Professional Documents
Culture Documents
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Prof. R. Balakrishnan, FCS
Pune
Landmark judgment of Apex Court
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n October 1996, the Supreme Court fixed the
responsibility for violations of the rules under
the Factories Act, 1948 on a nominated
Director of a company and not on any of the
employees as some companies chose to do by
appointing one of its employees as "Occupier
of the Factory". The Court's ruling in the case of
v.
(1997) 1LLJ
SC 772 have far-reaching consequences as
the designated Director under the Factories
Act, 1948 will henceforth be liable for all the
illegal acts of the unit along with the Manager.
Each of them is liable for offences punishable
with imprisonment or fine or with both (which
may extend to the extent of two years
imprisonment or fine of Rs. 1 lakh or with both).
The Apex Court, while delivering the judgment
made the following observations: -
The Legislature has attempted to plug the loopholes which
existed earlier and enable the Directors to escape their liability
by passing on the buck, as they say, to an employee. lt is
much too obvious that when top persons of the company are
made conscious of their responsibility and duties for the
implementation of the safety and welfare measures in a
factory and to carryout 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.
The court held that in the case of a company, which owns a
factory, it is only one of the Directors of the Company who can
be notified as the occupier of the factory for the purposes of
the Act and the company cannot nominate any other
employee as the occupier of the factory. Where the Company
fails to nominate one of its Directors as the occupier of the
factory, the lnspector of Factories shall be at liberty to proceed
The Factories Act, 1948 is a very important |egis|ation governing the
working of factories. The Act and the Pu|es framed thereunder
contemp|ate numerous procedures to be comp|ied with. !n view of
hazards invo|ved in the working of factories there is a need to notify a
person as occupier for foisting upon him the responsibi|ities for various
actions. The various comp|iances are |isted out in this artic|e.
Ensuring Compliance under
The Factories
Act, 1948
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against any of the Directors of the Company, treating him as
the deemed occupier of the factory, for prosecution and
punishment in case of any breach of contravention of the
provisions of the Act or for offences committed under the Act.
The Court further held that Proviso (ll) to Section 2(n) of the
Act was the substantive provisions of Section 2(n)
of the Act and constitutionally valid and not Articles
14,19(1) (g) and 21 of the Constitution of lndia.
While delivering the judgment the Court also made reference
to various Sections of the Factories Act, 1948 especially the
notice to be sent to the Chief lnspector of Factories once the
occupier is appointed, the vast difference between the
occupier, who would have the ultimate control over the factory
and the Manager, who would have the control over day to day
affairs of the factory. 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. ln 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
company to have immediate or day to day or even supervisory
control over the affairs of the factory. From the above it is clear
that as per Section 2 (n), 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", a
company cannot be permitted to defeat the object of the
amendment. The Supreme Court further observed that
though the expression 'ultimate control' was used in Section
2(n) even prior to the 1987 amendment 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.
VARI OUS COMPLI ANCES UNDER THE
FACTORI ES ACT, 1948
The Factories Act is administered by the State Governments
and each State Government has framed separate Factories
Rules. For example, in Maharasthra, the Factories Rules of
1963 is prevalent while in the Union Territory of Pondicherry,
they are following the Tamil Nadu Factories Rules of 1950 read
with The Pondicherry lndustrial Establishments Act, 1964.
Under the Factories Act, 1948 read with the relevant Factories
Rules, the following compliance will be applicable for factories.
(The Factory Rules of Maharashtra and Pondicheery are
referred while listing the requirements). ln other States also,
the requirement would be the same but the relevant sections
and rules may be different. The level of compliance may vary
depending upon the nature of business of the factory i.e.
whether chemical factory, factory producing dangerous
chemical products or hazardous chemical products, etc.
Displays on the Notice Boards
Prominent display of the following information is required in
the factory premises at or near the main entrance of the
establishment:
(a) Form No.11 showing clearly for every day the period of
work for adult workers pursuant to section 6(1).
(b) Abstract of the Act and Rules made there under along
with name and address of the lnspector and the
Certifying Surgeon as required under section 108.
(c) Form No. 7 showing the list of National and Festival
Holidays duly approved by the lnspector under the
Ensuring Compliance under The Factories Act, 1948
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Pondicherry lndustrial and Establishment Act (similar
Acts would be there for other states).
(d) Under the Payment of Gratuity Rules [Rule 4(1)} notice in
English and in vernacular language showing in bold
letters, the name of the officer with designation,
authorized by the employer to receive on his behalf the
notice under the Act or the Rules.
(e) An abstract of the Payment of Gratuity Act, 1972, and
Rules in Form U, in English and vernacular language.
Maintenance of Bound I nspection Book
Under Rule 118, one bound lnspection Book containing the
particulars as prescribed under this rule is required to be
maintained and the same is to be produced to the lnspector
of Factories for entering his remarks at the time of inspection.
List of Registers required to be
maintained
(a) Muster roll in Form 23 with entries made correctly and
upto date in respect of all workers employed in the factory
as required under Rule 115.
(b) Register in Form 25 with entries of dangerous
occurrences and accidents if any in the factory pursuant
to Rule 117.
(c) Register of wages with prescribed entries made correctly
and upto date in respect of all the workers employed in
the factory as per Section 13A of The Payment of Wages
Act. (Stamped receipt is required to be obtained from the
workers for the payment of wages).
(d) Register of National Holidays and Festival Holidays in
Form No. Vll as per Rule 8 (1) of the Pondicherry
Establishment Act (similar Acts would be applicable in
other states too).
(e) Pressure vessels are required to be thoroughly examined
by a competent person once in every period of six months
externally and twelve months internally and the result of
such examination is to be submitted in Form No. 8 to the
lnspectorate as per Rules 60 (9) (b) read with Section 31
& Rule 60 (7).
(f) Form No. 15 - Leave with Wages Register.
ln addition to the above, the following registers are also
required to be maintained as per format prescribed by the
rules:
(a) Record of lime washing, painting etc. [Form 8, rules 20 & 51| .
(b) Register of Compensatory holidays [Form 14, rule 93|.
(c) Overtime register [Form 15,rule 95|.
(d) Notice of periods of works for adult workers [Form 16,rule 98|.
(e) Register of adult workers [Form 17,rule 99| .
(f) Register of leave with wages [Form 20,rule 105|.
(g) Leave Book [ Form 21, rule 106| and Register of Leave
with wages [Form 20| should be made out separately for
each worker on a thick bound sheet.
(h) Report of the Accident [Form 24, rule 115|.
(i) Notice of Dangerous Occurrence - maintenance of
register [Form 24A, rule 115|.
(j) Muster roll [Form 29, rule 122|.
Further Provisions
Following are to be ensured: Cleanliness of walls and ceilings,
Standard Lighting, Provision for drinking water, proper toilets
with sign boards, proper drainage system/maintenance of
drains, periodical White washing, colour washing of toilets,
employment of sweepers, provision of Spittoons, disclosure of
information to workers (hazardous process etc.), Disposal of
industrial wastes, provision of ambulance vans in case of
hazardous process, Washing facilities, First aid
appliances/notice regarding first aid / ambulance room or
dispensary room.
Canteen facility is another requirement but the same will not
be applicable where less than 250 workers are employed.
Register of compensatory holidays, Overtime register, and
Register showing white washing, lime washing done etc. are
also required to be maintained.
Floor Space/ Rest Room Requirements
As per section 16(2) and rule 120(1) floor space of 23 square
meters in the case of existing factories built after the
commencement of the Act, shall be provided for each worker
working at any one time in the room but such floor space shall
be exclusively of the space occupied by materials in the room.
Adequacy and suitable shelters or rest rooms are required to
be provided to the workmen. Adequate suitable lunchrooms
are required to be provided.
Ensuring Compliance under The Factories Act, 1948
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Nomination Form
Under the Payment of Gratuity Act, 1972, duplicate copy of
the nomination in prescribed Form F duly attested by the
employer (as a token of recording of the nomination) is
required to be returned to the employee. ln addition to the
above, there may other requirements under the various labour
laws read with rules of the local state Government.
Labour Laws Provision v. Board of
Directors Responsibility
All the above provisions are made mainly to ensure that the
company ensures the Safety, Health and good working
environment to its employees. To ensure the above, the Board
of Directors needs to have a policy guidelines and a good
reporting system with review so that the compliance is taken
care of. The compliance is not only from the regulatory point
of view but also in the interest of its own employees with whom
the company is running its business.
APPOI NTMENT OF OCCUPI ER
(DI RECTOR) WHO WOULD HAVE
THE ULTI MATE CONTROL OVER
THE FACTORY
The Board of Directors, should pass a resolution to appoint
one of the Directors - generally the Managing Director as the
occupier of the factory, who would ensure the required
compliance. lf the company has more than one unit, then it
can identify the Director (s) under whose control the factory is
functioning and can appoint more than one occupier for
different factories. The Occupier Director, thus appointed
would be responsible in respect of the factory / factories for
which he is responsible to ensure compliance. The
organization can have more than one occupier in case of
multi-location units.
APPOI NTMENT OF THE
MANAGER WHO WOULD BE
RESPONSI BLE FOR
DAY-TO-DAY AFFAI RS OF THE
FACTORY
The Managing Director being the Chief Executive Officer of
the company and the whole time Director(s) being in-charge
of the total operation of the unit, it is always not possible for
them to look after the day to day affair of the factory. The
lawmakers also don't expect that the board members should
be involved on day-to-day affairs of the factory and look into
the routine matters. However, the ultimate responsibility lies
with the director, who is appointed as the occupier of the
factory.
ln practice, since the factory's operations are run by the
experts in the field such as works manager, production