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

Citation: [1998] 3 S.C.R. 598 · Decided: 14-07-1998 · Supreme Court of India · Bench: G.T. NANAVATI · Disposal: Appeal(s) allowed

Judgment (excerpt)

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. 
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 
A 
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

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