Decided on November 27,1973

Orient Paper Mills Limited And Anr. Appellant
The Chief Inspector Of Factories And Ors. Respondents


R.N. Mishra, J. - (1.) PETITIONER No. 1 is a public Company with its registered office at Brajarajnagar in the district of Sambalpur while Petitioner No. 2 is its Vice -President. Petitioner is a 'factory' within the definition of the term given in Section 2(m) of the Factories Act of 1948 (hereinafter referred to as the 'Act') and was obtaining the requisite licence valid for a year ending with every calendar year. Section 2(n) of the Act defines "occupier of a factory". The Company had nominated Sri A.L. Goenka as the occupier and his name had been duly registered as such. Goenka was occupier in respect of Company's two factories, one at Brajarajnagar and the other located at Amlai. This led to administrative difficulties and practical inconvenience and, therefore, on 30th July, 1976, the Company's Board of Directors resolved: ... Shri P. D. Bagri, Vice -President of the Company's Division at Brajarajnagar, be and is hereby vested with ultimate and complete control over the affairs of the factory of the company situate at Brajarajnagar in the district of Sambalpur, Orissa and appointed as Occupier of the said factory. He will have full power to exercise and do all such acts that may be necessary to look after the affairs of the factory and in particular, to comply with the requirements and provisions of the Factories Act, 1948, as in force from time to time. The Company made an application on 3rd of August, 1976, to the Inspector of Factories in Form -2 as prescribed by Rule 4 of the Orissa rules made under the Act notifying the said Bagri as the occupier of the factory and applied for renewal of the application with Bagri as occupier. On 9th of September, 1976, the Chief Inspector of Factories informed the Company that he was not in a position to accept Bagri as the occupier as he was not a Director of the Company and if the Company wanted replacement of Goenka and no other Director is nominated as a substitute, each of the Directors would be responsible individually and severally for any offence under the Act in accordance with Section 100(2) thereof. The Company preferred an appeal under Section 107 of the Act to the Secretary to Government in the relevant department and by order dated 31 -3 -1977, the appeal was allowed and the appellate authority quashed the order of the Chief Inspector and held: ... The Chief Inspector of Factories is directed to accept Sri P. D. Bagri as the Occupier of the Factory, M/s. Orient Paper Mills Ltd., Brajrajnagar. On 3 -5 -1977, the Company applied to the Chief Inspector to amend the licence by incorporating the name of Bagri as Occupier. Without disposing of the said application, the Chief Inspector called for the application for renewal for the year 1978 before 31st of October, 1977. The Company thereafter sent an application for renewal with a covering letter requesting that Bagri may be shown as the Occupier and referred to the appellate direction in respect of 1976. On 17th of December, 1977; the Chief Inspector sent the renewed licence which ran thus: Licence is hereby granted to Orient Paper Mills Limited valid only for the premises described below for use as a factory employing not more than 4500 (four thousand and five hundred only) persons on anyone day during the year and using motive power not exceeding 25,300 (twenty -five thousand and three hundred only) H. P. subject to the provisions of the Factories Act, 1948 and the Rules made thereunder. This licence shall remain in force till the 31st day of December, 1978 and appended the following covering letter to it: Since the application for renewal of licence has not been received from a person/persons specified in Sub -section (2) of Section 100 of the Factories Act, the licence of your factory is renewed in the name of the company and is sent herewith the receipt of which please acknowledge. On 16th January, 1978, the Company wrote to the Chief Inspector pointing out: It may be stated that earlier Shri A. L. Goenka was nominated as occupier of this factory. But as it had not been convenient for him or for any other. Director who are normally residing in Calcutta, to discharge the obligation as, Occupier under the Factories Act and as it was considered that an Officer of the local Management to be more suitable for the purpose, Shri P. D. Bagri was nominated as Occupier. Accordingly, he made an application to renew the licence in his name. But as the licence was not issued in his name, we are faced with a difficult situation and would once again request you kindly to reconsider the matter. As the Chief Inspector did not take any further steps, Petitioners have ultimately made this application for a direction that the appellate decision in respect of the licence for 1976 may be given effect to ; the licence issued on 17th of December, 1977, may be appropriately amended and for other consequential directions.
(2.) THE Chief Inspector, the Inspector of Factories and the State of Orissa who are opposite parties 1, 2 and 3 respectively have made a return to the rule nisi and in the affidavit by the Inspector of Factories, it has been pleaded that Bagri not, being a Director of the Company did not qualify to be . Occupier in terms of Section 100(2) of the Act and the Chief Inspector was, therefore, nut in a position to accept him as the substitute in place of Goenka. The Company which was the owner of the factory was the occupier unless and until a valid nomination in conformity with the provision of Section 100(2) of the Act was made. It was pleaded that the Company's appeal under Section 107 of the Act in respect of the year 1976 was not maintainable and as the appeal was disposed of without notice to the Chief Inspector, the decision rendered in the appeal was not binding on him. The Company filed a rejoinder disputing the stand taken in the counter affidavit. It is necessary to examine the correctness of the stand of the opposite parties as to the maintainability of the appeal and as to whether the Chief Inspector was bound by that decision because Mr. Das for the Petitioners during hearing of the application has stated that he would not press for the first relief, namely, a direction for giving effect to the appellate order and the Petitioners would be satisfied if a direction is given to appropriately modify the licence for the current year.
(3.) THE short question which requires examination, therefore, is as to whether Bagri is entitled to be an Occupier under the provisions of the Act. As already indicated, Bagri is not a Director, but an employee of the Company. There is no dispute that the ultimate and complete control over the affairs of the factory was duly vested in Bagri by the Board of Directors owners of the Company - and the assertion in paragraph 7 of the writ petition that in terms of the resolution, Bagri was as a fact put in ultimate control over the affairs of the factor has not he en disputed in the counter affidavit. We have, therefore, to examine the tenability of the legal stand taken by the opposite parties that Bagri not being a Director was not entitled to be Occupier. Under the scheme of the Act, every factory is bound to have an Occupier and ordinarily the owner of the factory is the occupier unless an Occupier has been duly nominated. The definition in Section 2(n) of the term, as far as relevant, is as follows: 'Occupier of a factory' means the person who has ultimate control over the affairs of the factory, and where the said affairs are entrusted to a managing agent, such agent shall be deemed, to be the occupier of the factory: Provided .... The opposite parties place reliance on the provisions of Section 100 in support of their stand that in the case of a Company, no other person excepting a Director can be nominated as Occupier. Section 100 occurs in Chapter - X which makes provisions for 'Penalties and Procedure', Sub -section (2) of Section 100 provides: Where the occupier of a factory ;s a company, anyone of the directors thereof may be prosecuted and punished under this Chapter for any offence for which the occupier of the factory is punishable: Provided that the company may give notice to the Inspector that it has nominated a director, who is resident within India, to be the occupier of the factory for the purpose 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 Inspector or until he ceases to be a director. Provided further.... We are of the view that the stand taken by the opposite parties has to be rejected on a plain construction of this provision. It has been conceded before us and rightly that in the absence of nomination of occupier, the owner is occupier and, therefore, where a Company does not nominate an occupier, the Board of Directors under the provisions of the Companies Act as representing the owners would be taken as occupier because the ultimate control would vest in them. The Proviso to Sub -section (2) is not intended to indicate that in respect of a company, no person other than a director qualifies to be occupier. If the Legislature intended to make such provision, it would have certainly proceeded to categorically provide for it at the appropriate place and would not have left the matter to be dealt with in the Chapter dealing with Penalties and Procedure relating thereto. Sub -section (2), in our opinion, intends to deal with a case where the company has not nominated an occupier and the proviso authorises the nomination of a director resident in India to be occupier. In the case of South India Corporation (Travancore) Ltd. v. Chief Inspector of Factories, Trivandrum, and Ors., 1957 L.L.J. 501, it has been held that a licensee can also be an occupier provided he has the right to occupy a property and dictate how it has to be managed. In the case of John Donald Mackenzie and Anr. v. The Chief Inspector of Factories, Bihar, Ranchi and Ors., 1977 (34) Fact. and Lab. Reports 354, the Supreme Court in dear terms indicated: Undoubtedly, the expression occupier is not to be equated with owner. But it must be borne in mind that the ultimate control over a factory must necessarily be with an owner unless the owner has completely transferred that control to another person.... In the case before the Supreme Court. Mackenzie, the manager of the factory, claimed to be the occupier and that claim was not turned down on the ground that under Section 100(2) of the Act, as it then stood, a share -holder alone of a private company was qualified to be occupier. If that was the law, the Supreme Court would have certainly rejected the claim by indicating that ground and not by holding that there was no material before the Chief Inspector or the High Court that Mackenzie was in ultimate control over the factory. A Bench of the Gujarat High Court in the case of Jyoti Switch gears Ltd. v. Chief Inspector of Factories and Anr. : A.I.R. 1962 S.C. 1351, has also taken the same view. In our view, the Gujarat High Court rightly placed emphasis on the phrase "for the purposes of this Chapter" occurring in the proviso to Sub -section (2) of Section 100 of the Act. In interpreting the definition given in Section 2(n) of the Act, the proviso to Section 100(2) thereof could have no relevance and that is why the Division Bench of the Gujarat High Court rightly turned down the contention raised before it that in view of Sub -section (2) of Section 100, a manager of a company was not entitled to be occupier. We would accordingly accept the contention advanced by the Petitioners that Bagri was entitled to be Occupier provided the ultimate control of the affairs of the Company vested in him. We have already indicated that there is no dispute about that assertion of the Petitioners and in that view of the matter, the opposite party No. 1 Chief Inspector of Factories was not correct in refusing to accept Bagri as the Occupier.;

Click here to view full judgement.
Copyright © Regent Computronics Pvt.Ltd.