
806 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A one of the individual partners or members thereof shall be deemeq
to be the occupier;

(ii) in the case of a company, any one of the directors shall be
deemed to be occupier;

B (iii) in the case of factory owned or controlled by the Central
Government or any State Govt. or any local authority, the person
or persons appointed to manage the affairs of the affairs of the
factory by the Central Government, the State Government or the
local authority, as the case may be, shall be deemed be the occupier
c
xxx xxx xxx xxx xxx xxx

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
D 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 or other association of in-
E dividuals, 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 furn or association may give notice to the
F 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
G 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
H punishable :
_J

J.K INDS. LTD. v. CHIEF INSPEGfOR OF FACTORIES AND BOILERS [DR. ANAND,J.] 807

Provided that the company may give notice to the Inspector that A
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 Inspec-
tor or until he ceases to be a director. B
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 C
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 20of1987.

There is divergence of opinion between various High Court 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.
E
The High Court of Karnataka in W.S. Industries (India) Ltd. and
Another v. The Inspector of Factories, Bangalore & Others., (1991) II LLJ,
480 opined that it is not necessary that the occupier must be necessarily
the owner or the director of the 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
F
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 G
the operative provisions of the Act makes it clear that the oc-
cupier 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) H
808 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A 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. v. VA. More & Others, (1993) I LLJ 805 was also not called upon to
B 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
C to the main provision by adding second proviso to Section 2(n) of the Act.
The learned Judges noticed the judgment of this Court in John Donald
Mackenzie and Another v. The Chief Inspector of Factories, Bihar, AIR
(1992) 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 person or employee nominated, as an occupier, by the Board of
D Directors.

The Orissa High Court in Indo Floglabes Limited & Anr. and Strew
Products Ltd. and Anr. v. Chief Inspector of Fact01ies 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
E judgments of the Kamataka 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 High Court of Guwahati in Wimco Ltd. & Others v. The Union
F of India & Others, (1995) FLl, 552 has followed the judgments of Kar-
nataka, Bombay and Olissa 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
laid down by these two High Courts a bare reading of Section 2(n)
as amended will show that the material part of the section defining
an occupier remains unaltered and so a person who has the
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
H the factory which is the touch-stone and not the ultimate control
J.K INDS. LTD. v. CHIEFINSPECIDROF FACTORIES AND BOILERS(DRANAND,J.) 809

of the company. A director may live at distance. But the ultimate A
control of the factory may be left to his Manager as in such 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 depend-
-.., able as such, an occupier of a factory assumes control and respon-
sibility and the legislature enunciated that the occupier should be B
the person who would be the person responsible to ensure that the
provisions of the Act are complied with. The proviso 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
c
deemed to be an occupier ....."

The Madras High Court in ION Exchange India Ltd. (represented by
as Manager) Hosur v. Deputy Chief Inspector .of Factolies, Salem (1995)
LLR, 756 and the Calcutta High Cowt in Greaves Ltd. and Another v. State D
of West Bengal and Another, {1996) LLR, 638, have also, following, the
judgments of Bombay and Kamataka 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 con- E
sideration.

On the other hand, the High Court of Allahabad in Mis. Bhatia Metal
Containers Pvt. Ltd. and Another v. The State of U.P., (1990) II LU, 534,
the High Court of Madhya Pradesh in Standard Industries Ltd. and Another F
Etc. Etc. v. The State of Madhya Pradesh and Others, (Misc. Petition No.
3130/91 and Writ petition No. 4419/94 etc. decided on 15.11.95), High
Court of Rajasthan in Asliok Leyland Ltd. v. The State of Rajasthan and
Others, (Civil Writ Petition No. 4195/89 decided on 1.11.91) and in Jaipur
Syntex Ltd. and Others v. State of Rajasthan and Others, (1991) LLR, 380 G
... and the High Court of Patna in Oiamparan Sugar C. Ltd. v. The Union of
India and Ors., (C.WJ.C. No. 2254/88 decided on 3.5.88) have held that
the nomination of an occupier to be ma<le 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. H
810 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A 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,
B health and welfare of workers were found to be inadequate and unsatisfac-
tory. 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
C 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
D safety. The stringent provisions relating to the obligations of the occupiers
or managers with a view to protect workers and to secure to them employ-
ment in conditions conducive to their health and safety indicate the broad
purpose of the Act. The Act and the Rules made thereunder impose
numerous restrictions upon the occupier or manager or the factory to
E ensure to workers adequate safeguards for their health and physical well
being and to secure to them safe and health 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
F 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 of workers particularly in case of factories which deal
with hazardous materials and the escape routes which the employers had
G found to shift their responsibilities on some employee or the other and
escape punishment and penalty, which were also noticed on certain judg-
ments of this Court, led the Parliament to amend the Act in 1987 which
inter alia amended Section 2(n), deleted Section 100 and incorporated
Section 7, 7A, Chapter IV-A, Section 104 A and Section 106 A, besides
H certain other provisions.
J.K INDS.LTD. v. CHIEF INSPECIDROFFACTORIESANDBOILERS[DRANAND,J.) 811

Prior to 1987, Section 2(n) of the Act which defined "occupier of a A
factory" had necessarily to be read alongwith 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 fact01y 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. B
Under the proviso to section 100(2), the Company had an option to
nominate one of its Directors, resident in India, who on such nomination
would be deemed to be an occupier for 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 C
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 com-
panies, taking advantage of the option as contained in the proviso to D
Section 100(2) of the Act and noticing the stringent provisions for punish-
ment 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, E
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 taken care of health, hygiene and welfare of the workers ·
being in ultimate control of the management of the company which owns
the factory, were able to escape prosecution and punishment even if they F
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 G
noticed the "escape route" which had been carved out by the Directors of
the Company, which own or runs the factory, and voiced its concern and
opined that if their 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 H
812 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A 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
workmen. In M.C. Mehta & Anr. v.. Union of India & Ors., [1986) 2 SCC,
325 it was obse!"Ved :

B "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.
C and Managing Director is not concerned with day to day functioning off
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 Chair-
man and Managing Director would be personally liable to pay compensa-
D tion. 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, particularly when we find that according
E to the reports of various expert committees which examined the working
of caustic chlorine plant, there was considerable negligence in looking after
its safety r~quirements 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 or hazard to the community. We
may however make it clear that the undertaking to be given by the Chair-
F man 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 or sabotage. But in all
pther cases the Chaimian or Managing Director must hold himself liable to
pay compensation. 17tat alone in our opinion would ensure proper and
,G adequate maintenance of safety devices and inst1Uments and operation of the
caustic chlorine plant in a manner which would considerably reduce, if not
eliminate, risk or hazard to the workmen and to the people living in the
vicinity"~
-
H (Emphasis ours)
J.K. INDS. LTD. v. CHIEF INSPECIDR OF FACTORIES AND BOILERS {DR ANAND, J.J 813

It was, thereafter, that the Parliament stepped in and passed the A
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:
B
"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 C
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 D
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 been come up which deal with hazardous E
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 F
and measures. The amendments would also include procedures for
siting of hazardous polluting 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. G

(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 H
814 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A 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 affairs 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
B 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
C 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 occupier. The Amending Act of 1987
eliminated altogether section 100 and instead introduced into Section 2(n)
D 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
E Board of Directors of any of its employees or officers, by a resolution, to
be the occupier was not allowed to defeat 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 :
F
7(1) The occupier shall, at least fifteen days before he beings to
occupy or use any premises as a factory, send to the Chief Inspec-
tor a written notice containing -

G (a) the name and situation of the factory;

(b) the name and address of the occupier; -
(bb) the name and addres~ of the owner of the premises or
building (including the precincts thereof) referred to in sec-
H tion 93:
J.K INDS. LTD. v. CIIlEF INSPE.CIDROF FACTORIES AND BOILERS (DR ANA.i.~D. J.) 815

(c) the address to which communication relating to the factory A
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 existence on the date of commence- B
ment 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
c
factory, which shall not include the rated horse power of any
separate stand-by plant;)

(t) the name of the manager of the factory for the purposes of
this Act: D
(g) the number or 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 : E
(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. F

(2) Without prejudice to the generality of the provisions of
sub-section (1), the matters to which such duty extends, shall
include -
G
,...,,. (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 the factory for ensuring safety and
absence of risks to health in connection with the use, ban·
dling, storage and transport of articles and substances; H
816 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A ( 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
B 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,
c 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 general policy with respect to the health and safety
D of the workers at 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."

E Under Section 7, a notice is required to be given to the Chief
Inspector, disclosmg 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
F 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 to the case of an existing factory seek the renewal of the licence
to continue to operate the factory. It is only when this statutory require-
G ment 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" f'

in Section 2(n) implies only individual does not bear scrutiny, when con-
strued in the case of a company, a firm of partners or an association of
H persons. Where it is the company which owns or runs such a factory, it is
J.K INDS. LTD. v. CHIEF INSPECTOR OF FACT'ORIF.sAND BOILERS [DR At'iAND, J.J 817

the company which has the ultimate control over the affairs of the factory, A
and, therefore it would be the company which 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 B
fiction under proviso(ii), therefore, only clarifies the position where com-

.. pany 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
c
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 D
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 control over the affairs of the factory, the ultimate control E
being retained by th~. company itself. The legislature did not designedly use
the expression immediate or day to day or supervi.sory control instead of
ultimate control in the main provision of Section 2(n) .

. The word 'ultimate' in cominon parlance means last or final. The
oxford Advanced Learner'.s DiC:tionary of Current English Encyclopedic F
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." G
; According to Collins Dictionary of the English Language the word
'ultimate' has been defmed as :

"last; final; elemental; fundamental; basic or essential; highest;
furthest or greatest thing." H
818 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A According to Black's Law Dictionary (Sixth Edition), the word 'ultimate'
means:

"at l~st, finally or at the end ....."

There is a vast difference between a person having the ultimate
B
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 I
.,:..
factory, always vasts in the company, through its Board of Directors. The
Manager or any other employee, of whatever status, can be nominated by
C 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 circum-
D vention 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
E 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 e-vasion 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
F 100(2), it gave an opportunity to the companies owning the.factory to dilute
the. rigour 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
G Directors cannot be vested in anyone else without completely transferring
the control over the factory to that 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
H considered to be the person having ultimate control over the affairs of the
J.K INDS. LTD. v. CHIEf INSPECIDR OF FACTORIES AND BOILERS (DR ANAND, J.j 819

factory notwithstanding what the resolution of the Board states. The litmus A
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 transfe1red that control to another person" are B
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 C
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 observation of this Court in John Donald Mackenzie and
Another v. 17te Chief Inspector of Factories, Bihar (supra) :

"Undoubtedly the expression 'occupier' is not to be equated with D
owner. But it must be borne in mind that the ultin:iate control over
the factory must necessarily be with an owner unless the owner has
completely transfe1red 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 E
of the factory and had the ultimate control thereof to lay before
the Chief ldspector of Factories t~e company had in some manner
transferred the entire control of the factory to petitioner No. 1".

(Emphasis supplied)
F
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, G
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 Shoe Company's factory at Dhiga in Bihar while H
820 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A 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
B 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 m_eaning of Section 2(n) of the Act and, thus, competent to make an
application for seeking renewal of the licence. The Chief Inspector, how-
ever, returned the application stating that if Mackenzie was not a Director,
.
C 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, dis-
missed by the High Court. The company then filed an appeal by special
D leave to this Court. This Court after setting out the definition of an occupier
under Section 2(n) of the Factories Act _went on to consider the correspon-
dence 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 :

E "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.

F (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
G 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 fresh application signed by the director submitted for
H renewal of the license, would not have been sustained by this Court. It is
J.K. INDS. LTD. v. CHIEF INSPECIDROF FACTORIES AND BOILERS (DR ANAND,J.( 821

not fair or proper to read a sentence from the judgment of this Court, A
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 advocate drew our attentio::i to an order of
a three Judges Bench of this Court in special leave petition No. 4141 of B
1979 dated 14.3.1990 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.
4141of1979 filed by the State of Orissa against the judgment of that High
Court observed : c
"We are of the view that that judgment of the High Court of Orissa
in the instant case and that of the Gujarat High Court in Jyoti
Switchgears v. Chief Inspector of Factories (34), Indian Faci:ories
and Labour Reports 354, "that the occupier of a factory need not
necessarily be either a Director or an owner of the factory is D
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) E
· as they stood prior to the 1987 amendment, whereunder 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. F

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. G
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 "oc-
cupier" would apply to all provisions of the Act, wherever the expression
occupier is used not merely for the purposes of Section 7 or 7A of the Act. H
822 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A Learned counsel for the appellants/petitioners, then, vehemently ar-
gued that proviso (ii) to Se<>tion 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. . .
B Learned counsel further. argued that proviso (ii) confers absolute, unfet-
tered and unguided powers upon the Inspector of factories to pick and
choose any one of the dir.ectors of company for prosecution and punish-
ment 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
C 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.

D 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
E 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, dues not in any manner make the substantive part of the defmi-
F tion clause otiose and that the proviso and the main provision can be
harmoniously construed. He submitted that in the ~se 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 imprison-
ment, and hence the necessity of the deeming fiction. The learned Attorney
G 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
H obligation is discharged, the Inspector of Factories has no choice but to
J.K. INDS. LTD. v. CHIEF INSPEC'IDR OF FACfORIESAND BOIIERS [DR ANANn,J.) 823

prosecute that notified director only. A
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 of India?

In Reserve Bank of India Etc. Etc. v. Peerless General Finance And
Investment Co. Ltd. & Others Etc. Etc., [1987] 1 SCC 424 dealing with the B
principle for interprettion 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 c
textual interpretation match the contextual. A statute is best inter-
preted when we know why it was enacted. With this knowledge, the
statute must be read, first as a whole and tJ-.en 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 D
statute-maker, provided bysuch context, its scheme, the sections,
clauses, phrases and words may take colour ~nd appear different
than 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 E
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 in its place".

(Emphasis supplied) F
In S. Gopal Reddy v. State of Andhra Pradesh, JT (1996) 6 SC 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 G
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 of interpreting
the Act is necessary."

(Emphasis supplied) H
824 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.~~.

A 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 4(n) stand without
proviso (ii) in the case of a company? What is the true function of proviso
(ii) to Section 2(n)?
B A proviso to a provi5ion 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
C 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 convassed
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
D 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 P:rovision, a portion, which, but
for the proviso would be a part of ?ate ma~ provision. A proviso must,
therefore, be considered in relation to the principal matter to which it
E 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
F 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
G to justify its necessity.
While dealing with proper function of a proviso, this Court in The
Commissioner of Income-Tax, Mysore & Ors. v. The Indo Mercantile Bank
Ltd. & Ors., AIR (1959) SC, 713 opined:

H "The proper function of a proviso is that it qualifies the generality
J.K INDS. LTD. v. CHIEF INSPECIDR OF FACTORIES AND BOILERS (DR. ANAND, J.J 825

of the main enactment by providing an exception and taking out A
as it were, from the main enactment, a portion which, but for the
proviso would fall within the main enactment. Ordinarily it is
foreign lo 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."
B
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).
c
Sy 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 D
company, more vigilant anJ 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 Admending
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 E
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 F
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 prosecu-
tion 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 G
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 H
826 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A 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 varioris provisos to Section
2(n). Of course, the expression "shall be deemed to be an occupier" in
B 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 were
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
C 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
D directors of the company who has been 11otified/identified by the company to
have ultimate control over the affairs of the factory' and where no such
director has been identified, the11 for the purposes of prosecution and punish-
me11t under the Act, the Inspector of Factories may i11itiate proceedings
against any one of the directors as the deemed occupier.

E 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 funded. Section 7 lays down a mandatory obligation on the factory
to notify the name of the 'occupier' for obtaining the licence or seeking
F 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 Inspec-
tor 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
G 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
H obligations ennumerated in Section 7 of the Act. That apart, the
J.K INDS. LTD. v. CHIEF INSPECIDROF FACTORIES AND BOILERS [DR ANAND, J.) 827

reasonableness of the restriction depends upon the circumstances obtain- A
ing 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 B
safeguard the interests of workers, stop their exploitation, a11d take care of
their safety, hygiene and welfare at their place of work, numerous restric-
tions 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 C
can be effective unless there is some sanction compelling its observance
and the provision for imposition of penalty for breach of the obligations
under the Act or the rules made thereunder is a concomitent 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 D
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 com- E
mission. 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 F
Act. Section 92 contemplates a joint liability of the occupiei and the
manager for _the 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 respon- G

- sible for the contravention cannot absolve him of his liability. The iden-
tified/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 cQmpany, which is the occupier of the
factory. H
828 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A Mr. Jain~ Mr. Nariman and Mr. Tripathi, appearing for the appel-
lants, however, argued that the 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
B occupier (the notified director) or manager, hod 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 un:known
C 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 µroper implementation of the
D 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 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 attrac- 1
E tive but not sound.

The offences under the Act are not a part of gen~ral 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
F on any mens rea. 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 liabil!ty, 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, preven-
G tion 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 known as public welfare offences.
A seven Judge Bench of this Court in R.S. Joshi v. Ajit Mills, AIR (1977) ·
H SC,· 2279 at page 21J!,7 observed :
J.K. INDS. LTD. v. CHIEF INSPECIDR OF FACIURIES AND BOILERS (DR. ANAND, J.) 829

"Even here we may reject the notion that a penalty or a punishment A
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 departmen-
tal penalties, have created severe punishments· even where the B
offences have been defined to exclude mens rea. Therefore, the
.contention that Section 37(1) fastens a heavy liability regardless of
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 C
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, there the company owns as factory is the com- D
pany 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, there-
fore, rightly called upon to answer the charge, being the directing mind of E
the company. Dealing with the question of vicarious liability of the directors
for offences co~mitted by a company, the following observations of Lord
Diplock in Tesco Supemarkets 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 F
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 person 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 G
pursuant to the articles, are entnlsted with the exercise of the powers
of the company. This test is in conformity with the classic statement
of Viscount Haldane, Lord Chancellor, in Lennard's Carrying Com-
pany Ltd. v. Asiatic Petroleum Company Ltd."

(Emphasis supplied) H
830 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A The passage of Viscount Haldane, Lord ChancelJor, in Lennard's Canying
Company v. Asiatic Petroleum Company Ltd., (1915), 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
B 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
c companies it is so, that person has an authority co-ordinate with
the board of directors given to him under the articles of associa-
tion........"

We are in complete agreement with the above view propounded by
D 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 e'go; Call be nominated as an occupier for the purposes
of the Act. ·

The object of the Act would stand defeated if for the commission of
E 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' case (supra). We
may excerpt that portion which formulates the question and furnishes the
answer:
F
"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 is Shriram
has several units manufacturing different products and each of
these units is headed and managed by competent and professional-
G
ly qualified persons who are responsible for the day to day manage-
ment 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 Manag-
ing Director to give an undertaking that in case of death or injury
H resulting on account of escape of chlorine gas, the Chairman and
. J.KINDS.LTD.v.CHIEFINSPECIDROFFACTORIESANDBOILERS[DRANAND,J.) 831

Managing Director would be personally liable to pay compensa- A
tion. 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."
B
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 rigour of Section 92 by providing an exception to the
strict liability rule by laying down a third party procedure in Section 101 of C
the Act which read :

101. Exemption of occupier of manager from liability in certain
cases. - Where the occupier or manager of a factory is changed
with an offence punishable under this Act, he shall be entitled, D
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 provided, the occupier or manager of the factory, as the case E
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 F
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, G

- 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 H
832 SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A his support shall be subject to cross- examination on behaH 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
B 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 proceeded to hear the charge against the
occupier or manager and shall if the offence be proved, convict
c 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
D facts as are contemplated by Section lOl(a) & (b). The principle under-
taking 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 Judge said :

A prima f acie liability is imposed upon the occupier or manager
E
from which however he can extricate himself; otherwise he remains
liable. The scheme of the Act is first to find the a de facto employer.·
An information may be laid against the occupier. His way or 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
F the English Sale of Food and Drugs Act. He may show that 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)
G End.), while dealing with exception 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;

H "As to the first, some penal statutes provide that when a charge is
J.K INDS. LTD. v. CIDEF INSPECTDR OF FACTORIES AND BOILERS [DR. ANAND, J.J 833

brought under them the defendant may bring in any other person A
(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
example are in the Shops Act 1950 (s. 71), the Food and Drugs
Act, 1955 (s. 113), the Medicines Act 1968) (s. 121) (this Act
B
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
C

...
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 D
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, E
the manager or occupier is entitled to complain against the actual offender .
before the Court and if he does so, the actu?-1 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
F
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 proceed-
ings is with the original complamant (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 In~pector and the other by the G
Manager occupier) are entitled to cross-examine the prosecution witnesses
at this stage and also lead evidence to disprove the charge. If the prosecu~
tion fails to prove the offence, both of them would be acquitted. However, .
if the offence is proved then the trial court shall recotd an order to that .
effect and the occupier or manager shall be afforded an opportunity to H
834 SUPREME COURT REPORTS (1996} SUPP. 6 S.C.R.

A extricate himself from the liability provided he can give satisfactory proof
of the facts requires by Section lOl(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
B 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.
c
In State of Gujarat v. Kansara Manila~ AI~ (1964) SC, 1893 at 1897
while dealing with the provisions of Section 101 of the Act, this Court . ._
opined:

D "Where an occupier or a manager is charged with an offence he .
is entitled to make a complaint in his own tum against any person
who was the actual offender and on proof of the commission of
the offence by such person the occupier or the manager is absolved
from liability. This shows that compliance with the preemptory
E provisions of the Act is essential and unless the occupier or
.manager brings the real offender to book he must bear the respon-
sibility. 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
F 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."

G This judgment has been noticed with approval by a three Judge
1
Bench of this· Court in Maneklal Jinabhai Kot v. State of Gujarat & Ors.,
[1967} 2 SCR, 507. We are in respec.tful agreerucnt 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
H himself from the liability if he can establish to the satisfaction of the Court
J.K INOS. LTD. v. CHIEF INSPECIDR OF FACTORIES AND BOILERS [DR. ANAND, J.) 835

that he is not the real offender but it is the other person charged by him A
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 101
requires that the actmtl offender must be brought before the Court at the B
time appointed for hearing the charge or at the latest within a period of
three months thereafth and if by the end of that period the actual offender
cannot be brought before the Court, the Court would proceed to hear the
charge agaim,t 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 C
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 D
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.
E
Thus, we are of the opinion that proviso (ii) to Section 2(n) when
considered in relation to Sec;tion 92 of the Act does not offend Article 21
of the Constitution of India either.

That Section 92 is a prefectly valid piece of legislation insofar as it
F
makes the occupier or manager or 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 readwith Section G
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. H
836 SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A 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 restric-
tions on the exercise of the right. Clause (6) of Article 19 is intended to
B strike a balance between individual freedom and social control. Keeping in A.
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
c 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, <leeme~ to be the occupier for all purposes,
D 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
E duties for the implementation of the safety ancl. 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.
F 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 a~y of th~ provisions of the Act or an offence
is committed under the Act, the notified director, and in the absence of
G 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).
H
J.K INDS. LTD. v. CHIEF INSPECIDROF FACI'ORIES AND BOILERS [DR ANAND, J.I 837

The restriction imposed by proviso (ii) if at all, it may be called a 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
.A 19(1)(g) of the Constitution.
B
Thus, from the above discussion, it follows that the directions given
by the Chief Inspector of Factories to the writ petitioners and the appel-
lants herein to the effect that only a director of the company could file an
application for renewal of the factory licence (or grant of factory licence),
as occupier of the factory and that no other employee could make such and
application even if nominated by the company as an occupier of the factory, C
• suffers from no infirmity whatsoever. ·

To sum up our conclusions are :

(1) In the case a company, which owns a factory, it is only one
of the director of the company who can be notified as the D
occupier or 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 E
the occupier of the factory, the Inspector of Factories shall be
at liberty to proceed against any one of the directors of th~
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. F

(3) Proviso (ii) to Section 2(n) of the Act is inter-vires the sub-
stantive provision of Section 2(n) of the Act;

(4) Proviso (ii) to Section 2(n) is constitutionally valid and is not
G
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 H
838 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A 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·
B own cost.

M.K. Petitions and appeals dismissed.