J.K. Industries Ltd v Chief Inspector of Factories and Boilers (1996)

The Factories Act fastens almost every duty in the Act on one person — the occupier. Who that person is therefore decides who goes to jail when a worker is maimed. J.K. Industries answers the question for the commonest form of factory ownership in India, the company, and the answer is blunt: in the case of a company the occupier must be a director of that company. No manager, no general manager, no vice-president (works), no "occupier by board resolution" — a director, or nobody.

It matters for the exam for three reasons: it is the leading authority on s. 2(n), a guaranteed short-note topic; it is one of the few Factories Act cases with a constitutional dimension, so it can be asked alongside Arts. 14 and 21; and it is the judicial face of the post-Bhopal amendments of 1987.

The Factories (Amendment) Act 1987, passed after the Bhopal gas disaster of December 1984, rewrote the safety architecture of the Act. It inserted s. 7A, imposing on the occupier a general duty to ensure, so far as is reasonably practicable, the health, safety and welfare of all workers; it inserted Chapter IV-A on hazardous processes; and it sharply raised the penalties in s. 92. It also added the provisos to s. 2(n), of which proviso (ii) says that in the case of a company, any one of the directors shall be deemed to be the occupier.

The appellants were companies owning factories. When they filed applications and notices under s. 7 read with the State Factories Rules for registration and licensing, they nominated as occupier not a director but a senior employee — typically the works manager or the resident chief executive of the plant. Each nomination was backed by a resolution of the Board of Directors purporting to vest in that employee the "ultimate control over the affairs of the factory", so as to bring him within the main part of s. 2(n).

The Chief Inspector of Factories refused those nominations, taking the view that after 1987 proviso (ii) left a company no choice: a director had to be named. The companies challenged that in the High Courts and attacked the vires of proviso (ii) as violating Arts. 14 and 21. The High Courts upheld the Inspector; the companies appealed.

1. On the true construction of s. 2(n), can a company nominate a person other than a director — an employee or officer, however senior — as the occupier of its factory?
2. Does proviso (ii) conflict with, or travel beyond, the main part of s. 2(n)?
3. Is proviso (ii) discriminatory under Art. 14, given that a firm may nominate any partner and a Government-owned factory may nominate a manager?
4. Does exposing a director to vicarious penal liability under s. 92, for acts he may know nothing about, violate Art. 21?

For the companies. The main part of s. 2(n) supplies the definition — "the person who has ultimate control over the affairs of the factory" — and it is a test of fact. A Board may delegate; where it has by resolution vested the ultimate control of a particular factory in a named executive, that executive answers the statutory description. Proviso (ii) is a deeming provision for cases of doubt, not a mandate; read as a mandate it contradicts the main part, and a proviso cannot swallow the section it qualifies. Practically, a director in a head office hundreds of kilometres away has no operational knowledge of the plant; exposing him to imprisonment under s. 92 for a breach on the shop floor offends Art. 21, and the distinction drawn between companies and other owners offends Art. 14.

For the State. Proviso (ii) is in harmony with the main part. In a company the ultimate control over the affairs of the factory vests in the Board of Directors as a matter of company law, and that control can be delegated in its exercise but not surrendered: what a Board hands to an employee is day-to-day control, never ultimate control. So a director is the person who satisfies the main test. The object of the 1987 amendments was to place responsibility for worker safety where money is voted and policy is made; permitting nomination of an employee would let companies install a paid scapegoat and leave the decision-makers untouched.

The appeals were dismissed. The holdings, in the order you should give them:

• Only a director of the company can be nominated as the occupier of a factory owned by a company. A company cannot nominate any employee or officer, however high in the hierarchy, unless he is also a director.
• The ultimate control over the affairs of a factory owned by a company vests in its Board of Directors, and cannot be vested in anyone else. A Board resolution purporting to confer "ultimate control" on an employee is ineffective for the purposes of s. 2(n): what is in truth delegated is the exercise of control, not the ultimate control itself.
• Proviso (ii) does not travel beyond the main provision of s. 2(n) and is not ultra vires it. There is no conflict between the two; the proviso identifies, for one class of owner, the person in whom the main test is satisfied.
• Proviso (ii) does not violate Art. 14. The classification of factory owners into individuals or firms, companies, and factories owned or controlled by Government has an intelligible differentia — it tracks where ultimate control actually resides in each form of organisation — and a rational nexus with the object of securing accountability for the safety and health of workers.
• Proviso (ii) read with s. 92 does not offend Art. 21. The liability is not absolute: s. 101 allows an occupier charged with an offence to bring the actual offender before the court and, on proving due diligence to enforce the Act and that the offence was committed without his knowledge, consent or connivance, to be discharged, the actual offender being convicted in his place. With that safeguard the procedure is fair, just and reasonable.

Three propositions, all necessary to the result:

1. In relation to a company, the "person who has ultimate control over the affairs of the factory" within s. 2(n) is a director, because ultimate control vests in the Board and is incapable of being transferred to an employee.
2. Proviso (ii) is therefore consistent with the main definition and is not ultra vires it; a company must nominate one of its directors as occupier, and the nomination of an employee is bad.
3. The proviso, and the penal consequences that follow from it under s. 92, are constitutionally valid against Arts. 14 and 21, the s. 101 defence being the answer on Art. 21.

Note the limits. The company retains a choice of which director — the Act designates no particular office-holder. And nothing turns on whether the nominated director lives near the factory or supervises it personally; his liability flows from the nomination, not from presence.

The decisive move is a company-law move, not a labour-law one. Everything turns on "ultimate control". A Board manages the company's affairs; it may appoint managers and delegate functions, but it remains answerable to the shareholders and may revoke any delegation at will. A power that can be recalled at pleasure is not the ultimate power — the ultimate power is the power to recall. So the executive named in the resolution never had what s. 2(n) requires, and the resolution was an attempt to relabel delegation as abdication.

The second move is purposive. Compliance costs money — guarding, ventilation, safety audits, emergency plans under Chapter IV-A. The person who decides whether that money is spent is not the works manager; it is the Board. A statute pinning criminal liability on the works manager would punish the person who asked for the money and spare those who refused it. Reading proviso (ii) as mandatory aligns liability with the power to prevent harm — exactly what the 1987 Parliament, legislating with Bhopal in front of it, intended.

The third move disposes of Art. 21 by pointing to s. 101. The Court did not say vicarious liability is unobjectionable in the abstract; it said this scheme leaves an escape route for the genuinely blameless director. Liability is severe but not blind.

Indian Oil Corporation Ltd v Chief Inspector of Factories (Supreme Court, 1998) applied the same test to proviso (iii). For a factory owned or controlled by Government — including a Government company — ultimate control lies with the Government notwithstanding the company's separate legal personality, so the persons appointed by the Government to manage the affairs of the factory are the occupiers and no director need be named. Together the two cases make the scheme coherent: the Act looks for ultimate control, and the provisos say where it is found in each form of ownership.

In practice the decision produced the now-universal corporate arrangement of a nominated "occupier-director" for each plant, with a board resolution recording the nomination and a compliance system designed to preserve the s. 101 defence. The case is also a standard citation for the proposition that a proviso may explain rather than derogate from the main provision.

The Factories Act 1948 was repealed on 21 November 2025 by the Occupational Safety, Health and Working Conditions Code 2020 (Act 37 of 2020), whose repeal and savings provision is s. 143.

The ratio of J.K. Industries survives intact, because the Code re-enacts the very words it construed. OSH Code s. 2(zs) defines "occupier" of a factory as the person who has ultimate control over the affairs of the factory, and keeps the same three provisos: for a firm or association of individuals, any one of the partners or members; for a company, any one of the directors; and for a factory owned or controlled by Government, the person or persons appointed to manage its affairs. Since the operative language is unchanged, the Court's construction of "ultimate control" applies to the Code without adjustment.

One substantive change, and it is the examinable one. The company proviso in s. 2(zs) now reads "any one of the directors, except any independent director". That answers a practical criticism of J.K. Industries: an independent director, who by definition takes no part in management, could nevertheless be nominated under the old proviso and prosecuted. Under the Code he cannot be. The principle is unchanged — the occupier must sit on the Board — but the pool is narrowed to directors who actually run the company.

The Code also makes the employer the principal duty-holder, and s. 2(u) expressly includes, in relation to an establishment which is a factory, the occupier of the factory. General duties of the employer are in s. 6; registration of establishments in s. 3.

Under the Code. OSH Code 2020, s. 2(zs) carries s. 2(n) forward in the same words — the occupier is the person with ultimate control over the affairs of the factory, and in the case of a company any one of the directors. The change is that an independent director is expressly excluded from nomination. J.K. Industries therefore continues to state the law: a company's occupier must be a director, never a manager or employee.