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TMI Blog1998 (7) TMI 493X X X X Extracts X X X X X X X X Extracts X X X X ..... Ms. Anil Katiyar for the Appearing Parties. JUDGMENT G.R. Nanavati, J. -- Leave granted. Heard learned counsel for r the parties. A short but an interesting question of law arises for consideration in these appeals. The question is : who is to be deemed "occupier" of a factory of a Government company incorporated under the Indian Companies Act? If the Government company is to be treated like any other company then according to clause (ii) of the first proviso to section 2(n) of the Factories Act, 1948, any one of the directors of that company is deemed to be the occupier, but if its factory is considered as a factory owned or controlled by the Government as provided by clause (iii) of the proviso the person appointed to manage the affairs of the factory by the Government is to be deemed the occupier. The appellant, Indian Oil Corporation Limited, is a Government company as defined by section 617 of the Companies Act, 1956. It is almost wholly owned and controlled by the Government. It is, inter alia, engaged in the supply and distribution of petroleum and petroleum products including LPG. In order to ensure an effective and efficient supply system it is required to establish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Inspector of Factories reiterated the stand taken by him and refused to recognise the officer-in-charge as the occupier. Thereupon, the Corporation filed a more comprehensive petition, C.W.J.C. No. 2456 of 1992, challenging the action of the Inspector of Factories. Before the High Court two questions were raised on behalf of the appellant. One was whether in the case of a company one of the directors of the company only can be recognised as an occupier of the factory owned by it and the second was whether clause (iii) would apply to the factories of the Corporation and it is open to the Central Government to nominate any person other than the director as the occupier. Following the decision of this court in J.K. Industries Limited v. Chief Inspector of Factories and Boilers [1997] 88 Comp Cas 285 ; 90 FJR 65 ; [1996] 6 SCC 665, wherein it is held that in the case of a company, which owns a factory, it is only one of the directors of the company who can be notified as the occupier of the factory for the purpose of the Factories Act and the company cannot nominate any other employee as the occupier of the factory, the High Court answered the first question accordingly. In view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arded as the occupier of the factory. He submitted that obviously in the case of a company, though it does not ordinarily look after the day to day affairs of its factories, the ultimate control is that of the company and, therefore, the directors in whom the power to manage the affairs of the company vests are deemed to be the occupier of the factory. He further submitted that if the ultimate control is the litmus test for finding out who should be regarded as occupier of the factory, as held by this court in the case of J. K. Industries Limited v. Chief Inspector of Factories and Boilers [1997] 88 Comp Cas 285 ; 90 FJR 65 ; [1996] 6 SCC 665, in the case of the appellant-Corporation it will have to be held that the ultimate control over the affairs of all the factories of the Corporation is really of the Central Government, and, therefore, all the factories of the Corporation should be regarded as factories owned and controlled by the Central Government. As there is a special provision governing factories owned or controlled by the Central Government the general provision made with respect to companies, will not apply. On the other hand, learned counsel for the contesting respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rosecuted and punished under this Chapter for any offence for which the occupier of the factory is punishable: Provided that the firm or association may give notice to the inspector that it has nominated one of its members, residing within India to be the occupier of the factory for the purposes of this Chapter, and such individual shall, so long as he is so resident, be deemed to be the occupier of the factory for the purposes of this 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the corporation itself which possesses such control. In Som Prakash Rekhi v. Union of India [1980] 57 FJR 370 ; [1981] 1 SCC 449, this court has held that corporations are one species of legal persons invented by the law and invested with varieties of attributes so as to achieve certain purposes sanctioned by the law. The characteristics of corporations, their rights and liabilities, functional autonomy and jurisdic status, are jurisprudentially recognised as of a distinct entity even where such corporations are State agencies or instrumentalities. But merely because a company or other legal person has functional and jural individuality for certain purposes and in certain areas of law, it does not necessarily follow that for the effective enforcement of fundamental rights under our constitutional scheme, the court should not scan the real character of that entity, and if it is found to be a mere agent or surrogate of the State, in fact owned by the State, in truth controlled by the State and in effect an incarnation of the State, constitutional lawyers must not blink at these facts and frustrate the enforcement of fundamental rights despite the inclusive definition of article 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strumentality of the State. The relevant thing to be noted is that this court while so holding took note of the fact that the corporation is subject to the policies, directions, instructions and guidelines issued by the Ministry of Energy. Again, in J.K. Industries Limited v. Chief Inspector of Factories and Boilers [1997] 88 Comp Cas 285 ; 90 FJR 65 ; [1996] 6 SCC 665, this court, while dealing with section 2(n), as amended by Act 20 of 1987, emphasised the use of the word "ultimate" and, after referring to the decision in John Donald Mackenzie v. Chief Inspector of Factories [1961-62] 20 FJR 466 ; AIR 1962 SC 1351, observed that 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 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 fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bviously the partners of the firm have ultimate control over the affairs of the partnership. In the case of other types of associations the members thereof will have such control. In the case of a company the directors have the ultimate control, as the power to manage the affairs of the company vests in the board of directors. What clauses (i) and (ii) of the proviso provide is that they shall be deemed to be "occupiers". Thus they merely restate the position which is obvious even otherwise. The position of the Government and the local authority is quite different from that of a firm or an association or a company not only with respect to the person who can be said to be in ultimate control but also with respect to the object for which the factory is set up. In a democratic set-up of Government, it may not be possible to say with certainty as to who is having the ultimate control. In a welfare State, the Government does not carry on such activity for its own profit or benefit but for the benefit of the people as a whole. Moreover, it is the Government which looks after the successful implementation of the provisions of the Factories Act, and, therefore, it is not likely to evade im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is made available to them. The said proviso though enacted as an exception to the main part of sub-section (2) is truly by way of a separate provision made in the case of a factory belonging to the Central Government or any State Government or any local authority. While making the amendment in 1987 in section 2(n) and deleting section 100 at the same time the Legislature made the proviso to sub-section (2) of section 100 an independent proviso to sub-section 2(n). That also clearly indicates the intention of the Legislature that it wanted to make a separate provision for deeming who should be the occupier of a Government factory. For the aforesaid reasons we hold that as the factories run by the appellant-Corporation are effectively and really owned and controlled by the Central Government they fall within the purview of clause (iii) and not clause (ii) of the first proviso to section 2(n). In our opinion, the High Court was wrong in taking a contrary view. We, therefore, allow these appeals, set aside the judgment and order passed by the High Court to the extent indicated above and direct respondents Nos. 1 and 2 to accept the persons appointed by the Central Government to ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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