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TMI Blog1996 (9) TMI 503X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Appearing Parties. JUDGMENT Dr. A.S. Anand, J.-Leave granted in C.A. No. 12552 of 1996, S.L.P. (C) No. 12498 of 1996. In this batch of cases, both in the writ petitions and in the appeals by special leave, the short facts, which are not in dispute and are relevant for the discussion hereinafter, are that the Chief Inspector of Factories called upon the petitioners/appellants to file applications seeking renewal of the registration of licence of their respective factories, signed by a director of the company in his capacity as the occupier of the factory and stated that a nominee of the board of directors, other than a director, could not make such an application as an occupier. The correctness of that direction/opinion has been put in issue in all these cases. The petitioners/ appellants have also called in question the constitutional validity of proviso (ii) to section 2(n ) of the Factories Act, 1948 (hereinafter referred to as "the Act"), as amended by Act 20 of 1987 as violative of articles 14, 19(1)(g) and 21 of the Constitution of India. The basic question which requires our consideration is whether in the case of a company which owns or runs the factory, it is onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter for any offence for which the occupier of the factory is punishable: Provided that the firm or association may give notice to the Inspector that it has nominated one of its members, residing within India to be the occupier of the factory for the purposes of this Chapter, and such individual shall, so long as he is so resident, be deemed to be the occupier of the factory for the purposes of this Chapter, until further notice cancelling his nomination is received by the Inspector or until he ceases to be a partner or member of 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 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 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 Inspector or until he ceases to be a director: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 100 by the Amending Act of 1987 and observed that the Legislature had carved out an exception to the main provision by adding a second proviso to section 2(n) of the Act. The learned judges noticed the judgment of this court in John Donald Mackenzie v. Chief Inspector of Factories [1961-62] 20 FJR 466; AIR 1962 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 directors. The Orissa High Court in Indo Floglabes Ltd. v. Chief Inspector of Factories and Boilers [1993] 66 FLR 171, dealt extensively with the provisions of the Factories Act before and after the 1987 amendment. It relied upon the judgments of the Karnataka 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 Gauhati in Wimco Ltd. v. Union of India [1995] FLJ 552; [1994] 85 FJR 503 has followed the judgments of the Karnataka, Bombay and Ori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hya Pradesh [1996] 89 FJR 107 (MP), the High Court of Rajasthan in Ashok Leyland Ltd. v. State of Rajasthan (Civil Writ Petition No. 4195 of 1989 decided on 1-11-91) and Jaipur Syntex Ltd. v. State of Rajasthan [1991] LLR 380 and the High Court of Patna in Champaran Sugar Co. Ltd. v. Union of India (C.W.J.C. No. 2254 of 1988 decided on 3-5-1988) have held that the nomination of an occupier to be made 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. 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, health and welfare of workers were found to be inadequate and unsatisfactory. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectors thereof may be prosecuted and punished for any offence under Chapter X for which the occupier of the factory was punishable. 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 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 companies, taking advantage of the option as contained in the proviso to section 100(2) of the Act and noticing the stringent provisions for punishment 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 subj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 to the reports of various expert committees which examined the working of the caustic chlorine plant, there was considerable negligence in looking after its safety requirements 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 chairman 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 other cases the chairman or managing director must hold himself liable to pay compensation. That alone, in our opinion, would ensure proper and adequate maintenance of safety devices and instruments 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 (he people living ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 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 an occupier. The Amending Act of 1987 eliminated altogether section 100 and instead introduced into section 2(n) 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 occu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and substances; (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 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, without risks to health and adequate as regards facilities and arrangement 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 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". Under section 7, a notice is required to be given to the Chief Inspector, disclosing the name of the occupier at least fifteen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontrol 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 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 immediate or day to day or supervisory control instead of ultimate control in the main provision of section 2(n). The word "ultimate" in common parlance means last or final. The Oxford Advanced Learner's Dictionary of Current English Encyclopadie, 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". According to Collins Dictionary of the English Language, the word "ultimate" has been defined as: "last; final; elemental; fundamental; basic or essential; highest; furthest or greatest thing". According to Black's Law Dictionary (sixth edi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he may be, (except a director of the company, or a partner in a partnership firm) cannot be considered to be the person having ultimate control over the affairs of the factory notwithstanding what the resolution of the board states. The litmus test, therefore, is who has the "ultimate" control over the affairs of the factory. The observations of this court in John Donald Mackenzie's case [1961-62] 20 FJR 466, that the "ultimate control over the factory must necessarily be with an owner unless the owner has completely transferred that control to another person" are 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 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 observations of this court in John Donald Mackenzie v. Chief Inspector of Factories [1961-62] 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 dismissed by the High Court. The company then filed an appeal by special 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 correspondence 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 (at page 468 of 20 FJR): "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". (emphasis supplied) 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 employees as an occupier of the factory, even if he is not a director of the company. The judgment in John D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e factory. In other words, an occupier of the factory in the case of a company must necessarily be any one of its directors who shall be so notified for the purposes of the Factories Act. Such an occupier cannot be any other employee of the company or the factory. This interpretation of an "occupier" would apply to all provisions of the Act, wherever the expression occupier is used and not merely for the purposes of section 7 or 7A of the Act. Learned counsel for the appellants/petitioners, then, vehemently argued that proviso (ii) to section 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. Learned counsel further argued that proviso (ii) confers absolute, unfettered and unguided powers upon the Inspector of Factories to pick and choose any one of the directors of a company for prosecution and punishment 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 textual interpretation match the contextual. A statute is best interpreted when we know why it was enacted. With this knowledge, the statute must be read, first as a whole and then 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 this statute-maker, provided by such context, its scheme, the sections, clauses, phrases and words may take colour and appear different than when 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 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). In S. Gopal Reddy v. State o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 to justify its necessity. While dealing with proper function of a proviso, this court in CIT v. Indo Mercantile Bank Ltd. [1959] 36 ITR 1; AIR 1959 SC 713 opined (at page 7 of 36 ITR): "The proper function of a proviso is that it qualifies the generality of the main enactment by providing an exception and taking out as it were, from the main enactment, a portion which, but for the proviso would fall within the main enactment. Ordinarily it is foreign to 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". 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). By 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 prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2(n) can become workable only in the case of a company, when the same is read along with proviso (ii). The deeming provision does not override the substantive provision of 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 directors of the company who has been notified/identified by the company to have ultimate control over the affairs of the factory" and where no such director has been identified, then for the purposes of prosecution and punishment under the Act, the Inspector of Factories may initiate proceedings against any one of the directors as the deemed occupier. 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 founded. Section 7 lays down a mandatory obligation on the factory to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) any order in writing made thereunder. It comprises both acts of omission and commission. 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 Act. Section 92 contemplates 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 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 responsible for the contravention cannot absolve him of his liability. The identified/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 company, which is the occupier of the factor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Ltd. [1977] 40 STC 497, 507; AIR 1977 SC 2279 observed (at page 2287): "Even here we may reject the notion that a penalty or a punishment cannot be cast in the form of an absolute or no-fault liability but must be preceded 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 departmental penalties, have created severe punishments even where the 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 and not his criminal intent to commit that offence. The rule of strict liability is attracted to the offences ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nate with the board of directors given to him under the articles of association ..." We are in complete agreement with the above view propounded by 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 ego, can be nominated as an occupier for the purposes of the Act. The object of the Act would stand defeated if for the commission of 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 in so far as an "innocent" director is concerned, was also canvassed in M. C. Mehta's case [1986] 2 SCC 325. We may excerpt that portion which formulates the question and furnishes the answer (at page 330): "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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t shall be subject to cross-examination on behalf 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 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 proceed to hear the charge against the occupier or manager and shall, if the offence be proved, convict 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 facts as are contemplated by section 101(a) and (b). The principle underlying section 101 may well be gathered from the following observations of Phillimore J., in Ward v. W.H. Smith and Son [1913] 3 KB 154. While dealing with a somewhat similar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ger or occupier under section 92 of the Act for contravention of any of the provisions of the Act, the manager or occupier is entitled to complain against the actual offender before the court and if he does so, the actual 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 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 proceedings is with the original complainant (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 inspector and the other by the manager or occupier) are entitled to cross-examine the prosecution witnesses at this stage and also lead evidence to disprove the charge. If the prosecution fails to prove the offence, both of them would be acquitted. However, if the offence is proved then the trial court shall record an order to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atisfaction of the court that he is not the real offender but it is the other person charged by him 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 section 101 requires that the actual offender must be brought before the court at the time appointed for hearing the charge or at the latest within a period of three months thereafter 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 against 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be the occupier for all purposes, 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 duties for the implementation of the safety and 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 the workers. 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 any 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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