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PETITIONER: STATE OF MAHARASHTRA

       Vs.

RESPONDENT: JAMNABHAI PURSHOTTAM ASSAR

DATE OF JUDGMENT: 25/04/1967

BENCH: HIDAYATULLAH, M. BENCH: HIDAYATULLAH, M. VAIDYIALINGAM, C.A.

CITATION:  1968 AIR   53            1967 SCR  (3) 808

ACT: Factories  Act, 1948, ss. 2(n), 85(1)(ii) anti  93-Owner  of Premises  giving on rent factory business and  machinery  to five  firms of ex-workers-Having no interest in  or  control over  affairs of the firms-Whether  "  occupier-"--Therefore whether  liable  to obtain licences under  Rule  3A,  Bombay Factory Rules, 1950.

HEADNOTE: The respondent had established a factory in Bombay which was closed  in April 1957.  In July 1957, the ex-workers of  the factory  combined together to form five partnerships and  by agreements  of  leave and licence, the  respondent  gave  in their use the factory premises and the machinery  in-stalled there.   He  himself  did not join any  of  the  five  part- nerships.  The licensees were to pay a fixed sum for the use of the premises and the machines. By   a  notification  on  September  29,  1960,  the   State Government   specified   the   premises   where   the   five partnerships  were working as a factory under s. 85  of  the Factories Act, 1948, thus applying the provision of the  Act to  the premises.  On November 10, 1959 five  separate  com- plaints  were filed against the respondent, whereby  it  was alleged  that  he was the owner and  therefore  an  occupier under the Act of the Factory where the workmen were  working under  an  agreement  with  him within  the  meaning  of  s. 85(1)(ii)  and that he had failed to take out five  licences under Rule 3A of the Bombay Factory Rule, 1950.  The respon- dent  contended that the Act did not apply to him as he  had no control over the five firms and he was not in a  position to  enforce the provisions of the Factories Act.  The  trial Court  ’held that the respondent had become an  occupier  by reason of the notification of September 29, 1960 so that  he was bound to obtain licences under Rule 3A, and he was fined for  his failure to do so.  The High Court however,  allowed an appeal against the order of the trial Court. On appeal to this Court, HELD  :  The respondent was not an ’Occupier’ of  a  factory within  the meaning the definition in s. 2(n) of the Act  as he  did  not have ultimate control over the affairs  of  the five  firms  running  the factory and  the  High  Court  had rightly  held  that s. 85(1)(ii) did not cover  the  present

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case. [S 11 D-E] The   condition  precedent  for  a  notification  under   s. 85(1)(ii) is that the    persons  working in a  factory  (a) work with the permission of, or, (b)    under  an  agreement with  the  owner.  The section does not contemplate  a  case where  the  owner  hands over the factory on  rent  and  the workers  work  without  his  permission  and  not  under  an agreement  with  him.   The High Court  had  considered  the agreements  between the respondent and the workers and  come -to the conclusion that the partnerships were independent of the  control of the owner and the workers could not be  said to  be working with his permission or under  agreement  with him; they had formed themselves into partnerships, taken the factory premises on 809 leave and licence and started their own business.  In  these circumstance-,, the conditions for the notification under s. 85(1)(ii) did not exist. [811F81 --A] The respondent was not liable as -,in owner under s. 93  (3) (ii)  of  the  Act  is the  machinery  and  plant  had  been specifically  entrusted  to the custody or use of  the  five partnerships. [812F]

JUDGMENT: CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No. 234 of 1964. Appeal  by special leave from the judgment and  order  dated November 8, 1963 of the Bombay High Court in Criminal Appeal No. 1135 of 1962. D.   R.  Prem,  S.  P. Nayyar for R. N.  Sachthey,  for  the appellant. P.   A. Mehta, V. J. Taraporevala, P. C. Bhartari and 0.  C. Mathur, for the respondent. The Judgment of the Court was delivered by Hidayatullah,  J. The  State of Maharashtra appeals against the  judgment  and order of the High Court of Bombay dated November 8, 1963  by which  the  High  Court set aside,  the  conviction  of  one Purshottamdas Ranchhoddas (since deceased and represented by his  widow) and the fine imposed on him, under s. 92 of  the Factories Act, 1948 read with r. 3-A of the Bombay Factories Rules, 1950.  Only one question arises in this appeal and it is  the true construction of S. 85 of the Factories  Act  on which different views have been expressed by the High  Court and the Court below. Purshottamdas  Ranchboddas was a lessee from the Port  Trust Bombay  of an open plot of land.  He established  a  factory called the Sunderdas Saw Mills.  He closed down the  factory on  April  1,  1957.  In July 1957, the  ex-workers  of  the factory  combined to-ether to form five partnerships and  by agreements  of leave and licence, Purshottamdas  Ranchhoddas gave  in  their  use, the premises of the  factory  and  the machinery  installed there.  He himself did not join any  of the  five partnerships.  The licensees were to pay  a  fixed sum  for  the  use of the premises  and  the  machines.   It appears  that some of the workers who were not taken  in  as partners  complained that the closure of the factory  was  a sham.   No action was taken on this complaint and -there  is no finding in this case that the closure of the factory  was unreal. In  the year 1959, a prosecution was started under S. 92  of the  Factories Act on the charge that the original  licensee of  the  factory had not given notice under s. 7(1)  of  the start  of the factory and had not renewed the licence  under

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r. 4 of the Bombay Factories Rules, 1950.  This ended in  an acquittal  since Government had not declared these  premises as a factory under s. 85 of the 810 Act,  as it could, if the workers (although not employed  by the  owner were working with the permission of or  under  an agreement  with  the  owner.  After  such  notification  the premises  are  deemed to be a factory and the owner  of  the premises is deemed to be an occupier. On  September 29, 1960, a notification was issued  under  s. 85.   That notification specified the places where the  five partnerships were working as factory.  On November 10, 1959, five separate complaints were filed for failure to take  out five   licences.    The  charge   was   that   Purshottamdas Ranchhoddas  was  the  owner of the  factory  and  hence  an occupier  and  the workmen were working under  an  agreement with him.  The owner defended himself by stating that he had no control over the five firms and he could not enforce  the provisions  of  the  Factories Act.  This  defence  was  not accepted.  Purshottamdas Ranchhoddas was held to have become an  occupier by reason of the notification  and,  therefore, to,  be compelled to take out a licence under r. 3-A of  the Bombay  Factories  Rules.  He was fined Rs.  201/-  for  the first  offence  and Rs. 25/- for  the  subsequent  offences. Purushottamdas  Ranchhoddas  appealed but  died  during  the pendency of the appeal.  As the sentence was one of fine the appeal  was continued by his legal representative  under  s. 431  of  the Coda of Criminal Procedure.   The  Bombay  High Court set aside the conviction and fine and now the  present appeal has been filed by the State of Maharashtra on special leave granted by this Court. Under  r. 3 of the Bombay Factories Rules, 1950 an  applica- tion has to be made for the approval of a factory.  Under r. 3A  no  occupier of a factory shall use any  premises  as  a factory  except  under  a licence  obtained  or  renewed  in accordance  with  the provisions of the rules.   Section  85 grants -power to the State Government to apply the Factories Act  to  certain  premises which would  otherwise  not  come within its purview.  The section reads :               S.    85 : "Power to apply the Act to  certain               premises  :-(1) The State Government  may,  by               notification in the Official Gazette,  declare               that all or any of the provisions of this  Act               shall   apply   to   any   place   wherein   a               manufacturing  process is carried on  with  or               without  the aid of power or is so  ordinarily               carried on notwithstanding that-               (i)   the  number of persons employed  therein               is  less than ten, if working with the aid  of               power and less than twenty if working  without               the aid of power, or               (ii)  the  persons  working  therein  are  not               employed by the owner thereof but are  working               with  the  permission of, or  under  agreement               with, such owner               811               Provided that the manufacturing process is not               being  carried on by the owner only  with  the               aid of his family.               (2)   After  a place is so declared, it  shall               be deemed to be a factory for the, purposes of               this Act, and the owner shall be deemed to  be               the occupier, and any person working  therein,               a worker.               Explanation.-For the purposes of this section,

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             "owner"  shalt include a lessee  or  mortgagee               with possession of the premises." The  present matter is said to be governed by s. 8 5 (  1  ) (ii).  It s contended that in as much as a notification  had issued, the owner of the pemises (the present lessee of  the premises   namely  Purshottamdas  Ranchhoddas)   became   an occupier and thus liable for breach of the Factories Act and the  Bombay  Factories  Rules since the  premises  were  not licensed.   The High Court, differing from the.   Presidency Magistrate, Mazgaon, held that s. 8 5 (i) (ii) did not cover the present case.  We think the High Court was right. Under  s. 2(n) of the Act an ’occupier’ of a  factory  means the person who has the ultimate control over the affairs  of the factory.  If one goes by this definition,  Purshottamdas Ranchhoddas  was not an occupier if he had not the  ultimate control  over  the  affairs of the  five  partnership  firms running  the  factory.   But here the  Factories  Act  gives special  powers to the State Government under s.  85  quoted above.  The notification of Government makes applicable  all or  any  of  the  provisions  of  the  Act  to  a  place  of manufacture notwithstanding that the persons working therein are not employed by the owner of the place wherein the manu- facture  is  carried on provided the workers work  with  the permission  of  or  under agreement  with  the  owner.   The condition precedent for the notification is that the persons working  therein  (a) work with permission of or  (b)  under agreement with the owner.  The section does not  contemplate a  case where the owner hands over the factory on  rent  and the  workers  work  without his  permission  and  not  under agreement  with  him.   In  other  words,  if  there  is  no connection  between the owner and the workmen in  the  sense that  they  work  without  his  permission  and  without  an agreement  with  him,  there would be  no  question  of  the liability of the owner as an occupier.  In the, present case the  agreements show that the, premises were given  over  to partnership  firms  in return for a periodic  payment.   The agreements  show  that the licensees of the  premises  bound themselves  to carry on the manufacturing process  on  their own and Purshottamdas Ranchhoddas had no control over  them. The  High Court has considered the clauses and come  to  the conclusion that the partnerships were independent 812 of  the control of the owner and the workers cannot be  said to  be working with his permission or under  agreement  with him.  They had formed themselves into partnerships, taken on leave and licence the factory premises and started their own business.   In these circumstances, the conditions  for  the notification hardly existed. An attempt was made to prove from S. 93 that the  definition of  an occupier cannot apply to circumstances arising  under S.  85  because  S.  93  makes  special  provision  for  the responsibility of the owner.  A glance at the provisions  of S.  93 however discloses the opposite.  It is not  necessary to  consider  all the clauses, some of which  may  bind  the owner  but a clause like 93 (3) (ii) clearly shows that  the owner is liable only when he has control.  The clause  reads :               "(3)  Where  in any premises,  independent  or               selfcontained,  floors or flats are leased  to               different   occupiers  for  use  as   separate               factories, the owner of the premises shall  be               liable  as if he were the occupier or  manager               of  a  factory, of any  contravention  of  the               provisions of this Act in respect of-               (i)..........

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             (ii)  fencing of machinery and plant belonging               to the owner and not specifically entrusted to               the custody or use of an occupier; The  difference  between the owner of the premises  and  the occupier is at once visible.  The liability of the  occupier is  patent but the liability of owner arises only  when  the machinery  and  plant is not specifically entrusted  to  the custody  or  use of an occupier.  In the present  case,  for example,  the machinery and plant has been  so  specifically entrusted to the custody or use of the various  partnerships and the owner of the premises cannot be made liable. As  we  said  above the finding is not that  the  owner  had indulged  in  a sham transaction.  If the  transactions  are genuine  and  the  five partnerships have  -taken  over  the factory to work independently, no question of the  liability of the owner under s. 85(1)(ii) arises.  It is possible that some obligations are still on the owner under S. 93 but that is  another matter.  Purshottamdas Ranchhoddas could not  be made liable for not taking out the licence.  The matter  has been  correctly approached by the High Court and we  see  no reason   to  interfere.   The  appeal  fails  and  will   be dismissed. R.K.P.S.                                        Appeal dismissed. 813