25 September 1996
Supreme Court


Bench: ANAND,A.S. (J)
Case number: C.A. No.-004014-004014 / 1993
Diary number: 200328 / 1993






DATE OF JUDGMENT:       25/09/1996




JUDGMENT:                             WITH   (W.P (C) 1129/91. C.A. NOS. 245-256/96, W.P. (C) 134/93.    W.P. (C) 657/91. C.A. NOS. 244/96, 1238, 4499-4500/96,          4501/96, W.P. (C) NOS. 165/96, 187/96 AND   C.A.NO.12552/96 (Arising out of S.L.P. (C) No. 12498/96)                       J U D G M E N T DR. ANAND. J.                       C.A.No. 12552/96      Leave granted in SLP (C) No. 12498/96.      In this  batch of cases, both in the writ petitions and in the  appeals by special leave, 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, is  it only  a director  of the  company who can be notified as  the occupier  of the factory within the meaning of proviso  (ii) to Section 2 (n) of the Act, or whether the company can  nominate any  other employee to be the occupier by passing a resolution to the effect that the said employee shall  have  ’ultimate  control  over  the  affairs  of  the factory’. If  the answer to the question is that in the case of a company, only a director can be notified as an occupier under the  Act, the  next question  which would  require our



consideration  is   about  the  constitutional  validity  of proviso (ii) to Section 2(n) of the Act as introduced by the Amending Act  of 1987.  The answer  to these questions would depend upon  the interpretation  of amended  Section 2(n) of the Act  It would, therefore, be appropriate to first notice the provisions  of Section  2 (n)  as it  sited prior to the amendment and as it stands today.      Section 2(n)  as it  stood prior to      Amendment of 1987      "2(n)    "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 thee factory;      Section  2(n)   as  it   is   after      Amendment of 1987      "2(n) "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 occupier;      (iii) in  the  case  of  a  factory      owned or  controlled by the Central      Government or  any State Government      of any  local authority, the person      or persons  appointed to  mange 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:      Section 2(n)  of the  Act prior  to its  Amendment  was required to be read along with Section 100 of the Act with a view to determine an occupier under different situations.      Section 100  as it  stood prior  to      the Amendment of 1987      "100. Determination  of occupier in      certain  cases   -  (1)  Where  the      occupier of  a factory is a firm of      other association  of  individuals,      anyone of  the individual  partners      or   members    thereof   may    be      prosecuted 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 in 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.      Provided further  that in  the case      of  a   factory  belonging  to  the      Central  Government  or  any  State      Government or  any local  authority      the person  or persons appointed to      manage the  affairs of  the factory      shall be  deemed to be the occupier      of that factory for the purposes of      this Chapter.      (3) Where the owner of any premises      or building  referred to in Section      93  is   not  an   individual,  the      provisions of  this  Section  shall      apply to  such owner  as they apply      to occupiers  of factories  who are      not individuals."      Section 100  has since been omitted      by Amendment Act 20 of 1987.      There is  divergence of  opinion between  various  High Courts in  the country with regard to the interpretation and scope of  proviso (ii)  to Section  2(n) of  the  Act.  That conflict also needs to be resolved. The High  Court of Karnataka in W.S. Industries (India) Ltd. and another  Vs. The  Inspector of  Factories,  Bangalore  & Others [(1991)  II LLJ, 480] opined that it is not necessary that the  occupier must  be necessarily  the  owner  or  the director of  thee company  and if by a resolution some other person is nominated to be the occupier who is declared to be in the  ultimate control  of the affairs of the factory then that person or officer would be treated as the occupier for the purposes of the Act. The Court said:      But the  main clause  provides that      occupier  shall   be  one  who  has      ultimate control  of the affairs of      the company.  This clause read with      the operative provisions of the Act      makes it clear that the occupier of      a  factory   could  be   a   person      nominated by  the board  or by  the



    firm notwithstanding  the fact that      such a  partner or  director  could      also be liable and the liability in      respect of the operative provisions      in  respect  of  such  director  or      partner    will    have    to    be      established." (Emphasis ours)      However, the  constitutional validity  of Section  2(n) was, not  dealt with  in the  above case and it was observed that "it  is  unnecessary  to  go  into  the  constitutional validity of the provisions of the Act." The Bombay  High Court  in the  case of  Kirloskar Pneumatic Company Ltd.  vs. V.A.  More &  Others [(1993)  LLJ 805] was also not  called upon  to decide the constitutional validity of Section  2(n) of the Act. The question debated before the High Court  was whether  one of the Directors only should be treated to be an occupier within the meaning of Section 2(n) or not.  The High  Court noticed the deletion of Section 100 by  the   Amending  Act   of  1987  and  observed  that  the legislature  had   carved  out  an  exception  to  the  main provision by  adding second  proviso to  Section 2(n) of the Act. The  learned Judges  noticed the judgment of this Court in John Donald Mackenzie and another Vs. The Chief Inspector of Factories.  Bihar [ 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 persons or  employee nominated, as an occupier, by the Board of Directors.      The Orissa  High Court in Indo Floglabes Limited & Anr. and Straw  Products Ltd.  and Anr.  Vs. Chief  Inspector  of Factories and  Boilers and Others [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  Guwahati in Wimco Ltd. & Others Vs. The Union of India & Others [1995 FLJ, 552] has followed the judgments of  Karnataka, Bombay  and Orissa High Courts. The Court observed:      "This being  the position of law as      enunciated  by  the  Karnataka  and      Bombay High  Courts, now let us see      whether this  is good law as a laid      down by  these two  High Courts.  A      bare reading  of S. 2(n) as amended      will show that the material part of      the section  defining  an  occupier      remains  ultimate  control  of  the      factory can  be  nominated  as  the      occupier, and it also must be borne      in mind  that always a director may      not be  in the  ultimate control of      the factory. It is ultimate control      of the  factory which is the touch-      stone and  not the ultimate control      of the company. A director may live      at a  distance.  But  the  ultimate      control of  the factory may be left      to his Manager as in such a case it      is the  manager who  will be deemed      to  be   occupier  of  factory  and      advisedly  such  a  person  can  be



    nominated as  the occupier. Because      of   certain    difficulties,    an      occupier only  would be  dependable      as such,  an occupier  of a factory      assumes control  and responsibility      and the legislature enunciated that      the occupier  should be  the person      who would be the person responsible      to ensure  that the  provisions  of      the  Act  are  complied  with.  The      provisio to  S. 2(n)  is only added      to carve  out an  exception to  the      Rules  that   a  person   who   has      ultimate control  over the  affairs      of the  factory as an occupier. The      legislature wanted  to have  a  say      that in  case of  a company,  being      the  owner   of  the  factory,  the      director would  be deemed  to be an      occupier...."      The Madras  High  Court  in  ION  Exchange  India  Ltd. (represented by as Manager) Hosur Vs. Deputy Chief Inspector of Factories,  Salem [1995  LLR, 776]  and the Calcutta High Court in  Greaves Ltd.  and Another Vs. State of West Bengal and Another  [1996 LLR,  638],  have  also,  following,  the judgments of  Bombay and  Karnataka High Court opined that a company which  owns or runs a factory can nominate  a person other than  a director  of the  company to be an occupier of the factory  within the  meaning of  Section 2(n)  read with proviso  (ii)  thereto.  None  of  these  High  Courts  has, however, dealt  with  the  constitutional  validity  of  the provision under consideration.      On the  other hand, the High Court of Allahabad in M/s. Bhatia Metal  Containers Pvt. Ltd. and Another Vs. The State of U.P.  [1990 (II)  LLJ, 534],  the High  Court  of  Madhya Pradesh in  Standard Industries  Ltd. and  another etc. etc. Vs. The State of Madhya Pradesh & Others [Misc. Petition No. 3130/91 and  Writ  Petition  No.  4419/94  etc.  decided  on 15.11.95], High Court of Rajasthan in Ashok Leyland Ltd. Vs. The State  of Rajasthan  and Others [Civil Writ Petition No. 4195/89 decided  on 1.11.91]  and in  Jaipur Syntex Ltd. and Others Vs. State of Rajasthan and Others [1991 LLR, 380] and the High  Court of Patna in Champaran Sugar Co. Ltd. Vs. The Union of  India and  Ors. [C.W.J.C.  NO. 2254/88  decided on 3.5.88] 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 from 1st of April, 1949 was, enacted to remove some of the shortcomings noticed in the 1934 Act.      The  1948   Act  is  an  act  to  consolidate  the  law regulating factories.  It  is  a  piece  of  social  welfare legislation enacted  primarily with the object of protecting



workmen  employed   in  factories   against  industrial  and occupational hazards.  It seeks  not  only  to  ensure  that workers would  not be  subjected to long hours of strain but also  that  employees  should  work  in  safe,  healthy  and sanitary conditions  and that adequate precautions are taken for their  welfare  and  safety.  The  stringent  provisions relating to  the obligations  of the  occupiers or  managers with a  view to  protect  workers  and  to  secure  to  them employment in  conditions  conducive  to  their  health  and safety indicate  the board  purpose of the Act.  The Act and the Rules  made thereunder impose numerous restrictions upon the occupier  or manager of the factory to ensure to workers adequate safeguards for their health and physical well being and to  secure to  them safe  and healthy  conditions at the place of  work. The  1948 Act was amended by Act 94 of 1976, with  a   view  to  remove  some  lacunae  relating  to  the definition  of   ’workers’  and   for  improvement   of  the provisions in regard to safety of workers and appointment of safety officers  and to provide for an enquiry in every case of a  fatal accident.  Some difficulties  experienced in the administration  of   the  1948   Act  even  after  the  1976 amendment, specially  those relating to hours of employment, safety  conditions   and  development  of  appropriate  work culture  conducive   to  safety   and  health   or   workers particularly in  case of factories which deal with hazardous materials and  the escape  routes which  the  employers  had found to  shift their  responsibilities on  some employee or the other and escape punishment and penalty, which were also noticed  in   certain  judgments  of  this  Court,  led  the Parliament to amend the Act in 1987 which inter alia amended Section 2(n),  deleted Section 100 and incorporated Sections 7, 7A, Chapter IV-A, Section 104 A and Section 106A, besides certain other provisions.      Prior to  1987, Section  2(n) of  the Act which defined "occupier of a factory" had necessarily to be read alongwith Section 100  of the  Act  to  find  out  an  occupier  under different  situations.   Sub-section  (2)   of  Section  100 provided that where the occupier of a factory was a company, any one  of the  Directors 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 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  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 subjected to penalty and punishment and not the Directors or any one of them. Thus, by nominating an employee or an officer as the occupier, the directors of the company who  are primarily  responsible for  ensuring safety measures in the factory and take care of health, hygiene and welfare of  the workers  being in  ultimate control  of  the



management of the company which owns the factory, where able to escape prosecution and punishment even if they were found to be negligent or indifferent to the welfare of the workmen or had failed to provide adequate and proper safety measures in the  factory as  well as  in cases  where the  breach was found  to   have  been   committed  with  their  consent  or connivance, or due to lack of diligence on their part. After a tragedy  occurred in Delhi by the leakage of chlorine gas, this Court  noticed the "escape route" which had been carved out by  the Directors of the Company, which owns or runs the factory, and voiced its concern and opined that if there was negligence in  looking after  the safety  requirements, in a hazardous industry, in particular, even the Chairman and the Managing Director  besides the  Board of  Directors must  be held responsible  and liable  (even when  they are  not  the actual offenders)  as that alone could ensure, reduction of, if not  altogether  eliminations  of,  risk  and  hazard  to workmen. In  M.C. Mehta  & Anr.  Vs. Union of India & Ors. [ 1986 (2) SCC, 325 ] it was observed:      "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    are      responsible  for  the  day  to  day      management of  its affairs  and the      Chairman and  Managing Director  is      not  concerned   with  day  to  day      functioning of  the  units  and  it      would not  therefore  be  fair  and      just to  require the  Chairman  and      Managing  Director   to   give   an      undertaking that  in case  of death      or injury  resulting on  account of      escape   of   chlorine   gas,   the      Chairman  and   Managing   Director      would be  personally liable  to pay      compensation. We  find it difficult      to accept  this contention urged on      behalf of  Shriram. We  do not  see      any reason why the Chairman  and/or      Managing  Director  should  not  be      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  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  of      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      of sabotage. But in all other cases      the Chairman 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      pant  in   a  manner   which  would      considerably   reduce,    if    not      eliminate, risk  or hazard  to  the      workmen and to the people living in      the vicinity"             [Emphasis ours]      It was,  thereafter, that the Parliament stepped in and passed the  Amendment Act  20  of  1987,  which  as  already noticed, besides  amending the  definition  of  an  occupier under Section  2(n)  of  the  Act  by  addition  of  various provisos thereto  also made some more significant changes in the Act.  The statement  of objects and reasons of Amendment Act 20 of 1987, reads:      "Statement of Objects and Reasons"      (1)  The   Factories   Act,   1948,      provides for  the  health,  safety,      welfare  and   other   aspects   of      workers in  factories, The  Act  is      enforced by  the State  Governments      through        their        Factory      Inspectorates.   The    Act    also      empowers the  State Governments  to      frame  rules,  so  that  the  local      conditions prevailing  in the State      are appropriately  reflected in the      enforcement.  The   Act  was   last      amended in  1976 for  strengthening      the provisions  relating to  safety      and health  at work,  extending the      scope   of    the   definition   of      "workers", providing  for statutory      health   surveys,   and   requiring      appointment of  safety officers  in      large factories.      (2) After the last amendment to the      Act,  there  has  been  substantial      modernization and innovation in the      industrial field  Several  Chemical      Industries have  come up which deal      with    hazardous     and     toxic      substances. This has brought in its      strain   problems   of   industrial      safety  and   occupational   health      hazards.    It    is,    therefore,      considered necessary  that the  Act      may be appropriately amended, among      other     things     to     provide      specifically for  the safeguards to



    be adopted against use and handling      of  hazardous   substances  by  the      occupiers  of   factories  and  the      laying down  of emergency standards      and measures.  The amendments would      also include  procedures for siting      of hazardous  industries to  ensure      that   hazardous    and   polluting      industries are  not set up in areas      where  they   can   cause   adverse      affects  on   the  general  public.      Provision has  also been  made  for      the   workers’   participation   in      safety management.      (3) Opportunity has been availed of      to make the punishments provided in      the Act  stricter and certain other      amendments found  necessary in  the      implementation of the Act."      It is  in this  background that  we shall  consider the scope and  validity of Section 2(n) of the Act as amended in 1987. According  to the  definition of  the ’occupier’ under section 2(n), an occupier means a person who is in ’ultimate control of  the affaires  of 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 occupier  of the factory and, therefore, it has been  provided that in the case of a company, any one of the directors  of the  company shall  be deemed  to  be  the occupier. To  remove the  ambiguity and  ensure that  a mere ’authorisation’ by  the Board  of Directors  of any  of  its employees or  officers, by  a resolution, to be the occupier was not  allowed the  object of  the  Act,  particularly  in matters  of  punishment  and  penalty  the  Parliament  also enacted Sections  7 and 7A of the Act by the Amending Act of 1987.      Section 7(1)  of the  Act reads  as      under:      7(1) The  occupier shall,  at least      fifteen days  before he  begins  to      occupy or  use any  premises  as  a      factory,   send    to   the   Chief      Inspector    a    written    notice      containing.        (a) the name and situation of the                                 factory;      (b) the  name and  address  of  the



    occupier;      (bb) the  name and  address of  the      owner of  the premises  or building      (including the  precincts  thereof)      referred to in section 93:      (c)   the    address    to    which      communication   relating   to   the      factory may be sent:      (d) the nature of the manufacturing      process:      (i)  carried   on  in  the  factory      during the  last twelve  months  in      the case  of factories  in exist of      commencement of this Act, and      (ii)  to   be  carried  on  in  the      factory  during   the  next  twelve      months   in   the   case   of   all      factories;      (e) the  total  rated  horse  power      installed or to be installed in the      factory, which  shall  not  include      the  rated   horse  power   of  any      separate stand-by plant;]      (f) the  name of the manager of the      factory for  the purposes  of  this      Act;:      (g) the number of workers likely to      be employed in the factory:      (h) the  average number  of workers      per employed during the last twelve      months in  the case of a factory in      existence  on   the  date   of  the      commencement of this Act:      (i) such  other particulars  as may      be prescribed.      7A. General duties of the occupier.      (1) Every occupier shall ensure, so      far as  is reasonably  practicable,      the health,  safety and  welfare of      all workers  while they are at work      in the factory.      (2)  Without   prejudice   to   the      generality  of  the  provisions  of      sub-section  (1),  the  matters  to      which  such   duty  extends,  shall      include-      (a) the  provision and  maintenance      of plant and systems of work in the      factory that  are safe  and without      risk of health;      (b)  the   arrangements   in   that      factory  for  ensuring  safety  and      absence  of   risks  to  health  in      connection with  the use, handling,      storage and  transport of  articles      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   arrangements  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 generally  policy      with  respect  to  the  health  and      safety of  the workers  as 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  days before  he occupies or begins to use any premises as  a factory.  It also  requires the disclosure of the name  of the  owner of  the premises or building and the name and  particulars of  the Manager. Section 7A prescribes the duties  of the occupier. The provisions of Section 7 and 7A when  considered in  the light of proviso (ii) to Section 2(n), leave  no manner  of doubt  that  it  is  a  statutory obligation under Section 7 of the Act after 1987 to nominate the occupier  before the  occupier occupies or begins to use the premises  to run  the factory  and in  the  case  of  an existing factory seek the renewal of the licence to continue to operate  the factory.  It is  only  when  this  statutory requirement is fulfilled that the factory would be given the licence or  its licence  shall be  renewed in  the  case  of existing factories.  The argument of the learned counsel for the appellants/petitioners  that the  expression "person" in Section 2(n)  implies  only  an  individual  does  not  bear scrutiny, when construed in the case of a company, a firm of partners or  an association  of persons.  Where  it  is  the company which owns or runs such a factory, it is the company which owns  or runs  such a factory, it is the company which has the  ultimate control  over the  affairs of the factory, and, therefore it would be the company would be the occupier of that  factory.  However,  since  a  company  is  a  legal abstraction, it  can act only through its agents who in fact control and  determine the  management and are the centre of its  personality.  Such  agents  are  generally  called  the directors  being  the  "directing  mind  and  will"  of  the company. The  deeming fiction under proviso (ii), therefore, only clarifies the position where company is the occupier of the  factory.  The  legislature  by  providing  the  deeming fiction  under   proviso  (ii)  did  not  detract  from  the generality of  the main  provision under  Section 2(n),  but only clarified  it. The  directors are  not the employees or servants of the company. They manage, control and direct the business of  the company  as "owners"  (Section 291  of  the Companies Act).  The Directors  are often referred to as the "alter ego" of the company. 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.  An employee or  officer of  the factory or of the company, even if authorised  by the  board of directors by a resolution to be a  person "in  the ultimate control 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  Encyclopedic   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  Edition), the word ’ultimate means:      "at  last,   finally  or   at   the      end....."      There is  a vast difference between a person having the ultimate control of the affairs of a factory and the one who has immediate  or day to day control over the affairs of the factory. In  the case  of a company, the ultimate control of the factory,  where the company is the owner of the factory, always vests in the company, through its Board of Directors. The Manager  or any  other employee, of whatever status, can be nominated  by the Board of Directors of the owner company to have  immediate or day to day or even supervisory control over the  affairs of  the factory. Even where the resolution of the  Board of Directors says that an officer or employee, other than  one of  the directors, shall have the ’ultimate’ control over  the affairs of the factory, it would only be a camaflouge or  an artful  circumvention because the ultimate control cannot  be transferred  from that of the company, to one of  its employees  or officers,  except where there is a complete transfer  of the  control of  the  affairs  of  the factory. Mechanical recitation of the words of Section 2(n), as a  Mantra, in  a resolution  nominating an employee or an officer as  the occupier  by  stating  that  he  shall  have "ultimate control  over the  affairs of the factory", cannot be permitted  to defeat  the object  of the  amendment.  The provisions of the Act have to be construed in a manner which would promote  its object,  prevent its  subtle evasion  and foil its  artful circumvention  to  suppress  the  mischief. Though, the  expression ultimate control was used in Section 2(n) even prior to the 1987 amendment also but read with the proviso to  Section 100(2),  it gave  an opportunity  to the companies owning  the factory  to dilute  the rigor  of  the provision by  not notifying  one of  its directors to be the



occupier and  instead nominating  some employee or the other to be  the  ’’occupier’’  for  purposes  of  punishment  and penalty. The ultimate control which vests in an owner and in the case  of a  company in  the Board of Directors cannot be vested in  anyone else  without completely  transferring the control over the factory to that other person.  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 factory.      The observations  of this  Court  in  Mackenzie’s  case (supra) 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 and  another vs.  The Chief Inspector of Factories, Bihar (supra) :      "Undoubtedly     the     expression      ’occupier’ is  not  to  be  equated      with owner. But it must be borne in      mind that the ultimate control over      the  factory  must  necessarily  be      with an  owner unless the owner has      completely transferred that control      to another person. Whether that was      done in the present case would be a      question of  fact.   It was for the      petitioners   to    contend    that      petitioner No.1  was the manager of      the factory  and had  the  ultimate      control thereof  to lay  before the      Chief Inspector  of  Factories  the      necessary material for showing that      the  company  had  in  some  manner      transferred the  entire control  of      the factory  to petitioner  No. 1".      (Emphasis supplied)      and from  these observations,  those High  Courts  have concluded that  the law  laid down  by this  Court  in  John Donald Mackenzie’s  case (supra) is that the occupier of the factory need  not necessarily  be a  Director and  that  any person to whom control has been transferred and who has been given the  entire control over the affairs of the factory by the company  through a  resolution can be the occupier, even if he  is not  a director.   In  our opinion,  this is not a correct reading  of that  judgment, which even otherwise was concerned  with   the  pre-amendment   provisions.  A  brief reference to the facts of that case is, therefore, necessary at this  stage. Mackenzie,  who was  petitioner No. 1 in the writ petition,  had described  himself as  the  Manager  and occupier of Bata while seeking renewal of the licence of the



factory. The  Chief Inspector of Factories enquired from the factory whether  Mackenzie was  one of  the Directors of the company and  pointed out that if he was not a Director, then a fresh application seeking renewal of the factory’s licence signed by  the  occupier  should  be  submitted.  The  Chief Secretary of  Bata Shoe  Company sent  a reply  to the Chief Inspector of  Factories stating  therein that  Mackenzie was the person  who had  been nominated  to  have  the  ultimate control of  the affairs  of the factory and therefore he was an occupier  within the  meaning of  Section 2(n) of the Act and, thus,  competent to  make an  application  for  seeking renewal  of  the  licence.  The  Chief  Inspector,  however, returned the application stating that if Mackenzie was not a Director, then a fresh application signed by the Director is required to be submitted.  The Company, 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.  The  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:      "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 ours)      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 employee  as an  occupier of  the factory, even if he is not a  Director of  the company. The judgment in Mackenzie’s case, therefore,  has to  be understood  in the  context  in which it  was given  as otherwise  the decision of the Chief Inspector of  Factories calling upon Mackenzie (who had been nominated as  the occupier having ’ultimate control over the affairs of  the factory’) but was not himself a director, to have a  fresh application  signed by  the Director submitted for renewal of the license, would not have been sustained by this Court. It is not fair or proper to read a sentence from the judgment  of this  Court,  divorced  from  the  complete context in  which it  was given  and  to  build  up  a  case treating as  if that  sentence is  the complete  law on  the subject. Judgments  of this Court are not to be read in that manner.      Mr. Jain,  learned senior  advocated drew our attention to an order of a three Judges Bench of this Court in special leave petition  No. 4141  of 1979 dated 14.3.1980 to support his submission  that the  occupier of the factory owned by a company need  not necessarily be one of the directors of the company. Their  Lordships  while  dismissing  special  leave petition No.  4141 of  1979 filed  by the  State  of  Orissa against the judgment of that High Court observed:      "We  are   of  the  view  that  the      judgment  of   the  High  Court  of      Orissa in the instant case and that      of the  Gujarat High Court in Jyoti



    Switchgears Vs.  Chief Inspector of      Factories  (34),  Indian  Factories      and labour  Reports 354,  "that the      occupier  of  a  factory  need  not      necessarily be either a Director or      an  owner   of   the   factory   is      correct". In other words it is open      to a  Company to  nominate a person      other  than   a  Director   of  the      company as  an  "occupier"  of  the      Company  for  the  purpose  of  the      Factories Act."      The above  order, was  concerned with the provisions of Section 2(n)  as they  stood prior  to the  1987  amendment, where under there was an option available to the company, to nominate a person other than a director of the company as an ’occupier’ of  the company.   This  order, therefore, cannot advance the  case of  the appellants/petitioners herein, who are governed by the provisions of Section 2(n) as amended by the Amending Act of 1987.      Thus, we  find that  after the 1987 amendment, the true import of  proviso (ii) to Section 2(n) would be that in the case of  a company,  which owns  the  factory,  the  company cannot nominate any one of its employees or officers, except a director  of the  company, as the occupier of the 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 proposes 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) is,  therefore, violative of Article 14 of the  Constitution  also.  It  is  submitted  that  there  is potential for  abuse of power by the Inspector of Factories, both in  selecting and  in not  selecting a  director, as an occupier for  prosecution, punishment  and penalty under the Act:      The  learned   Attorney  General  and  learned  counsel appearing for  different States, on the other hand submitted that proviso  (ii) to  Section 2(n)  of the Act does not run counter to  the substantive  provision and  that  it  is  an exception to  the main  Section and  has been enacted with a view to  advance the  object of the Act and the intention of the legislature  and it  does not travel beyond the scope of the main  section. It  is submitted that the proviso neither offends Article 14 nor the main provision of Section 2(n) of the Act.  Mr. Ashok  Desai, the  learned  Attorney  General, further submitted  that the  second proviso to Section 2(n), by making  any one  of the Directors to be a deemed occupier of the  factory owned  or run  by a company, does not in any



manner make  the substantive  part of  the definition clause otiose and  that the  proviso and  the main provision can be harmoniously construed.  He submitted  that in the case of a company, the main provision of Section 2(n) may be incapable of proper  working without  the aid  of proviso  (ii) to the said Section  because the company itself may not be possible to be  prosecuted and sentenced to any term of imprisonment, and hence  the necessity of the deeming fiction. The learned Attorney General  submitted that  the apprehension expressed by  the   learned  counsel  for  the  petitioners  that  the Inspector of  Factories can  pick and choose any director at his  whims   is  not  well  founded  because  Section  7  as introduced by  the 1987  Amendment Act  casts a  duty on the company to  notify, the  name of a director who would be the occupier and  once that  statutory obligation is discharged, the Inspector  of Factories  has no  choice but to prosecute that notified director only.      Does proviso  (ii) to  Section 2(n)  travel beyond  the scope of  the main  provision or  is otherwise  violative of Article 14 of the Constitution India?      In Reserve Bank of India Etc. Etc. Vs. Peerless General Finance And Investment Co. Ltd. & Others Etc. Etc. [1987 (1) SCC, 424]  dealing with the principles for interpretation of statutes this Court observed:      "Interpretation must  depend on the      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 the      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 its place."           (Emphasis supplied)      In S.  Gopal Reddy  Vs. State  of Andhra  Pradesh [  JT 1996(6) 268],  to which  one of us (Anand,J.) was a party it was observed:      "It   is   well   known   rule   of



    interpretation of statutes that the      text and  the context of the entire      Act  must   be  looked  into  while      interpreting any of the expressions      used in  a statute. The courts must      look  to   the  object   which  the      statute  seeks   to  achieve  while      interpreting any  of the provisions      of the  Act. A  purposive  approach      for   interpreting   the   Act   is      necessary." {Emphasis supplied}      It is in the light of the above settled principles that we shall  consider the true scope and intent of Section 2(n) with reference  to proviso (ii) thereto within the scheme of the Act.  Can Section 2(n) stand without proviso (ii) in the case of a company? What is the true function of proviso (ii) to Section 2(n)?      A proviso  to a  provision in  a  statute  has  several functions and while interpreting a provision of the statute, the Court  is required  to carefully scrutinise and find out the real  object of  the proviso appended to that provision. It is  not a proper rule of interpretation of a proviso that the enacting  part or  the  main  part  of  the  Section  be construed first  without reference to the proviso and if the same is  found to be ambiguous only then recourse may be had to examine  the proviso  as has been canvassed before us. On the other  hand an accepted rule of interpretation is that a Section and the proviso thereto must be construed as a whole each portion  throwing light,  if need,  be, on  the rest. A proviso is  normally used  to remove  special cases from the general enactment and provide for them specially.      A  proviso   qualifies  the   generality  of  the  main enactment by  providing an exception and taking out from the main provision,  a portion, which, but for the proviso would be a  part of the main provision. A proviso must, therefore, be considered  in relation  to the principal matter to which it stands  as a  proviso. A proviso should not be read as if providing something by way of addition to the main provision which is foreign to the main provision itself.      Indeed, in  some cases,  a proviso, may be an exception to the  main provision though it cannot be inconsistent with what is  expressed in the main provision and if it is so, it would be ultra-vires  of the main provision and struck down. As a  general rule  in construing  an enactment containing a proviso, it  is proper  to construe  the 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  The Commissioner  of Income-Tax. Mysore & Ors. Vs. The Indo  Mercantile Bank  Ltd. &  Ors. [AIR 1959 (SC), 713] opined:      "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 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  vigilant 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. The  state of  unemployment in the country being what it  is, it  is not  difficult to "hire" the services of someone only  for this  "job". Proviso  (ii)  now  makes  it possible to  reach out  to a director of the company itself, who shall  be prosecuted  and punished  for  breach  of  the provisions of the Act, apart from prosecution and punishment of the  Manager and  of the actual offender. The proviso, by making one  of the  directors of the company responsible for proper implementation   of  the provisions  of the Act, to a great extent  ensures  that  more  care  is  taken  for  the maintenance of  the  factory  and  various  safety  measures prescribed under  the Act for the health, welfare and safety of the  workers are not neglected. In the case of a company, the main  part of  Section 2(n) would not be workable unless that  provision   is  read   alongwith  proviso   (ii).  The definition of  an occupier  under Section 2(n) is of general application and  different situations  have been  covered by the legislature  only  in  different  provisos  appended  to Section 2(n).  These situations  were,  to  a  large  extent earlier covered  by Section  100 of  the Act  and  with  the deletion of  Section 100,  it became imperative to take care of different  situations dealt  therein, by enacting various provisos to  Section 2(n).  Of course, the expression "shall be deemed  to be  an occupier"  in second proviso to Section 2(n) indicates  the creation  of a  legal fiction  but it is wrong to  presume that such legal fiction can come into play only where  the substantive provision of Section 2(n) is not attracted. As already observed, the substantive provision of Section 2(n)  can become  workable only  in the  case  of  a company, when  the same  is read alongwith 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 notify the  name of the ’occupier’ for obtaining the licence or seeking  renewal of  the  licence  of  the  factory  and, therefore, the  option to ’select’ the director who would be the "occupier"  vests   in the  Board of  Directors and once they notify  the name  and particulars of that director, the Inspector of  Factories is  left with no discretion to ’pick and choose’  any other director for prosecution etc. for the breaches committed  in the  factory or  for contravention of the provisions of the Act. It is only when the company fails to perform  its statutory  obligation to  notify the name of the director  under Section 7 of the Act, that the Inspector of Factories  may "choose"  any one  of the directors as the deemed occupier  and  proceed  against  him.  The  area  for mischief can,  thus, be  totally blocked  by the  company by notifying one  of its directors as the occupier in discharge of its  statutory obligations enumerated in Section 7 of the Act. That  apart,  the  reasonableness  of  the  restriction depends upon  the circumstances  obtaining at  a  particular time and  the urgency  of the  evil sought to be controlled. The possibility  of the  power being abused is no ground for declaring the  provision unconstitutional.  Proviso (ii)  to Section 2(n),  therefore, does  not offend Article 14 of the Constitution.      In keeping  with the aim and object of the Act which is essentially to  safeguard the  interests  of  workers,  stop their exploitation,  and take  care of their safety, hygiene and welfare  at their  place of  work, numerous restrictions have been  enacted in  public interest in the Act. Providing restrictions in  a Statute  would be a meaningless formality unless the statute also contains a provision for penalty for the breach  of the  same. No  restriction can  be  effective unless there  is some sanction compelling its observance and a provision  for imposition  of penalty  for breach  of  the obligations under  the Act or the rules made thereunder is a concomitant and  necessary incidence  of  the  restrictions. Such a  provision is  contained in  Section 92  of the  Act, which  contains   a  general  provision  for  penalties  for offences under  the Act  for which  no express provision has been made  elsewhere and  seeks to  lay down uniform penalty for all  or any of the offences committed under the Act. The offences under  the Act  consist of contravention of (1) any provision of  the Act;  (2) any rules framed thereunder; and (3) 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 factory.      Mr. Jain,  Mr. Nariman  and Mr. Tripathi, appearing for the  appellants,  however,  argued  that  since  Section  92 imposes a  liability for  imprisonment and/or  fine, both on the occupier  (the notified director) and the manager of the factory, jointly and severally, for the contravention of any of the  provisions of the Act or any rule made thereunder or of any  order in  writing given  thereunder, irrespective of the fact  whether the  occupier (the  notified director)  or manager, had  any mens-rea  in respect of that contravention or that  the contravention  was not  committed by him or was committed by  any other  person in  the factory  without his knowledge, consent  or connivance,  it  is  an  unreasonable restriction. Learned  counsel argued  that in  criminal law, the doctrine  of vicarious  liability is  unknown and  if  a director is to be punished for some thing of which he is not actually guilty,  it would  violate his fundamental right as enshrined in  Article 21  of the  Constitution. It was urged that on  account of  advancement in  science and technology, most of  the companies, appoint professionally qualified men to run  the factories  and nominate  such a person to be the ’occupier’ of  the factory  and  make  him  responsible  for proper implementation  of the  provisions of  the Act and it would, therefore,  be harsh  and unreasonable  to  hold  any director of  the company, who may be wholly innocent, liable for the  contraventions committed under the Act etc. when he may be totally ignorant of what was going on in the factory, having vested  the control  of the affairs of the factory to such an  officer or  employee, by  ignoring the liability of that officer  or employee.  The argument  is  emotional  and attractive but not sound.      The offences  under the  Act are  not a part of general penal law  but arise from the breach of a duty provided in a special beneficial social defence legislation, which creates absolute or  strict liability without proof of any mens rea. The  offences   are  strict  statutory  offences  for  which establishment of  mens rea  is not  an essential ingredient. The omission or commission of the statutory breach is itself the offence. Similar type of offences based on the principle of strict  liability, which means liability without fault or mensrea, exist  in many statutes relating to economic crimes as  well   as  in   laws  concerning   the  industry,   food adulteration, prevention  of pollution  etc.  In  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 knows as public welfare  offences. A  seven Judge Bench of this Court in R.S.  Joshi Vs.  Ajit Mills [AIR 1977 (SC), 2279, at page 2287] observed :      "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  proceeded 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  or 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 committed under the Act and the occupier is  held vicariously  liable alongwith  the Manager and the actual offender, as the case may be. Penalty follows actus reus, mens-rea being irrelevant.      As already noticed, where the company owns a factory it is the  company which is the occupier, but, since company is a legal  abstraction without  a real  mind of its own, it is those who  in fact  control and  determine the management of the company,  who are held vicariously liable for commission of statutory  offences. The  directors of  the company  are, therefore, rightly  called upon  to answer the charge, being the directing mind of the company. Dealing with the question of  vicarious   liability  of  the  directors  for  offences committed by  a company,  the following observations of Lord Diplock in  Tesco Supermarkets  Ltd. V. Nattrass [(1972) AC, 153], are useful :      "In   my   view,   therefore,   the      question: what  natural persons are      to be  treated in  law as being the      company for  the  purpose  of  acts      done in the course of its business,      including the taking of precautions      and the  exercise of  due diligence      to  avoid   the  commission   of  a      criminal offence, is to be found by      identifying those  natural  persons      who by  the memorandum and articles      of association  or as  a result  of      action taken  by the  directors, or      by the  company in  general meeting      pursuant  to   the  articles,   are      entrusted with  the exercise of the      powers of the company. This text is      in  conformity   with  the  classic      statement of Viscount Haldane, Lord      Chancellor, in  Lennard’s  Carrying      Company Ltd.  Vs. Asiatic Petroleum      Company Ltd."           {Emphasis supplied}      The passage  of Viscount  Haldane, Lord  Chancellor, in Lennard’s Carrying Company Ltd. v. Asiatic Petroleum Company Ltd. [(1915)  AC 705],  referred to  by Lord  Diplock, is as follows :      My  Lords,   a  corporation  is  an      abstraction. It  has no mind of its      own any  more than it has a body of      its own;  its active  and directing      will must consequently be sought in      the person of somebody who for some      purposes may  be called  an  agent,      but who  is  really  the  directing      mind and  will of  the corporation,      the very  ego  and  centre  of  the      personality  of   the  corporation.      That  person   may  be   under  the



    direction of  the  shareholders  in      general meeting; that person may be      the board  of directors  itself, or      it may be, and in some companies it      is so, that person has an authority      co-ordinate  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  insofar  as  an "innocent" director is concerned, was also canvassed in M.C. Mehta’s case  (supra). We  may excerpt  that  portion  which formulates the question and furnishes the answer :      "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    are      responsible  for  the  day  to  day      management of  its affairs  and the      Chairman and  Managing Director  is      not  concerned   with  day  to  day      functioning of  the  units  and  it      would not  therefore  be  fair  and      just to  require the  Chairman  and      Managing  Director   to   give   an      undertaking that  in case  of death      or injury  resulting on  account of      escape   of   chlorine   gas,   the      Chairman  and   Managing   Director      would be  personally liable  to pay      compensation. We  find it difficult      to accept  this contention urged on      behalf of  Shriram. We  do not  see      any reason  why the Chairman and/or      Managing  Director  should  not  be      required to  give an undertaking to      be personally liable for payment of      compensation in  case of  death  or      injury  resulting   on  account  of      escape of chlorine gas."      We, therefore,  find no  hesitation  in  rejecting  the argument of learned counsel for the appellants.      It  deserves   a  notice   that  under   the  Act,  the legislature has  itself taken  care to  dilute the  rigor of Section 92 by providing an exception to the strict liability rule by  laying down  a third party procedure in Section 101 of the Act which reads :      101.  Exemption   of  occupier   of      manager from  liability in  certain



    cases.-  Where   the  occupier   or      manager of  a  factory  is  charged      with an  offence  punishable  under      this Act,  he  shall  be  entitled,      upon complaint duly made by him and      on giving  to  the  prosecutor  not      less than  three clear  days notice      in writing  of his  intention so to      do, to  have any  other person whom      he charges  as the  actual offender      brought before  the  Court  at  the      time  appointed   for  hearing  the      charge;   and    if,   after    the      commission of  the offence has been      proved, the  occupier or manager of      the factory,  as the  case may  be,      proves to  the satisfaction  of the      court-      (a) that  he has used due diligence      to enforce  the execution  of  this      Act, and      (b)  that  the  said  other  person      committed the  offence in  question      without his  knowledge, consent  or      connivance,-      that   other    person   shall   be      convicted of  the offence and shall      be liable to the like punishment as      if he  were the occupier or manager      of the factory, and the occupier or      manager, as  the case may be, shall      be discharged  from  any  liability      under this  Act in  respect of such      offence :      Provided that  in seeking  to prove      as  aforesaid,   the  occupier   or      manager of the factory, as the case      may be,  may be  examined on  oath,      and his  evidence and  that of  any      witness  whom   he  calls   in  his      support 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) & (b). The principle  underlying Section  101 may  well be gathered from the  following observations of Phillimore J. in Ward v. Smith [1913(3)K.B.  154],  while  dealing  with  a  somewhat similar provision in England, the learned Judged said :      A prima  facie liability is imposed      upon the  occupier or  manager from      which  however   he  can  extricate      himself;   otherwise   he   remains      liable. The  scheme of  the Act  is      first  to   find   the   de   facto      employer.  An  information  may  be      laid against  the occupier. His way      of escape  is provided  for by this      section. He  may set up  a  defence      not unlike  the defence of warranty      which the seller of food may set up      under the  English Sale of Food and      Drugs Act.  He may  show  that  the      offence was  not committed  by  his      fault. To do this he must bring the      real offender before the court."      Prof. Glanville  Williams in his "Text Book on Criminal Law" (1978  Edn.), while  dealing  with  exceptions  to  the strict liability  rule opined  that the  principle of strict liability may  be modified by the statute itself and further that the  statutes, generally  speaking,  contain  two  main types of  excuses (i) the third party procedure and (ii) the no-negligence defence. Prof. Williams observes at page 954 :      "As  to   the  first,   some  penal      statutes provide that when a charge      is brought under them the defendant      may bring in any other person (e.g.      a supplier) to whose act or default      he alleges  that the  contravention      was due,  and shift  the  blame  to      him.  The   defence  is   sometimes      called a  "passing on" defence. The      most important  examples are in the      Shops   Act   1950   (s.113),   the      Medicines Act  1968  (s.121)  (this      Act replacing the provisions of the      1955 Act with regard to drugs), the      Weights  and   Measures  Act   1963      (s.27), and  the Factories Act 1961      (s. 161).      The ’passing on’ defence provided in Section 101 of the Act is  an accepted form of an exception to the principle of strict liability  but its  benefit would  be available  only when the  requirements of  that Section  are fully  complied with and  the Court is satisfied about the proof of facts as are contemplated by clauses (a) and (b) of Section 101.      The provisions  of Section  101 are almost identical to the provisions  of Section  71 of the Factories Act prior to its amendment, with the difference that under Section 101, a provision for  3 days  advance notice  to the prosecutor has been added.  Under Section 101, after a complaint is made by the Inspector  of Factories  against the manager 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 Manger  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  that effect and the occupier or manager shall be  afforded an  opportunity to extricate himself from the liability provided he can give satisfactory proof of the facts required  by Section  101 (a)  and (b).  The  onus  of proof, at  that stage,  is shifted  to the  manager  or  the occupier. He is entitled to call evidence as well as to give evidence himself.  The alleged  actual offender would have a right to  cross-examine the  manager or  the occupier as the case may  be. He  would also  be entitled  to call evidence. Even where the occupier establishes that the actual offender is the  person named  by him,  he must  still prove  to  the satisfaction of the Court, that he had used due diligence to enforce the  execution of  the act  and that  the said other person  committed   the  offence  in  question  without  his knowledge, consent or connivance.      In State of Gujarat Vs. Kansara Manilal [AIR 1964 (SC), 1893 at  1897] while  dealing with the provisions of Section 101 of the Act, this Court opined :      "Where an  occupier or a manager is      charged  with   an  offence  he  is      entitled to make a complaint in his      own turn against any person who was      the actual offender and on proof of      the commission  of the  offence  by      such person  the  occupier  of  the      manager is absolved from liability.      This shows that compliance with the      preemptory provisions of the Act is      essential and  unless the  occupier      or manager brings the real offender      to   book    he   must   bear   the      responsibility.  Such  a  provision      largely excludes  the operation  of      S. 117 in respect of persons guilty      of a  breach of  the provisions  of      the Act.  It is  not necessary that      mens rea must always be established      as has  been said  in some  of  the      cases  above   referred   to.   the      responsibility  exists   without  a      guilty mind. An adequate safeguard,      however,  exists   in  Section  101      analysed above and the occupier and      manager can save themselves if they      prove that  they are  not the  real      offenders but who, in fact is."      This judgment has been noticed with approval by a three Judge Bench of this Court in Maneklal Jinabhai Kot Vs. State of Gujarat & Ors. [ 1967 (2) SCR, 507]. We are in respectful agreement with  the view that an adequate safeguard has been provided under  Section 101,  under which, for circumstances mentioned therein,  the  occupier  or  manager  can  absolve



himself from  the liability  if  he  can  establish  to  the satisfaction 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  charges 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 be  brought before  the Court by the process  of law.  If that  cannot  be  done,  the  trial against the  occupier or  the manager  as the  case may  be, cannot be  allowed to be protracted indefinitely and we find it difficult  to see  how any  fault can  be found with this provision.      Thus, we  are of  the  opinion  that  proviso  (ii)  to Section 2(n)  when considered  in relation  to Section 92 of the Act  does not  offend Article  21 of the Constitution of India either.      That  Section   92  is   a  perfectly  valid  piece  of legislation insofar as it makes the occupier or manager of a factory guilty of an offence for contravention of any of the provisions of  the Act or the rules made thereunder, even if the actual  contravention may not have been committed by the occupier or  the manager.  is not disputed or doubted before us and,  therefore, we  are unable  to  appreciate  how  the provision contained  in proviso  (ii) to  Section  2(n)  can render the  said proviso  read with  Section 92  invalid  or unreasonable or  how it  offends  Article  19(1)(g)  of  the Constitution by defining an occupier to be only the director of the company.      Article 19(1)(g)  of the  constitution guarantees  to a citizen the  right to practice any profession or to carry on any occupation,  trade or  business. This right, however, is subject to  Clause (6)  of Article  19 which  lays down that nothing in  sub-Clause (g) of Article 19(1) shall affect the operation of  any existing  law insofar  as  it  imposes  or prevents the  State from  making any  law  imposing  in  the interest of  the general  public reasonable  restrictions on the exercise  of the  right. Clause  (6) of  Article  19  is intended to  strike a balance between individual freedom and social control.  Keeping in  view the  object of the Act, we must look  to the  reasonableness of the provision requiring the nomination  of a director as the occupier of the factory under Section 7 of the Act, with a view to determine whether proviso (ii)  to Section  2(n) has a rational nexus with the object which  the legislature  seeks to  achieve. It was, as already observed, with a view to secure proper and effective enforcement of  the provisions of the Act and the Rules made thereunder, that  the legislature  considered it appropriate to fasten the liability for proper implementation of the Act on one  of the  directors by insisting that in the case of a



company, which  owns the factory, one of the directors shall be deemed  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 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  provision 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 be prosecuted and shall be liable to  be punished as the deemed occupier. "A law has to be judged  for its  constitutionality by  the generality  of cases it  covers,  not  by  the  freaks  and  exceptions  it martyrs." [See AIR 1977 S.C. 2279 (supra)].      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  Section  2(n)  is  thus,  not  ultra-vires Article 19(1)(g) of the Constitution.      Thus, from  the above  discussion, it  follows that the directions given  by the Chief Inspector of Factories to the writ petitioners  and the  appellants herein  to the  effect that  only   a  director   of  the  company  could  file  an application for renewal of the factory licence (or for grant of factory  licence), as occupier of the factory and that no other employee  could  make  such  an  application  even  if nominated by  the company  as an  occupier of  the  factory, suffers from no infirmity whatsoever.      To sum up our conclusions are :      (1) In  the case of a company, which owns a factory, it is only  one of  the director  of the  company  who  can  be notified as  the occupier of the factory for the purposes of the Act  and the  company cannot nominate any other employee to be the occupier of the factory:      (2) Where  the company  fails to  nominate one  of  its directors as  the occupier  of the factory, the Inspector of Factories shall  be at liberty to proceed against any one of the directors  of the  company, treating  him as  the deemed occupier of  the factory,  for prosecution and punishment in case of any breach or contravention of the provisions of the Act or for offences committed under the Act.      (3)  Proviso  (ii)  to  Section  2(n)  of  the  Act  is intravires the  substantive provision of Section 2(n) of the Act;      (4) Proviso  (ii) to  Section 2(n)  is constitutionally valid and is not ultra-vires Articles 14, 19(1)(g) and 21 of the Constitution of India;      (5) The  law laid  down by  the High  Courts of Bombay, Orissa, Karnataka,  Calcutta, Guwahati and Madras is not the correct law  and the  contrary view  expressed by  the  High Courts of  Allahabad, Madhya Pradesh, Rajasthan and Patna is



the correct  enunciation of  law in  regard to the ambit and scope of proviso (ii) to Section 2(n) of the Act.      All the writ petitions and the appeals by special leave consequently fail  and are  hereby, dismissed.  We, however, leave the parties to bear their own costs.