INDIAN OIL CORPORATION LTD.versusTHE CHIEF INSPECTOR OF FACTORIES AND ORS. ETC.

A                 INDIAN OIL CORPORATION LTD.
                               v
         THE CHIEF INSPECTOR OF FACTORIES Al\ID ORS. ETC.

                                  JULY 14, 1998

B                [G .T. NANA VA Tl AND S.P. KURDlJKAR, JJ.]


         Factories Act, I 948 :

           S.2(nj, Finl proviso, clause (iii)· Factory Occupier of Storage units
C   of Indian Oil Corporation· Depot Manager applying for licence· Inspector
    of Factories declining to grant licence showing Depot Manager as owner on
    the ground that Corporation being a company, any one of its Direc:tors could
    only be deemed to be occupier Held, Factories run by corporation being
    effectively and really owned and controlled by Central <Jovernment, persons
    appointed to manage affairs of the factory shall have to be deemed to be the
D   occupier.

           The appellant- Indian Oil Corporation, a company almost wholly owned
    and controlled by the central Government and engaged in supply and
    distribution of petroleum and petroleum products including L.P.G., had storage
E   facilities at Namkum in Bihar and established there a new unit in 1992.
    Since storage facilities were covered by the definition 'factory' under the
    Factories Act, the Depot Manager of 'lumkum Depot applied for licence for
    the new unit and for renewal of licence for the existing units. The Inspector
    of Factories refused to grant the licence showing the Depot Manager as the
    occupier, on the ground that Indian Oil Corporation, being a company, anyone
F   of its Directors could only be deemed to be the occupier. The Government
    of India, Ministry of Petroleum and Natural G11s informed the Chief Inspector
    of factories of its notifications declaring the unit incharge as the occupier
    for the purpose of the Act. The Inspector of Factories reiterated his stand
    and refused to recognise the officer inchargc as occupier. The corporation
G   filed writ petitions before the High Court.

          It was argued before the High Court that clause (iii) of the first proviso
    to s.2(n) of the Factories Act, 1948 would apply to the factories of the
    corporation and it would be open to the Central Government to nominate any
    person other than the Director, as occupier of the said factories. The High
H   Court negatived the plea and dismi~scd the petitions. Aggrieved, the
                                          598
                INDIAN Oil. V. CHIEF !~SPECTOR OF FAC. 01rn:s               599

corporation filed the present appeals.                                             A
      It was contended for the Corporation that though it was a Government
company and, therefore, a company as contemplated by clause (ii) of the
proviso to Section 2(n), its factories would properly fall within the purview
of clause (iii) inasmuch as the corporation was in reality owned by the
Central Government and almost all its affairs, except the day to day affairs,      B
were cm1trolled by the Central Government. It was argued that the ultimate
control over the affairs of all the factories of the Corporation was really of
the Central Government and, therefore, they should be regarded as factories
owned and controlled by the Central Government; and, there being a 5pecial
provision governing factories owned or controlled by the Central Government,       C
the general provision made with respect to companies would not apply.

       Allowing the Appeals, this Court

      HELD : I. I. In order to determine the 'Occupier' of a factory a• defined
under s.2 (n) of the Factories Act, 1948, What is to be seen is who has the
ultimate control over the affairs of the factory. As the factories run by the      D
appellant-Corporation are effectively and really owned and controlled b} the
Central Government, they fall within the purview of clause (iii) and not
clause (ii) of the first proviso to s.2 (n) The High Court was wrong in takinl!,
a contrary view.

      1.2. It cannot be said that the ultimate control over the factorie• of the   E
Corporation lies with the Corporation and not with the Central Government,
though it is true that the Corporation is a legal entity, has a separate and
independent existence of it~ own and the right to mana11.e the affairs of the
Corporation including the right to set up and run the factories vests in the
Board of Directors. It will not be proper to adopt this narrow approach while
construing the scope and ambit of clauses (ii) and (iii) of the first proviso
                                                                                   F
to Section 2 (n). The approach which deserves to be adopted is one which
would achieve the object of the provision.

       Som Prakash Rekhi v. Union of India Anr.. 119811 I SCC 449, relied
Oil.

      Mahabir Auto Stores and uthe" v. Indian Oil Curporatior1 and others.
(19901 3 sec 752, referred to.

      1.3. Relevant provisions regarding establishment of the Corporation
and its working leave no doubt that the ultimate control over all the affairs
of the Corporation, including opening and running of factories is with the         H
     600                    SUPRE\1E COUU REPORTS                    (1998) 3 S.C.R.

A    Central Government and not with the Corporation . Acting throng~ the
     corporation is only a method employed by the Central Government for running
     its petroleum industry. In the context of Section 2(n) it will have to be held
     that all the activities of the corporation are really carried on by Central
     Government with a corporate mask.

B       1.4. Apart from the main part of Section 2(n), the first proviso also
  indicates that the Legislature intended that the person having ultimate
  control over the affairs of the factory has to be regarded as occupier of the
  factory. The proviso to the Section is not in the nature of an exception. ln
  order to avoid any ambiguity, to plug loop-holes and to seal the escape routes
C a deeming provision has been made in a mandatory form. In the case of a firm
  obviously the partners of the firm have ultimate control over the affairs of
  the partnership. In case of other type of association the members there of
  will have such control, as the power to mange the affairs of the company vests
  in the Board of Directors. What clauses (i) and (ii) of the proviso provide is
  that they shall be deemed to be 'occupiers'.
D
          J.K Industries Limited and uther v. The Chief /nspectur uf Factories
     and Boilers and Others, (19961 6 SCC 665, followed.

           1.5. The position of the government and the local authority is quite
     different from that of a firm or an association or a company not only with
E    respect to the person who can be said to be in ultimate control but also with
     respect to the object for which the factory is set up. In a democratic set-up
     of a Government, it may not be possible to say with certainty as to who is
     having the ultimate control. In a welfare state, the government does not carry
     on such activity for its own profit or benefit but for the benefit of the people
     as a whole. Therefore, in the case of a factory in fact and in reality owned
F    or controlled by the Central Government or the State Government or any
     local authority the person or persons appointed to manage the affairs of the
     factory shall have to be deemed to be the occupier, even though for better
     management of such a factory or factories or a corporate form is adopted by
     the government.
G
             2. Respondents No. I and 2 would accept the persons appointed by the
     Central Government to manage the affairs of the factories at Namkum as
     the occupiers of those factories for the purpose of Section 2(n) of the Act.

             CIVIL APPFLLA TE JURISDJCTION : Civil Appeal No. 3237of1998
II    Etc.
        INDIAN OIL v. CHfEF INSPHTOR OF FACTORIES [NANA VA TL J.]              601
      From the Judgment and Order dated 29.11.96 of the Patna High Court              A
in C.W.J.C No. 443of199l(R).

     Ashok Desai, Attorney General. Avijit Chaudhary, A.k.Dhar, Ms. Deepti
Choudhary, Ms. Sangeeta Manda!, B.B. Singh, Ms. Abba R. Sharma and ,\1s.
Anil Katiyar for the appearing parties.
                                                                                      B
      The Judgment of the Court was delivered by

      NAN AV ATl, J. Leave granted. Heard learned counsel for the parties.

      A short but an interesting question of law arises for consideration in
these appeals. The question is : who is to be deemed 'occupier' of a factory
of a government company incorporated under the lndian Companies Act'! If C
che government company is to be tn:ated like any other company then
according to clause (ii) of the first provisio to Section 2(n) of the Factories
Act, 1948 any one of the directors of that company is deemed to be the
occupier; but, if its factory is considered as a factory owned or controlled by
the Government as provided by cfause (iii) of the proviso the person appointed D
to manage the affairs of the factory by the Government is to be deemed the
occupier.

        The appellant, Indian Oil Corporation Limited, is a government company
as defined by Section 617 of the Companies Act. It is almost wholly owned
and controlled by the Government. It is, inter a/ia, engaged in the supply            E
and distribution of petroleum and petroleum products including L.P.G. In
order to ensure an effective and efficient supply system it is required to
establish and maintain storage facilities at many places in the country. At
Namkum, in Ranchi District, it already had large storage facility. With the
object of increasing storage capacity at "lumkum it established a new storage
unit in 1992 after obtaining approval of the Central Government. As storage           F
facilities are also covered by the definition of 'factory' as defined by the
Factories Act. the Depot Manager posted at the Namkum Depot made an
application on l 0.4.92 for obtaining a licence for the new unit. He also made
an application on 30.12.91 for renewal of the licence of the existing unit. \\bile
granting the licence earlier, for the existing unit, the Inspector of Factorie> had   G
recognized the Depot Manager as the 'occupier' and the occupancy certificate
etc. were issued in his name. But this time, the new Inspector of Factories,
by his letter dated 28.4.92 refused to grant the licence showing Oepot Manager
as the occupier, on the ground that Indian Oil Corporation is a company and
in case of a company any one of the directors only can be deemed to be the
occupier. He directed the appellant to submit proper applications duly signed         H
    602                      SllPREMF C<H'R'I REPORIS                  ::9981 3 S.C.R.

A   by one of the directors of the company. ln view of this refusal the appellant
    filed C. W.J.C. l'<o. 443 of 199 I in the Patna High Court. On I : .5 .92 the
    Corporation wrote to the Ministry of Petroleum and Natural Gas apprising it
    of the stand taken by the Inspector of Factories at Ranchi and seeking its
    guidance in the matkr. On 26.5.92 the :nspector of Factor;es passed an order
B   granting permis,wn to the Corporation to start pumping of oil and '.o do other
    allied processes .·n its new unit at Namkum on certain conditions and on
    temporary basis till the disposal of the said writ petition. [n that order also
    he rdterated that he would recognise oniy the Board of Directors of the
    Corporation '.n general and Director (\1arketing) 'n particular as the occupier
    of the factory and not the local Depot \bnager. On 2.'?.9! ti.e (1overnment
C   of India. in the Ministry of Petrolt:um and i'latural Oas. wrote to the Chid
    Inspector of Factmks that the Ministry had already issued notifaations
    dee aring the unit 'ncharge as the occupt~r for the purpos~ of'.he Act. !k was
    accordingly advis"d to recognrse the offk,-r 'ncharg:e of th.: concn:1ed depot
    as the occupier of that factory. Rejecting th,s r~qucst the (n,pcctor of Factories
D    reherakd the stand ~aken by him and refus«d to n:cornise the otlkcr ind1arge
    as the occupier. lht·"cupon the Corporation filed a more comprchensiv~ petition,
    C.W.J.C. No. 2456uf1992 challenging tht action of the !nspcctor of Factories.

         Before the High Court two questions were rabed on behalf of the
   appeHant. On.: was whether in the case of d company one of the directors of
E the company oniy L'dn be recognised as an occupier of the factory o\~'.led by
   it and the second Wds whether dause (iii) would apply to the factories of the
   Corporation and it :, open to the Centrai Government to num inate any person
   other than the director as the occupier. Fol~ov. ing the decision of this Court
   in J K. Industries Limited und 'lthers v. The Chii'f !mpedvr <1 Fa<tories
   und Boilers and Oth<:n, [ 1996 J 6 SCC 665, wherein it :s held that in the case
F of company, which owns a factory, it is only one of the dir~cturs of the
   company who can be '.lotified as tltc occupi~r of the factory for the purposes
   of the ractories Act and the company cannot :10minate any oth~r '"·nployc.:
   as the occupier of the factory. the High Cullrt answered the fiN r.,,ucstinn
   accordingly. In vkw· of this decision the learned Attm·ne) ( 'encrai appearin~.
(i for the Corporation has not raised that point before us. On th~ s.:cund ;mint.
   the High Court ~dd that proviso· (1i) to Section 2(n) would ~pply to the
   stora8e depots at Narni..Jn. It g.aVt' th.: foHuv. ing three reasons ''or takmg. ~hat
    view:(:) The stong.: depots an: ov.ned by :he company and not by Crntral
    Government, though the company itself is owned. to a vc-ry '.arg.: ~x:ent by
    the Central Government. (2) proviso (ii) to Section 2(n) is applicable tu all the
H companies as it does not make any distinction between a private company
        INDIAN OIL v. l'HIEF INSPECTOR OF FACTORILS [NANA VATL J.;         603
and a Government owned company, and (1) the Depot "1anager has not been          A
appointed by the Central Government but by the company. It, therefore,
dismissed both the petitions.

        Pressing or. ly the second point the learned Attorney General submitted
 that though Indian Oil Corporation is a Government company and, therefore,
 a company as contemplated by clause (ii) of the proviso to Section 2(n), its B
 factories would properly fall within the purview of clause (iii) inasmuch as the
 Corporation is in reality owned by the Central Government and almost all its
 affairs, except the day to day affairs, are controlled by the Central Government.
 He submitted that 9 ! .5 per cent of its share capital is held by the Government,
 5 per c~nt by its employees and the rest by the financial institutions. The C
 Government officers, acting for and on behalf of the President, had, as initial
 subscribers, applied for the formation and incorporation of the company. ·;·he
 articles of association disclose that the Central Government has all-pervasive
 control as regards increase or reduction of the capital of the corporation, its
 borrowing powers, appointment and removal of its Chairman and directors,
 powers of its directors and working of the corporation \tself. Under Article D
 144 the President has been given the power to call for any returns, accounts
 and other information with respect to the papers and activities of the company
 and to issue such directives or instructions as may be considered necessary
 in regard to the financing, conduct of business and affairs of the corporation.
 He also drew our atkntion to Section 2(n) of the Act and submitted that the
main part of the definition of the word "occupier" itself makes it clear that the E
person who has the ultimate controt over the affairs of the factory is to be
regarded as the occupier of the factory. He submitted that obviously in case
of a company, though it does not ordinarily look after day to day affa1rs of
 its factories, the ultimate c'Jntrol is that of the company and, therefore, the
directors in whom the power to manage the affairs of the company vest are
                                                                                   F
deemed to be the occupier of the factory. He further submitted that if the
ultimate control is the litmus test for finding out who should be regarded as
occupier of the factory, as held by the this Court in the case of J.K. Industries
(Supra), in the case of the appellant-corporation it will have to be held that
the ultimate control over the affairs of ail the factories of the Corporation is
really of the Central Uovernment, anri, therefore, all the factories of the G
Corporation should be regarded as factories owned and controlled by the
Central Government. As there is a special provision governing factories
owned or controlled by the Central Government the genen1l provision made
with respect the companies, will not apply.

      On the other hand, the learned counsel for the contesting respondents      Il
    604                        SUPREME COllR I RFPOR IS                 [1998: 3 SC.R.

A   supported the judgment of the High Court on the first two grounds given by
    it and further contended that on a correct and harmonious interpretation of
    clauses (ii) and (iii) of the first proviso to Section 2(n) it should be held that
    clause (iii) applies only to those factories which are run by the government
    departmentally. He submitted that the appeHant-C'orporation is just :ike any
B   other company, has its own share capital. has a Board of Directors !n whom
    the power to manage the affairs of the company vests and profit and loss
    made by it would be its own. Thus it is not merely a separate legal entity but
    is quite independent and different from the government. He also submitted
    that though the Government has vast powers to control the aff.irs of the
    Corporation yet the factories of the Corporation are run by the Corporation
C   and its employees and not by the concerned Government department and the
    employees working therein.

             Section 2(n) of the Act which defmes the word 'occupier' reads as
    under.

D         "2(n) 'occupier' of a factory means the person who has ultimate control
    over the affairs of the factors:

              Provided that

               (i)    in the case of a firm or other association of individuals, any one
E                     of thi: individual partners or members thereof shall be deemed to
                      be the occupier,

               (ii)   in the case of a company; any of the directors shaH be deemed
                      to be occupier,

F              (iii) in the case of a factory owned or controlled by the Central
                     Government or any State Government, or any local authority. the
                     person or persons appointed to manage the affairs of the factory
                     by the Central Government, the State Government or the local
                     authority, as the case may be 'hall be deemed to be the occupier;

G

           Second proviso to Section 2(n) is not set out.. as it is not necessary to
    refer to it.

H            Prior to its amendment in 1987 section 2(n) read as under:
       IND!AN OU. v. CHIEF l._SPECTOROl- l·M'TOR:ES [NANA YA Tl, J.]       605
      "2(n) ·occupier of a factory means the person who has ultimate control       A
over the affairs of the factory, and where the said affairs are entrusted to a
manag;ng agent. such agent shall be deemed to be the occupier of the
factory"

     Before l 987 Section 2(n) was required to be read with Section I 00 of the
Act which mad as under :                                                           B

     "Section \ 00 Determination of occupier in certain cases:

        (1)   Where the occupier of a factory is a firm or other association of
              individuals, any one of the individual partners or members thereof
              may be prosecuted and punished under this Chapter for any            c
              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      D
              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 of the             E
              directors thereof may be prosecuted and punished under this
              Chapter for any offence for which the occupier of the factory is
              punishable:

              Provided that the company may give notice to the Inspector that
              it has nominated a director, who is resident within India, to be
                                                                                   F
              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:                      G
              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.                                    H
    606                      Sl:PRFME (_'(){,I{' REl'ORrs              [ 1998] 3 S.C.R.

A           (3)

           \Vhile amending Section 2( n) in : 987 a >ignificant change was made by
    the :egislature. Section 100 was Jeleted and instead in Section 2(n) itself a
    stricter provision was made by introducing the tirst proviso. In J.K. Industries
    Limited (supra) this Court had an occasion to consider the history of these
B   provisions and the ob_iects and reasons why changes were made therein from
    time to t'.me. In that context. the Court observed that '"By the Amending Act
    of 1987 it appear .s that the le~islature 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
C   factories and the sakty measures therein ........... Proviso (ii) was introduced by
    the Amending Act. cou~hed in a mandato1y form-"any one of the directors
    shall be deemed to be the octupier"- keeping in view the experience gained
    over the year as to how the directors of a company managed to escape their
    liability, for various bn:aches and defaults committed in the factory by putting
    up another employce as a shield and nominating him as the 'occupier' who
D   would wil tingly suffrr penalty and punishment ...... Proviso (ii) now makes it
    possible to reach out to a director of th" company itself, who shall be
    prosecuted and punished for breach of the provisions of the Act, apart from
    prosecution and punbhmcnt of the Manag.:r and of the actual offender."
    These observations were made by this Court while considering constitutional
    validity and correct interpretation of clause (ii) of the tirst proviso to Section
E   2(n). We have referred to the same as they arc also reievant for construing
    the true ambit and width of clauses (ii) and (iii) of that provision.

           If ultimate control is the litmus test, then as contended by the learned
    Attorney General, it 1s necessary to find out whether the Central Government
    has the ultimate control over the affairs of the factories of the corporation or
F   it is the corporation itself which possesses such control.

          In Som Praka;,h Rekhi v. Union of India .4nr., [1981] l SCC 449 this
    Court has held that corporations are one sp.:cies of legal persons invented
    by the law and :nvcsted with a varieties of attributes so as to achieve certain
G   purposes sanctioned by the law. The characteristics of corporations, their
    rights and liabilit:es, functional autonomy and juristic status, are
    jurisprudentia:ly recognised as of a distinct ent!ty even where such
    corporations are Stal<:! agencies or instrumentalities. But merely because a
    company or other kgal person has functional and jural ndividuality for
    certain purposes and m certain areas of law, it does not necessarily follow that
H   for the efti:ctive enforcement of fundamental rights under our constitutional
       INDIAN OIL v. CHIEFINSPECTOROFFACTORIES [NANAVATU.]                   607
scheme, court should not scan the real character of that entity; and if it is A
found to be a mere agent or surrogate of the State, in fact owned by the State,
in truth controlled by the State and in effect an incarnation of the State,
constitutional lawyers must not blink at these facts and frustrate the
enforcement of fundamental rights despite the inclusive definition of Article
 12 that any authority controlled by the Government of India is itself State. The B
true test is functional, not how the legal person is born but why it is created.
Apart from discharging functions or doing business as the proxy of the State,
wearing the corporate mask there must be an element of ability to affect legal
relations by virtue of power vested in it by law. After taking into consideration
the fact that control by the government over the Corporation is writ large in
the Act and in the factum of being a Government company and the C
circumstances under which the Bharat Petroleum Corporation Limited was
made a Corporation, this Court further held that they emphasise the fact that
it "is not a mere company but much more than that and has a statutory flavour
in its operation and functions, in its powers and duties and in its personality
itself, apart from being functionally and administratively under the thumb of
the government." It was also observed that a "commercial undertaking although D
permitted to be run under our constitutional scheme by government, may be
better managed with professional skills and on business principles, guided,
of course, by social goals, if it were administered with commercial flexibility
and celerity free from departmental rigidity, slow motion procedures and
hierarchy of officers ...... Welfare States like ours called upon to execute many
economic projects readily resort to thi~ resourceful legal contrivance because E
of its practical advantages without a wee bit of diminution in ownership and
control of the undertaking. The true owner is the State, the real operator is
the State and the effective controllerate is the State and accountability for its
actions to the community and to Parliament is to the State ...... The core fact
is that the Central Government, though this provision, chooses to make over,
for better management, its own property to its own off spring. A Government F
company is a mini-incarnation of government itself, made up of its blood and
bones and given corporate shape and status for defined objectives, not
beyond."

      Though in a different context this Court in Mahabir Auto Stores and G
others v. Indian Oil Corporation and others, [I 990] 3 SCC 752 held that the
Indian Oil Corporation which is a statutory body incorporated under the
Companies Act, is an organ of the State or an instrumentality of the State.
The relevant thing to be noted is that this Court while so holding took note
of the fact that the corporation is subject to the policies, directions, instructions
and guidelines issued by the Ministry of Energy.                                      H
    608                      SUPREME COURT REPORTS                       [1998] 3 S.C.R.

A          Again in J.K. Industries Ltd. this Court, while dealing with Section 2(n),
    as amended by Act 20 of 1987 emphasised the use of the word "ultimate" and
    after referring to the decision in John Donald Mackenzie v. Chief Inspector
    of Factories, AIR ( 1962) SC : 351 observed that the law does not countenance
    duality of ultimate control. If the transfer of the control to another person is
B   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 fact. It is
C   also held therein that the deeming provision made in proviso (ii) does not
    override the substantive provision of Section 2(n) but clarifies it.

           The above discussion fully supports the contention of the learned
    Attorney General that for the purpose of Section 2(n) what is to be seen is
    who has the 'ultimate control' over the affairs of the factory. Relevant
D   provisions regarding establishment of the corporation and its working leave
    no doubt that the ultimate control over all the affairs of the corporation,
    including opening and runnmg of factories, is with the Central Government.
    Acting through the corporation is only a method employed by the Central
    Government for running its petroleum industry. In the context of Section 2(n)
    it will have to be held that all the activities of the corporation are really carried
E   on by the Central Government with a Corporate mask.

         It is, therefore, not possible to agree with the contention raised on
  behalf of the contesting respondents that the ultimate control over the factories
  of the Corporation lies with the Corporation and not with the Central
  Government, though it is true as contended by the learned counsel appearing
F for them that the Corporation is a legal entity, has a separate and independent
  existence of its own and the right to manage the affairs of the Corporation
  including the right to set up and run the factories vests in the Board of
  Directors. In our opinion, it will not be proper to adopt this narrow approach
  while construing the scope and ambit of clauses (ii) and (iii) of the first
G proviso to Section 2 (n). The approach which deserves to be adopted is one
  which would achieve the object of the provision and, therefore, the same
  approach which was adopted by this Court in Som Prakash Rekhi's case.
  (supra) is to be preferred over the narrow approach which is the basis of the
  contention raised on behalf of the contesting respondents.

H         Apart from the main part of Section 2(n), the first proviso also indicates
            INDIAN OIL v. CHIEF INSPECTOR OF FACTORIES (NANAVATI,J.]             609
     that the Legislature intended that the person having ultimate control over the A
     affairs of the factory has to be regarded as occupier of the factory. The
     proviso to the Section is not in the nature of an exception. In order to avoid
     any ambiguity, to plug loopholes and to seal the escape routes a deeming
     provision has been made in a mandatory form. In the case of a firm obviously
     the partners of the firm have ultimate control over the affairs of the partnership. B
     In case of other type of association the members thereof will have such
     control. In the case of a company the directors have the ultimate control, as
     the power to manage the affairs of the company vests in the Board of
     Directors. What clauses (i) and (ii) of the proviso provide is that they shall
     be deemed to be 'occupiers'. Thus they merely restate the position which is
     obvious even otherwise. The position of the government and the local C
     authority is quite different from that of a firm or an association or a company
     not only with respect to the person who can be said to be in ultimate control
     but also with respect to the object for which factory is set up. In a democratic
     set-up of Government, it may not be possible to say with certainty as to who
     is having the ultimate control. In a welfare state, the government does not
     carry on such activity for its own profit or benefit but for the benefit of the D
     people as a whole. Moreover, it is the government which looks after the
.,   successful implementation of the provisions of the Factories Act and, therefore,
     it is not likely to evade implementation of the beneficial provisions of the
     Factories Act. That appears to be the reason why the legislature though it
     fit to make a separate provision for the Government and the local a~thorities.
     Ordinarily, for running the factories owned or controlled by the Central E
     Government or any State Government, or any local authority, a person or
     persons would be appointed by it to manage the affairs of the factory,
     because the Government or the local authority as a whole would not run the
     factory. Therefore, the legislature appears to have provided that in case of a
     factory owned or controlled by the Central Government, the State Government F
     or the local authority the person or perscms appointed to manage the affairs
     of the factory by the Central Government, State Government or the local
     authority, as the case may be, shall be deemed to be the occupier. Therefore,
     if it is a case of a factory in fact and in reality owned or controlled by the
     Central Government or the State Government or any local authority then in
     case of such a factory the person or persons appointed to manage the affairs G
     of the factory shall have to be deemed to be the occupier, even though for
     better management of such a factory or factories a corporate form is ad0pted
     by the government.

           Before 1987, when Section I 00 was the governing provision, any one
     of the individual partners of a firm or any one of the members of association     H
    610                     SUPREME COURT REPORTS                   [1998] 3 S. C.R.

A of individuals could be punished unqer sub-section (I) thereof for any offence
    for which the occupier of the factory was punishable. The firm or association
    was given an option to nominate one of its members as the occupier of the
    factory and if such an option was exercised by giving a notice to the Inspector
    then he alone was to be deemed to be the occupier of the factory for the said
B   purpose. Under sub-section (2) if the occupier of the factory was a company
    then any one of the directors thereof could be prosecuted and punished. A
    similar option was available to the company, as in th~case of a firm and an
    association of individuals. It is significant to note that it was by way of a
    proviso to sub-section (2) which dealt with case of a company that the
    provision was made for dedding who should be deemed to be the occupier
C   of a factory in case it belonged to the Central Government or any State
    Government or any local authority and a similar option is made available to
    them. The said proviso though enacted as an exception to the main part of
    sub-section (2) is truly by way of a separate provision made in the case of
    a factory belonging to the Central Government or any State Government or
    any local Authority. While making the amendment in 1987 in Section 2(n) and
D   deleting Section 100 at the same time the Legislature made the proviso to sub-
    section (2) of Section I00 an independent proviso to Section 2(n). That also
    clearly indicates the intention of the Legislature that it wanted to make a
                                                                                       ,
    separate provision for deeming who should be the occupier of a government
    factory.
E
           For the aforesaid reasons we hold that as the factories run by the
    appellant-corporation are effectively and really owned and controlled by the
    Central Government they fall within the purview of clause (iii) and not clause
    (ii) of the first proviso to Section 2 (n). In our opinion, the High Court was
    wrong in taking a contrary view. We, therefore, allow these appeals, set aside
F   the judgment and order passed by the High Court to the extent indicted
    above and direct Respondents Nos. 1 and 2 to accept the persons appointed
    by the Central Government of manage the affairs of the factories at Namkum
    as the occupiers of those factories for the purposes of Section 2(N) of the
    Factories Act. In view of the facts and circumstances of the case, we direct
G   the parties to bear their own cost.

    R.P                                                         Appeals allowed.