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Allahabad High Court · body

1975 DIGILAW 273 (ALL)

Kamal Kisore Jhunjhunwala v. Prescribed Authority

1975-05-06

K.N.SINGH

body1975
JUDGMENT K. N. Singh, J. - This is a petition under Article 226 of the Constitution challenging order of the Prescribed Authority. Kanpur, dated 14-4-1972, directing the petitioner under Section 15 of the Payment of Wages Act, 1936 to pay wages and compensation to the respondent workmen. 2. M/s. Peepal Iron and Steel Indus- tries Ltd.. respondent No. 2, is a Public Limited Company registered under the Indian Companies Act, having- its office at Kanpur. The paid up capital of the Company was about rupees two lacy sixteen thousands divided into equity shares out of which Mukut Lal G. Bhatt and Bhanu Shanker G. Bhatt. respondent Nos. 4 and 5 held shares of about Rs. 38,000.00/- and their sons and wife and close relations held shares about Rs. 44.000/- and thus the controlling shares were held by the Bhatt group. The Company runs a factory known under the name and style of M/s. Peepal Iron and Steel Industries which carries on business of manufacture and sale of cast iron sluice valves corks etc. The Company fell into financial difficulties and it obtained loans from another firm styled as M/s. Shankerlal Murlidhar of Kanpur. They advanced a sum of Rs. 86.000.00 to the Peepal Iron and Steel Industries Ltd. and with a view to watch and safeguard their interest the petitioner Kamal Kishore Jhunjunwala was appointed one of the Directors of the Company with effect from 15-4-1971 as a nominee of the lenders viz-Mls. Shankerlal Murlidhar. The petitioner holds a share of Rs. 1.000/- only in the share capital of M/s. Peepal Iron and Steel Industries as that was the necessary qualification share for being appointed as Director. The petitioner was appointed Executive Director while Maha Narain Kapoor respondent No. 3. was the Managing Director, Mukut Lai G. Bhat and Bhanu Shanker G. Bhat were appointed as Directors. Since the Factories Act. 1948 was applicable to M's. Peepal Iron and Steel Industries Ltd. Mukut Lai G. Bhatt, respondent No. 4 was named and notified as Occupier under the provisions of Section 7 of the Factories Act with effect from 11-6-1966 and he still continues to be so named and notified. It is an admitted fact between the parties that no person has been named as Manager of the Factory under the provisions of Clause (f) of sub-section (1) of S. 7 of the Factories Act. 3. It is an admitted fact between the parties that no person has been named as Manager of the Factory under the provisions of Clause (f) of sub-section (1) of S. 7 of the Factories Act. 3. It appears that the Directors fell out amongst themselves and the financial position of the Company deteriorated with the result wages could not be paid to the work- men. Respondents Nos. 7 to 45 who are workmen of M/s. Peepal Iron and Steel Industries Ltd. filed an application under Section 15 of the Payment of Wages Act before the City Magistrate. Kanpur. who was appointed as the Prescribed Authority under the Payment of Wages Act, 1936, for the realisation and recovery of their wages and compensation. The petitioner and other Directors including respondents Nos. 3, 4 and 5 were arrayed as parties to the said application. The petitioner contested the workmen's claim and denied his liability for making payment of wages to them. The Prescribed Authority, however, held that it was the petitioner who was in the ultimate control of the affairs of the Company. therefore. he was responsible for payment of wages to the applicants. It was on the basis of this finding that the Prescribed Authority vide its order dated 14-4-1972 directed the petitioner to pay a sum of Rs. 14.493.01 as delayed wages to the said workmen and a sum of Rs. 390/- as compensation to respondents Nos. 7 to 45. The Prescribed Authority did not issue any direction against the respondent No. 3 who was the Managing Director or against the respondent No. 4 who was occupier of the factory or the respondent No. 5 who was also a Director or against the Company itself. Aggrieved the petitioner filed the present petition challenging the validity of the order of the Prescribed Authority. 4. Sri V. B. Singh, learned counsel for the petitioner urged that since the petitioner was neither Manager nor Occupier nominated or notified under Section 7 of the Factories Act, he was not personally responsible for the payment of wages, to the work- men. The Prescribed Authority committed a patent error of law in holding the petitioner responsible for the payment of wages and compensation to respondent workmen. The Prescribed Authority committed a patent error of law in holding the petitioner responsible for the payment of wages and compensation to respondent workmen. It was further urged that the Prescribed Authority relied upon a number of documents which were never disclosed to the petitioner nor he was given any opportunity to rebut the same. The petitioner was denied a reasonable opportunity of meeting the evidence relied upon against him by the Prescribed Authority. Sri Faujdar Rai learned counsel appearing for the respondent work- men urged that the findings recorded by the Prescribed Authority are findings of fact which cannot be interfered with under Article 226 of the Constitution and further the petitioner is not entitled to any relief as he failed to avail statutory alternative remedy available under the Payment of Wages Act. 5. Section 3 of the Payment of Wages Act 1936 fixes responsibility for payment of wages. The section is in the following terms : "3. Every employer shall be responsible for the payment to persons employed by him of all wages required to be paid tinder this Act : Provided that in the case of persons employed (otherwise than by a contractor) (a) in factories, if a person has been named as the manager of the factory under clause (f) of sub-section (I) of section 7 of the Factories Act, 1948. (I,) in industrial establishments, if there is a person responsible to the employer for the supervision and control of the industrial establishment, (c) upon railways (otherwise than in factories, if the employer is the railway administration and the railway administration has nominated a person ;n this behalf for the local area concerned. the person so named, the person so responsible to the employer, or the person so nominated, as the case may be, shall he responsible for such payment." 6. The enacting clause of the above section lays down that every employer shall he responsible for the payment of wages to the persons employed by it. The three sub clause; to the proviso indicate persons responsible for the payment of wages. Sub-clause-(a) to the proviso is applicable to factories. It lays down that in the case of factories it will be the responsibility of the Manager for payment of wages provided a Manager of the Factory is named under clause (f) of sub-section (I) of section 7 of the Factories Act, 1948. Sub-clause-(a) to the proviso is applicable to factories. It lays down that in the case of factories it will be the responsibility of the Manager for payment of wages provided a Manager of the Factory is named under clause (f) of sub-section (I) of section 7 of the Factories Act, 1948. Sub-clause (b) refers to other industrial establishments and it lays down that the responsibility for payment of wages is of a person who is responsible to the employer for the supervision and control of the industrial establishments. Sub-clause (c) lays down that in the case of railways the responsibility for payment of wages will be of a person nominated by the Railway Administration in their behalf for the area concerned. The proviso further lays down that the persons so named in either of the three sub-clauses shall be responsible to the employer or the persons so nominated as the case may be, he shall also be responsible for such payment. Any decree or order under Section 15 of the Payment of Wages Act can legally he passed for recovery of delayed or withheld wages against the prison who may be responsible for the pay merit of wages to workmen under Section 3 of the Act. 7. In the instant case on the admitted facts the provisions of Factories Act 1948 are applicable to M/s. Peepal Iron and Steel Industries Ltd., Kanpur, respondent No. 2. Therefore sub-clause (a) of the Proviso to Section 3 of the Payment of Wages Act is applicable to determine the responsibility for payment of wages to the respondent workmen. The Factories Act 1948 has been enact- ed by the Central Legislature preliminary with the object of protecting workers employed in the factories and for that purpose it seeks to improve and protect the interest of the workers and to make provision for the security of their employment and conditions conducive to their health and safety. The Factories Act 1948 has been enact- ed by the Central Legislature preliminary with the object of protecting workers employed in the factories and for that purpose it seeks to improve and protect the interest of the workers and to make provision for the security of their employment and conditions conducive to their health and safety. Section 7 of the Factories Act lays down that the occupier of the factory shall at least 15 days before he begins to occupy or use any premises as a factory send to the Chief Inspector a written notice containing the name and situation of the factory, name and address of the occupier, name and address of the owner of the premises or building including the precincts thereof, the address to which communications relating to the factory may be sent, the nature of the manufacturing process. the nature of quantity of power to be used and the name of the Manager of the Factory for the purposes of the Act and such other particulars as may be prescribed. Sub clause (4) lays down that whenever a new Manager is appointed the occupier shall send to the Inspector a written notice and to the Chief Inspector a copy thereof within 7 days from the date on which such person takes over charge. Sub-section (5) is in the following terms : "(5) I)During any period for which no person has been designated as manager of a factory or during which the person designated does not manage the factory, any person found acting as manager, or if no such person is. found, the occupier himself shall be deemed to be the manager of the factory for the purpose of this Act." Section 7 of the Factories Act lays down that a Manager should be designated for managing the affairs of the factory. The aforesaid sub-section (5) further contemplates that if no person is designated as Manager of a factory or if a person who is designated as Manager is absent, then any person who is found acting as Manager will be responsible for payment of wages and if no manager is designated in that event the occupier himself shall be deemed to be the Manager of the factory for the purposes of this Act. As already noted it is the occupier who is required to designate Manager and once a Manager is not designated or appointed by him, the occupier shall be deemed to be the Manager of the factory for the purposes of the Factories Act. Section 2 (n) defines "occupier" which 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 Jeemed, to be occupier of the factory. It is admitted" that the affairs of the respondent factory were not entrusted to a managing agent. It is further admitted that no Manager was designated by the occupier viz., respondent No. 4. Therefore it is he who had the ultimate control over the affairs of the factory' in the eye of law. In view of these provisions it was not open to the Prescribed Authority to record a finding that the petitioner was Manager of the factory or that since he had certain documents with him he had ultimate control over the affairs of the factory and for that reason he was responsible for payment of wages to the workmen. Sub-section (5) of section 7 of the Factories Act read with Section 3 of the Payment of Wages Act makes it clear that the responsibility for payment of wages to the workmen engaged in a factory shall be that of a Manager of the factory as designated and notified by the occupier under clause (f) of sub-section (1) of section 7 of the Factories Act but in a case where no person is designated as Manager, the law requires that the occupier himself shall be deemed to be Manager of the factory and it it is he who will be responsible for the payment of wages to the workmen engaged in the factory. 8. In the instant case it is admitted that Mukut Lai G. Rhatt, respondent No. 4. was notified as occupier under Section 7 of the Factories Act from 11-6-1966 and that he continued to be so named and notified. It is further admitted that no person has been named as Manager of the factory under clause (f) of sub-section (1) of section 7 of the said Act. The petitioner's averments contained in paragraph 4 of the petition are not disputed in the counter affidavit filed on behalf of the respondent workmen. It is further admitted that no person has been named as Manager of the factory under clause (f) of sub-section (1) of section 7 of the said Act. The petitioner's averments contained in paragraph 4 of the petition are not disputed in the counter affidavit filed on behalf of the respondent workmen. Further in the impugned order the Prescribed Authority itself has stated that since no Manager was named in this factory tinder the provisions of the Factories Act the application was not pressed against him. On these admitted facts it is clear that the petitioner was not manager of the factory. Therefore respondent No. 4. who was the occupier of the factory is deemed to be the manager of the factory under sub-section (5) of section 7 of the Factories Act. As already discussed in the absence of the Manager the responsibility for payment of wages is that of the occupier the prescribed authority committed a patent error of law in holding the petitioner responsible for the payment of wages of the respondent workmen. 9. The prescribed authority framed an issue to the effect as to who was responsible for payment of wages to the workmen. While dealing with that issue it recorded a finding that there was a dispute be. tween the directors themselves and no manager had been designated but since the papers produced before it indicated that the petitioner exercised control over the affairs of the Company he was responsible for payment of wages to the workmen. It was on these findings that the decree for payment of wages and compensation was passed against the petitioner. As noted earlier the petitioner was only an Executive Director while the respondent No. 4 was the occupier. In the absence of a Manager designated under Section 7 of the Factories Act, respondent No. 4 was the Manager of the Factory under the deeming provisions of sub-section (5) of Section 7 of the Factories Act therefore the responsibility for payment of wages was that of the respondent No. 4 who was the occupier of the factory. The definition of occupier itself indicates that it is he who has the ultimate control over the affairs of the factory. The definition of occupier itself indicates that it is he who has the ultimate control over the affairs of the factory. Respondent No. 4 was notified as occupier, since he had not appointed any Manager, the Prescribed Authority was not competent to hold that the petitioner was responsible for wages on the basis of certain unspecified documents. When the law fixes the responsibility for payment of wages on the occupier or manager, it is not possible to fasten the responsibility to the petitioner. The prescribed authority committed a patent error of law in holding the petitioner responsible for payment of wages to the respondent workmen. 10. In view of the above discussion the petition is liable to succeed. In the result I allow the petition and quash the impugned order of the Prescribed Authority dated 14-4-1972. The parties shall bear their own costs.