State of U. P. v. Kamla Prasad Khetan — 1973 DIGILAW 549 (ALL)

JUDGMENT D.S. Mathur, C.J. - This is an appeal by the State of Uttar Pradesh against the order of the learned Single Judge partly allowing the writ petition of Kamla Prasad Khetan and Maheshwari Khetan Sugar Mills Private Ltd., Ramkola, district Deoria, and directing the Collector of Deoria to permit the petitioners to file objection against the appointment and continuance of the Receiver and to decide the objections in the light of the principle laid down in the case of Kundan Sugar Mills Private Ltd. and in accordance with the law. Naturally, the observations made by the learned Single Judge were also to be kept in mind while deciding the objections. There was also a direction that the objection shall be decided before the end of November 1973. 2. One of the findings recorded by the learned Single Judge was that the "occupier" of a factory as contemplated by Section 2(k) of the U. P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 (hereinafter referred to as the Act) did not include the company, and therefore, no proceedings for recovery of the cane price, commission and interest thereon as arrears of land revenue could be taken against the company. It is this finding which has been challenged in the special appeal. 3. It is under Section 17(4) that the amount of arrears, on account of the price of cane and commission on the purchase of cane and also interest due thereon, can be recovered as arrears of land revenue. The sub-section runs as below : "17(4). The Cane Commissioner shall forward to the Collector a certificate under his signature specifying the amount of arrears on account of the price of cane plus interest, if any, due from the occupier and the Collector, on receipt of such certificate, shall proceed to recover from such occupier the amount specified therein as if it were an arrear of land revenue." 4. The sub-section clearly provides that the arrears can be recovered from the occupier as if it were an arrear of land revenue. Being a rule of special procedure it must be strictly construed; otherwise, the remedy of the cane growers is to recover the amount due in a regular suit. The recovery provided by the sub-section is from the occupier and not from the owners. Being a rule of special procedure it must be strictly construed; otherwise, the remedy of the cane growers is to recover the amount due in a regular suit. The recovery provided by the sub-section is from the occupier and not from the owners. Consequently, unless the company falls in the category of occupier the arrears cannot be recovered from it as arrears of land revenue under the provisions of Secs. 279 and 286-A of the U. P. Zamindari Abolition and Land Reforms Act. 5. The expression `occupier' has been defined in Section 2(k) of the Act as below :- "Occupier of a factory or a Gur, Rab, or Khandsari Sugar Manufacturing unit means the person who, or the authority which has the ultimate control over the affairs of the factory, and, where the said affairs are entrusted to a Manager, a Managing Director or a Managing Agent, such Manager, Managing Director or Managing Agent shall be deemed to be the occupier of the factory and the Gur, Rab, or Khandsari Sugar Manufacturing Unit." 6. Section 21 of the Act makes it clear that the expression `person' used in Section 2(k) includes a company. Section 4(33) of the U. P. General Clauses Act also leads to the same inference. The term `Person' has been defined therein to include any company or association or body of individuals, whether incorporated or not. This definition can be made applicable unless there is anything repugnant in the subject or context of the enactment. The term `person' used in Section 2(k) of the Act, therefore, includes a company. 7. The question, however, which arises is whether the company can be treated as an occupier when the affairs of the company have been entrusted to a Manager, a Managing Director or a Managing Agent. It has been strongly contended on behalf of the State that a deeming clause enlarges the scope of the provision and, therefore, in case of there being a Manager, a Managing Director or a Managing Agent, the occupier is not only such Manager, Managing Director or Managing Agent but also the company which has the ultimate control over the affairs of the factory. A finding on this question can be recorded on a consideration of the various statutory provisions. 8. A finding on this question can be recorded on a consideration of the various statutory provisions. 8. The definition of Manager contained in the Indian Companies Act, 1913 and also in the companies Act, 1956, makes it clear that the Manager acts under the superintendence, control and direction of the Board of Directors. Similarly, the definition of Managing Director contained in the Companies Act, 1956, as amended, makes it clear that the Managing Director of a company shall exercise his powers subject to the superintendence, control and direction of the Board of Directors. There was no such restriction for a Managing Agent : it may, however, be mentioned that this expression has since been deleted from the Companies Act, 1956. There is also a marked difference in the terminology of the corresponding definition of "occupier" in the Factories Act, 1948. Thereunder, reference was made only to Managing Agent and not to a Manager or a Managing Director. 9. From the above provisions it shall be evident that even though the Manager or the Managing Director does not have ultimate control over the affairs of the factory they always act subject to the superintendence, control and supervision of the Board of Directors, they were included in the definition of an occupier. 10. Section 21 of the Act lays down who shall be deemed to be an "occupier" of the factory where the occupier is a firm or other association of individuals or is a company. We shall make a reference to Sub-sec. (2) which is applicable to a company. This sub-section provides that where the occupier of a factory is a company, anyone or more of the directors thereof may be prosecuted and punished under the Act for any offence for which the occupier of the factory is punishable. The proviso to the sub-section, however, provides that where the company has given notice to the Collector that it has nominated a director to be the occupier of the factory for the purposes of the Act, such director shall be deemed to be the occupier of the factory for the purpose of the Act until further notice cancelling his nomination is received by the Collector or until he ceases to be a Director. There was some controversy as to the application of this proviso for determination who the occupier is, whether this definition would apply merely to prosecution and punishment as contemplated by Section 21 or for all purposes of the Act. For the purposes of this Special Appeal we need not express any opinion on this question. There can, however, he no difficulty in considering Section 21 while expressing an opinion whether the company continues to be an occupier when the affairs of the factory have been entrusted to a Manager, a Managing Director or a Managing Agent who can by virtue of Section 2(k) be regarded as an occupier of the factory. 11. Section 21 becomes applicable when the company is within the meaning of the Act the occupier of the factory. In case on the existence of a Manager, Managing Director or a Managing Agent, as contemplated by Section 2(k), the company continues to be an occupier of the factory, it would mean that there would be two sets of occupiers, one consisting of the directors of the company and the other occupier shall be the Manager, Managing Director or Managing Agent. In case the company continues to be the occupier in spite of there being a Manager, Managing Director or Managing Agent, the Director nominated may not be the Managing Director himself. The proviso to Section 21(2) does not empower the Collector to reject the nomination made by the company. The rules framed under the Act do make such a provision. Any rule made beyond the rule making power can have no legal effect. In the above circumstances, for the purposes of prosecution and punishment, the person liable to prosecution and punishment can be not the Managing Director but a person other than the Managing Director. It could not be under the contemplation of the Legislature that even though there is a Managing Director who is, in the eye of law, the occupier of the factory and such Managing Director is responsible for complying with the provisions of the Act and the rules made thereunder, the Director who can be prosecuted and punished is another person. It could not be under the contemplation of the Legislature that even though there is a Managing Director who is, in the eye of law, the occupier of the factory and such Managing Director is responsible for complying with the provisions of the Act and the rules made thereunder, the Director who can be prosecuted and punished is another person. It is true that under Section 22 of the Act any person contravening any of the provisions of the Act or the rules or the orders made thereunder can be prosecuted, but there are many provisions disregard for which the occupier of the factory can be proceeded with. In such cases, the Managing Director who is the occupier of the factory shall be able to escape punishment and the punishment can be awarded to another person who is not the Managing Director. This conflict can be resolved only to holding that where there is a Manager, a Managing Director or a Managing Agent as contemplated by Section 2(k), he alone is the occupier of the factory and in such circumstances the company cannot be regarded as the occupier of the factory. The provisions of Section 21 shall then be applicable to only those cases where there is no Manager, Managing Director or Managing Agent as contemplated by Section 2(k) and to avoid prosecution of all the directors the company can nominate one director who shall be deemed to be the occupier of the factory; but where there is a Manager, a Managing Director or a Managing Agent as contemplated by Section 2(k), provisions of Section 21 shall not be applicable and that person alone shall be the occupier of the factory and can be prosecuted for breach of the provisions of the Act, the rules and the orders made thereunder. 12. While enacting Section 17(4) the Legislature had in mind to provide a speedy remedy for the recovery of the cane price and commission. It was from this reason that it was contended on behalf of the State that such an intention of the Legislature could be given effect to only if the company continues to be one of the occupiers of the factory. It was from this reason that it was contended on behalf of the State that such an intention of the Legislature could be given effect to only if the company continues to be one of the occupiers of the factory. It was further contended that the underlying intention was that the arrears of cane price and commission be recovered as arrears of land revenue and such recovery was possible from the company, that is, from the assets of the company, the Manager or the Managing Director being a person who may not have sufficient assets of his own from which the recovery can be made. In case this factor is given greater importance than to what can be deduced from the provisions of Section 21 of the Act, hardship of more serious nature can be caused to the directors of the company. 13. The mode of recovery as arrears of land revenue is provided in Secs. 279 and 286-A of the U. P. Zamindari Abolition and Land Reforms Act. One of the mode of recovery is by arrest and detention of the defaulter. The result of accepting the contention of the learned Advocate General shall be that even though the non-payment of the price of cane and commission and interest thereon may be due to defaults on the part of the Manager, Managing Director or Managing Agent, the Managing Agent being one who manages the factory without the superintendence, control and supervision of the Board of Directors, the directors of the company can be arrested and detained for the recovery of the arrears. 14. On a consideration of the provisions of the Act and the hardship to which the directors of the company may be put to, we are of opinion that the provisions of Section 2(k), be not given a wider scope to include the company among the occupier of the factory where there is a Manager, a Managing Director or a Managing Agent as contemplated by Section 2(k). We are alike to the inconvenience and difficulties to which the cane growers would be put to if there is no speedy remedy for the recovery of the cane price and the commission from the company; but it is for the courts of law to interpret the provisions of the enactment leaving it open to the Legislature to amend it. 15. 15. Our attention was drawn to the case of John Donald Mackenzie v. Chief Inspector of Factories, Bihar, Ranchi, A.I.R. 1962 S. C. 1351. The question for determination in this special appeal was not in issue in that case. Further, that was a case under the Factories Act whereunder only a Managing Agent can be regarded as occupier of the factory provided that the affairs of the company had been entrusted to him. A Manager of the factory is not and cannot be treated as the Managing Agent. The Manager could, in that case, be regarded as an occupier provided that the ultimate control over the factory had been transferred to him. Another rule, laid down in this case is that the burden to prove that the person is an occupier, in the eye of law lies upon him and he must discharge this burden before he can be recognised as an occupier. This principle can easily be made applicable to a case under the Act. When the matter is considered by the Collector he shall have to first of all record a finding whether there is any person who can within the meaning of Section 2(k) of the Act be deemed to be a Manager, Managing Director of Managing Agent and if not, the company shall be the occupier and the recovery can be made from the assets of the company. 16. To sum up we are in respectful disagreement with the view expressed by the learned Single Judge that the occupier of a factory must be a sentient being. The company having ultimate control over the affairs of the factory can be the occupier of the factory provided that there is no Manager, Managing Director or Managing Agent as contemplated by Sec. 2(k). 17. The term of the present Receiver expires after three days i.e. on December 23, 1973. Consequently. there need be no direction for the decision of the objection in respect of the appointment of the Receiver whose term is expiring very shortly. However, before the term of the Receiver is extended or a fresh Receiver is appointed there should be compliance of the law as laid down by this Court. 18. Subject to the observations made above, the Special Appeal is here-by dismissed. Costs on parties.