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Monday, January 10, 2000



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`Occupier' in the Factories Act

Akshey Kumar

THE Factories Act, 1948 is a beneficial legislation. The aim and object of the Act is essentially to safeguard the interests of workers, stop their exploitation and take care of their safety, hygiene and welfare at their places of work. It casts various obligations, duties and responsibilities on the occupier of a factory. Amendments to the Act and court decisions have further extended the nature and scope of the concept of occupier, especially vis-a-vis hazardous processes in factories.

Who is an occupier

Section 2(n) states that `occupier' of a factory means the person who has ultimate control over the affairs of the factory; provided that: i) in the case of a firm or other association of individuals, any one of the individual partners or members thereof shall be deemed to be the occupier; ii) in the case of a company, any one of the directors,shall be deemed to be the occupier; and iii) in the case of a factory owned or controlled by the Central Government, or any State Government, or any local authori ty, the person or persons appointed to manage the affairs of the factory by the Central Government, the State Government or the local authority, as the case may be, shall be deemed to be the occupier.

Provided further that in the case of a ship being repaired, or on which maintenance work is being carried out, in a dry dock which is available for hire:

i) the owner of the dock shall be deemed to be the occupier for the purposes of any matter provided by or under Sec. 6 (approval, licensing and registration of factories); Sec. 7 (notice by occupier); Sec. 7A (general duties of the occupier); Sec. 7B (ge neral duties of manufacturers, and so on); Sec. 11 (cleanliness in a factory); or Sec. 12 (effective arrangements for the treatment of wastes and effluents); Sec. 17, insofar as it relates to the providing and maintenance of sufficient and suitable light ing in or around the dock; Sec. 18 (effective arrangements for drinking water); Sec. 19 (provision of latrines and urinals); Sec. 42 (provision of washing facilities); Sec. 46 (provision of canteens); Sec. 47 (shelters, restrooms and lunch rooms); or Sec . 49 (employment of welfare officers) in relation to workers employed on such repair or maintenance;

ii) the owner of the ship or his agent or master or other officer-in-charge of the ship or any person who contracts with such owner, agent or master or other officer-in-charge to carry out the repair or maintenance work shall be deemed to be the occupier for the purposes of any matter provided for by, or under Sec. 13 (provision of adequate ventilation and temperature to secure reasonable conditions of comfort and prevent injury to health); Sec. 14 (prevention of inhalation and accumulation of dust and fumes); Sec. 16 (prevention of over-crowding), or Sec. 17 (provision of lighting arrangements), or provisions relating to safety, or Sec. 43 (facilities for storing and drying clothing), Sec. 44 (facilities for sitting), or Sec. 45 (provision of first-ai d appliances), provisions relating to working hours of adults, employment of young persons, annual leave with wages, or special provisions relating to compliance of rules laid down by the government, or Sec. 108 (display of notices); Sec. 109 (service of notices on owners, occupiers or managers of factories), or Sec. 110 (submission of returns) in relation to the workers employed directly by him, or by or through any agency; and the machinery, plant or premises in use for the purpose of carrying out suc h repair or maintenance work by such owner, agent, master or other officer-in-charge or person.

The definition of `occupier' has a long and chequered history. The amendment of 1987 made significant changes in it and Sec. 100 of the Act was deleted. A stricter provision in Sec. 2(n) was introduced by incorporating the first proviso.

A remote but ultimate control clothes a person with the position of occupier. That the legislature intended that the person having ultimate control over the affairs of the factory has to be regarded as its occupier is evident from the first proviso. The proviso has been made in a mandatory form.

In the landmark case of J. K. Industries Ltd vs Chief Inspector of Fisheries and Boilers (1996 (7) SCALE 247), the Supreme Court observed that by the Amending Act, 1987, the legislature wanted to bring in a sense of responsibility in the minds of those w ho 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 company more vi gilant and 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 Amending 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 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.

It was held that 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. Even where the resolution of the board says that an officer or employee other than one of t he directors shall have ultimate control over the affairs of the factory, it would only be a camouflage or an artful circumvention because the ultimate control cannot be transferred from that of the company to one of its employees or officers, except whe re there is a complete transfer of the control of the affairs of the factory.

An occupier of the factory in the case of a company must necessarily be any of its directors who shall be so notified for the purposes of the Factories Act. Such an occupier cannot be any other employee of the company or the factory. This interpretation of an `occupier' would apply to all provisions of the Act wherever the expression `occupier' is used, and not merely for the purposes of Sec. 7 or Sec. 7A of the Act.

The Supreme Court further held that proviso (ii) is not ultra vires the main provision of Sec. 2(n) and, as a matter of fact, there is no conflict at all between the main provision of Sec. 2(n) and proviso (ii) thereto. Both can be read harmoniously and when so read in the case of a company, the occupier of a factory owned by a company would mean any one of the directors of the company who has been notified/identified by the company to have ultimate control over the affairs of the factory. And where no such director has been identified, then, for the purposes of prosecution and punishment under the Act, the Inspector of Factories may initiate proceedings against anyone of the directors as the deemed occupier.

The Supreme Court further held that there is 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 c ontravention under of the provisions of the Act or an offence is committed under the Act the notified director and, in the absence of the notification, anyone of the directors of the company shall be prosecuted and shall be liable to be punished as the d eemed occupier.

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 Sec. 2 (n) is thus not ultra vires Article 19(1)(g) of the Constitution.

In another Supreme Court case, Indian Oil Corporation vs Chief inspector of Factories [1998(4) SCALE 116], it was observed that it is the Government which looks after the successful implementation of the Factories Act and, therefore, it is not likely to evade its implementation. That appears to be the reason why the legislature thought it fit to make a separate provision for the Government and local authorities, and so on. The legislature has provided that in the case of a factory owned or controlled by any of these authorities the person or persons appointed to manage the affairs of the factory shall be deemed to be the occupier. Therefore, if it is a case of a factory, in fact and in reality, owned or controlled by the Central Government or other aut hority, the person or persons appointed to manage the affairs of the factory shall have to be deemed to be the occupier even though for better management of such a factory, a corporate form is adopted by the Government.

It was held in the case that the relevant provisions regarding the establishment of the appellant corporation and its working leave no doubt that the ``ultimate control'' over all the affairs of the corporation, including opening and running of the facto ries, is with the Central Government. Acting through the corporation is only a method employed by the Central Government for running its petroleum industry. In the context of Sec. 2(n), it will have to be held that all the activities of the corporation a re really carried on by the Central Government with a corporate mask.

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