Dear All,
Question: Can a CEO (Occupier) of a foreign company claim ignorance of the law and show the HR Head to escape from lapses, particularly under the Factories Act? In such a situation, is the HR Head, even though they have left the company, responsible for such omissions and lapses, and will they be answerable to the Court of Law at any stage?
Regards, K. Ramachandra Bangalore
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9Question: Can a CEO (Occupier) of a foreign company claim ignorance of the law and show the HR Head to escape from lapses, particularly under the Factories Act? In such a situation, is the HR Head, even though they have left the company, responsible for such omissions and lapses, and will they be answerable to the Court of Law at any stage?
Regards, K. Ramachandra Bangalore
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Dear Mr. K Ramachandra,
As a matter of fact, ignorance of the law is not an excuse. Once an employee (even though he is the Head or CEO) is relieved (either through retirement or resignation) from the office, then he cannot be called for any legal obligations. Even in government organizations and offices, if any case is pending against the employee, it should be cleared before relieving the employee.
From India, Kumbakonam
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As a matter of fact, ignorance of the law is not an excuse. Once an employee (even though he is the Head or CEO) is relieved (either through retirement or resignation) from the office, then he cannot be called for any legal obligations. Even in government organizations and offices, if any case is pending against the employee, it should be cleared before relieving the employee.
From India, Kumbakonam
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One more thing I would like to tell you, sir. If an employer, even though they are a foreign employer, plans to start a factory, they must be well acquainted with the rules and regulations of the country where they are planning to open the factory. Hence, the employer cannot escape by claiming that they were not aware of the rules and regulations governing their factory.
From India, Kumbakonam
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From India, Kumbakonam
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Dear Mr. K. Ramachandra,
Under the Factories Act, 1948, an Occupier has been defined as a person who has ultimate control over the affairs of the factory.
Before 1987, the liberal provisions in the Act allowed a designation of any employee managing the affairs of the factory as an occupier of the factory. After the Bhopal gas tragedy in 1987, the Occupier was redefined, mandatorily deeming that any one of the directors of a company running a factory would be the Occupier of such factory.
In a landmark case, JK Industries Ltd and others v. Chief Inspector of Factories and Boilers and others, 1996, the Supreme Court noted that where a company owns or runs a factory, it is the company that has ultimate control over the affairs of the factory and would, therefore, be the Occupier.
Section 92 of the Act provides for strict liability on the Occupier for non-compliance under the Act and also provides for joint liability/punishment of the occupier and the Manager for offences under the Act.
The fact that a director designated as the occupier is ignorant about the management of the factory, which has been entrusted to a Manager, and is himself not responsible for the contravention does not absolve him of his liability.
Regards,
Kamal
From India, Pune
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Under the Factories Act, 1948, an Occupier has been defined as a person who has ultimate control over the affairs of the factory.
Before 1987, the liberal provisions in the Act allowed a designation of any employee managing the affairs of the factory as an occupier of the factory. After the Bhopal gas tragedy in 1987, the Occupier was redefined, mandatorily deeming that any one of the directors of a company running a factory would be the Occupier of such factory.
In a landmark case, JK Industries Ltd and others v. Chief Inspector of Factories and Boilers and others, 1996, the Supreme Court noted that where a company owns or runs a factory, it is the company that has ultimate control over the affairs of the factory and would, therefore, be the Occupier.
Section 92 of the Act provides for strict liability on the Occupier for non-compliance under the Act and also provides for joint liability/punishment of the occupier and the Manager for offences under the Act.
The fact that a director designated as the occupier is ignorant about the management of the factory, which has been entrusted to a Manager, and is himself not responsible for the contravention does not absolve him of his liability.
Regards,
Kamal
From India, Pune
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Dear M/s. Bhaskar and Kamal,
Thank you for your inputs. Also, thanks to Mr. Kamal for a detailed reply. I am raising this issue in the background of a live case known to me wherein a Manager (HR Head) who has left the company is fixed in a case wherein the company had allowed excess OT to its workers than the prescribed limit as per the Factories Act. In the background of Mr. Kamal's point, that the Act provides for joint liability/punishment of the occupier and the Manager for offenses, I am inclined to know whether the Manager who has left the company can still be called back by the Court of Law to give an explanation in favor of the Ex. Employer and whether he can be punished. The company has fixed the Ex. HR Head for these lapses in the guise that the Occupier is a Foreigner and had appointed him to take care of these provisions.
I would also request Mr. Kamal to post the JK Industries case and the conclusions in this case.
Regards,
K. Ramachandra
Bangalore
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Thank you for your inputs. Also, thanks to Mr. Kamal for a detailed reply. I am raising this issue in the background of a live case known to me wherein a Manager (HR Head) who has left the company is fixed in a case wherein the company had allowed excess OT to its workers than the prescribed limit as per the Factories Act. In the background of Mr. Kamal's point, that the Act provides for joint liability/punishment of the occupier and the Manager for offenses, I am inclined to know whether the Manager who has left the company can still be called back by the Court of Law to give an explanation in favor of the Ex. Employer and whether he can be punished. The company has fixed the Ex. HR Head for these lapses in the guise that the Occupier is a Foreigner and had appointed him to take care of these provisions.
I would also request Mr. Kamal to post the JK Industries case and the conclusions in this case.
Regards,
K. Ramachandra
Bangalore
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Dear Mr. Ramchandra,
The law as declared by the Supreme Court in 1996 was that a company cannot nominate any one of its employees or officers, except a director of the company, as the occupier of the factory.
The word 'ultimate control over the affairs of the factory' was discussed and explained in detail.
The Court said that the word "ultimate" in common parlance means last or final. There is a vast difference between a person having ultimate control of the affairs of a factory and one who has immediate or day-to-day control over the affairs of the factory. The manager or any other employee, of whatever status, can be nominated by the board of directors of the owner company to have immediate or day-to-day or even supervisory control over the affairs of the factory. However, the ultimate control over the affairs of the factory will always be with the board of directors of the company and cannot be vested in any other person, without completely transferring the control over the factory to the other person.
So I don't think that the Occupier can escape the liability just because he is a foreigner.
As far as the liability of the Manager is concerned who has left the job, I am not sure whether he has to share the liability and punishment with the Occupier.
But at the same time, if you see the case from another angle, then no Manager will get punishment if resigning or leaving a job will absolve him of his past liability.
Regards,
Kamal
From India, Pune
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The law as declared by the Supreme Court in 1996 was that a company cannot nominate any one of its employees or officers, except a director of the company, as the occupier of the factory.
The word 'ultimate control over the affairs of the factory' was discussed and explained in detail.
The Court said that the word "ultimate" in common parlance means last or final. There is a vast difference between a person having ultimate control of the affairs of a factory and one who has immediate or day-to-day control over the affairs of the factory. The manager or any other employee, of whatever status, can be nominated by the board of directors of the owner company to have immediate or day-to-day or even supervisory control over the affairs of the factory. However, the ultimate control over the affairs of the factory will always be with the board of directors of the company and cannot be vested in any other person, without completely transferring the control over the factory to the other person.
So I don't think that the Occupier can escape the liability just because he is a foreigner.
As far as the liability of the Manager is concerned who has left the job, I am not sure whether he has to share the liability and punishment with the Occupier.
But at the same time, if you see the case from another angle, then no Manager will get punishment if resigning or leaving a job will absolve him of his past liability.
Regards,
Kamal
From India, Pune
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Dear all,
From the brief description, the facts are not clear. As stated, the CEO is the occupier; however, being a foreigner does not put him above the law. He is still answerable for the lapses. It is not clear whether the ex-HR Head was nominated as Factory Manager. Presuming so, the Factory Manager alone cannot be proceeded against. Primarily, it is the Factory Occupier who is responsible for due compliance (Section 7A).
Under Section 101 of the Factories Act, the Occupier or the Factory Manager can claim exemption by pointing out the actual offender and bringing him to book by apprising the prosecutor of the factual situation that caused the accident. However, this application for exemption would depend on the court's satisfaction that the Occupier/Factory Manager has used due diligence in executing the provisions of the Act and the other person to whom the blame is getting attached has acted on his own without the knowledge, consent, or connivance of the actual Occupier.
I wonder whether the foreigner CEO is banking upon this provision. But in any case, such shifting of blame can only be done with the authority of the Court trying the offense. It cannot be at the choice of the CEO!
Regards,
KK
From India, Bhopal
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From the brief description, the facts are not clear. As stated, the CEO is the occupier; however, being a foreigner does not put him above the law. He is still answerable for the lapses. It is not clear whether the ex-HR Head was nominated as Factory Manager. Presuming so, the Factory Manager alone cannot be proceeded against. Primarily, it is the Factory Occupier who is responsible for due compliance (Section 7A).
Under Section 101 of the Factories Act, the Occupier or the Factory Manager can claim exemption by pointing out the actual offender and bringing him to book by apprising the prosecutor of the factual situation that caused the accident. However, this application for exemption would depend on the court's satisfaction that the Occupier/Factory Manager has used due diligence in executing the provisions of the Act and the other person to whom the blame is getting attached has acted on his own without the knowledge, consent, or connivance of the actual Occupier.
I wonder whether the foreigner CEO is banking upon this provision. But in any case, such shifting of blame can only be done with the authority of the Court trying the offense. It cannot be at the choice of the CEO!
Regards,
KK
From India, Bhopal
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Dear Kamal & Ramchandra,
Thanks for your very useful comments. Here I would like to mention some clarification about the definition of an Occupier.
Occupier: The term "occupier" has been defined under Section 2 (n) of the Factories Act 1948 as follows: "Occupier" of a factory means the person who has the ultimate control over the affairs of the factory provided that.
- In the case of a firm or other association of individuals, any one of the individual partners or members is deemed to be the occupier.
- In the case of a company, any one of the directors is deemed to be the occupier.
- In the case of a factory controlled or owned by the Central Government or any State Government or any local authority, the person or persons appointed to manage the affairs of the factory are deemed to be the occupier.
- In the case of a ship which is being repaired, or on which maintenance work is being carried out, or in a dry dock available for hire, the owner of the dock is deemed to be the occupier.
- The owner of the ship or his agent or master to carry out the repairs or maintenance work is deemed to be the occupier.
A remote but ultimate control clothes a person with the position of occupier. The term "Occupier" in general means a person who occupies the factory either by himself or by his agent. He may be an owner, a lessee, or mere licensee, but he must have the right to occupy the property and dictate the terms of management.
Nitin
Rainbow Facility Services
9820436383
From India, Mumbai
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Thanks for your very useful comments. Here I would like to mention some clarification about the definition of an Occupier.
Occupier: The term "occupier" has been defined under Section 2 (n) of the Factories Act 1948 as follows: "Occupier" of a factory means the person who has the ultimate control over the affairs of the factory provided that.
- In the case of a firm or other association of individuals, any one of the individual partners or members is deemed to be the occupier.
- In the case of a company, any one of the directors is deemed to be the occupier.
- In the case of a factory controlled or owned by the Central Government or any State Government or any local authority, the person or persons appointed to manage the affairs of the factory are deemed to be the occupier.
- In the case of a ship which is being repaired, or on which maintenance work is being carried out, or in a dry dock available for hire, the owner of the dock is deemed to be the occupier.
- The owner of the ship or his agent or master to carry out the repairs or maintenance work is deemed to be the occupier.
A remote but ultimate control clothes a person with the position of occupier. The term "Occupier" in general means a person who occupies the factory either by himself or by his agent. He may be an owner, a lessee, or mere licensee, but he must have the right to occupy the property and dictate the terms of management.
Nitin
Rainbow Facility Services
9820436383
From India, Mumbai
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The discussions are going on in the right direction. One more thing I would like to mention is that if a violation of the law has been done ignorantly, without the intention to do so, the benefit of the doubt goes in favor of the accused, and they may be excused with a lesser amount of punishment. However, when it is established that it has been done deliberately, the individual may receive a harsher punishment.
From India, Calcutta
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From India, Calcutta
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The HR manager is not liable in labour court or departmental proceedings. It's the factory manager and occupier who are liable. The exception would probably be a person who deliberately violated the act and hid details from their employer, like through forged documents, misreporting, etc.
The doctrine of "respondeat superior" applies. The occupier is liable for the acts of their subordinates as they are supposed to monitor and keep track. The concept of due diligence stated earlier is just that - actual due diligence. The occupier will be excused only if they exercised due diligence and it was not possible for them to find out the facts in the normal course. Lack of knowledge of the law is not covered under this clause.
At best, the occupier may have a separate civil remedy against the HR manager for their failure to warn them or for misleading the company or not reporting it to the board. But we all know how useless that action will be.
The court is free to call back any retired employee to court for answering questions. So can the labor department in its investigation. In such a case, the company will have to pay for their travel and stay if they have shifted to a different city.
From India, Mumbai
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The doctrine of "respondeat superior" applies. The occupier is liable for the acts of their subordinates as they are supposed to monitor and keep track. The concept of due diligence stated earlier is just that - actual due diligence. The occupier will be excused only if they exercised due diligence and it was not possible for them to find out the facts in the normal course. Lack of knowledge of the law is not covered under this clause.
At best, the occupier may have a separate civil remedy against the HR manager for their failure to warn them or for misleading the company or not reporting it to the board. But we all know how useless that action will be.
The court is free to call back any retired employee to court for answering questions. So can the labor department in its investigation. In such a case, the company will have to pay for their travel and stay if they have shifted to a different city.
From India, Mumbai
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This should be a case study and a warning for HR managers who willfully and actively support their management in violating the laws of the land. In times of need and trouble, the management will look for scapegoats, which could be you.
From India, Mumbai
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From India, Mumbai
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Dear HR Head,
The HR head is not responsible for any non-compliance if they are not nominated as the factory manager under the Act. Only the Factory Manager and Occupier nominated under the Factories Act are responsible for non-compliance. After leaving the company, the court will call the Factory Manager and Occupier who are nominated under the act until the final case. They cannot escape after leaving the organization.
Regards,
Shamsher Yadav
From India, Delhi
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The HR head is not responsible for any non-compliance if they are not nominated as the factory manager under the Act. Only the Factory Manager and Occupier nominated under the Factories Act are responsible for non-compliance. After leaving the company, the court will call the Factory Manager and Occupier who are nominated under the act until the final case. They cannot escape after leaving the organization.
Regards,
Shamsher Yadav
From India, Delhi
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Dear K.Ramachandra,
Mr. Kamal Prasoon is totally right nothing left to say after his elaborated posts. thanks a ton Mr Prasoon.
However the definition of Occupier under factories act is given below for everybody's reference.
(n) “occupier” of a factory means the person who has ultimate control over the affairs of the factory12[***].
13[Provided that—
(i) in the case of a firm or other association of individuals, any one of the individual partners or members thereof shall be deemed to be the occupier;
(ii) in the case of a company, any one of the directors shall be deemed to be the occupier
(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, shall be deemed to be the occupier:]
13[14[Provided further that] in the case of a ship which is being repaired, or on which maintenance work is being carried out, in a dry dock which is available for hire,—
(1) the owner of the dock shall be deemed to be the occupier for the purposes of any matter provided for by or under:
(a) section 6, section 7, 13[section 7A, section 7B,] section 11 or section 12;
(b) section 17, in so far as it relates to the providing and maintenance of sufficient and suitable lighting in or around the dock;
(c) section 18, section 19, section 42, section 46, section 47 or section 49, in relation to the workers employed on such repair or maintenance;
(2) the owner of the ship or his agent or master or other officer-in-charge of the ship or any person who contracts with such owner, agent or master or other officer-in-charge to carry out the repair or maintenance work shall be deemed to be the occupier for the purposes of any matter provided for by or under section 13, section 14, section 16 or section 17 (save as otherwise provided in this proviso) or Chapter IV (except section 27) or section 43, section 44 or section 45, Chapter VI, Chapter VII, Chapter VIII or Chapter IX or section 108, section 109 or section 110, in relation to—
(a) the workers employed directly by him, or by or through any agency; and
(b) the machinery, plant or premises in use for the purpose of carrying out such repair or maintenance work by such owner, agent, master or other officer-in-charge or person;]
From India, New Delhi
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Mr. Kamal Prasoon is totally right nothing left to say after his elaborated posts. thanks a ton Mr Prasoon.
However the definition of Occupier under factories act is given below for everybody's reference.
(n) “occupier” of a factory means the person who has ultimate control over the affairs of the factory12[***].
13[Provided that—
(i) in the case of a firm or other association of individuals, any one of the individual partners or members thereof shall be deemed to be the occupier;
(ii) in the case of a company, any one of the directors shall be deemed to be the occupier
(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, shall be deemed to be the occupier:]
13[14[Provided further that] in the case of a ship which is being repaired, or on which maintenance work is being carried out, in a dry dock which is available for hire,—
(1) the owner of the dock shall be deemed to be the occupier for the purposes of any matter provided for by or under:
(a) section 6, section 7, 13[section 7A, section 7B,] section 11 or section 12;
(b) section 17, in so far as it relates to the providing and maintenance of sufficient and suitable lighting in or around the dock;
(c) section 18, section 19, section 42, section 46, section 47 or section 49, in relation to the workers employed on such repair or maintenance;
(2) the owner of the ship or his agent or master or other officer-in-charge of the ship or any person who contracts with such owner, agent or master or other officer-in-charge to carry out the repair or maintenance work shall be deemed to be the occupier for the purposes of any matter provided for by or under section 13, section 14, section 16 or section 17 (save as otherwise provided in this proviso) or Chapter IV (except section 27) or section 43, section 44 or section 45, Chapter VI, Chapter VII, Chapter VIII or Chapter IX or section 108, section 109 or section 110, in relation to—
(a) the workers employed directly by him, or by or through any agency; and
(b) the machinery, plant or premises in use for the purpose of carrying out such repair or maintenance work by such owner, agent, master or other officer-in-charge or person;]
From India, New Delhi
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Mr. K. Ramachandra,
As per my opinion ultimate statutory is with the occupier. He much accepts the lapses in front of court. Further, he should take following steps to avoid the same in future:-
1) Statutory Audit from reputed HR firm
2) Lapses must be identified & corrected the same immediately.
3) MIS must be maintained by the occupier
This is for your information.
Thanks & Regards,
Yogesh Kulkarni
Assistant Manager – HR
Krishidhan Seeds Pvt. Ltd.
Contact No. : +91 98908 45553
Email ID :
From India, Mumbai
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As per my opinion ultimate statutory is with the occupier. He much accepts the lapses in front of court. Further, he should take following steps to avoid the same in future:-
1) Statutory Audit from reputed HR firm
2) Lapses must be identified & corrected the same immediately.
3) MIS must be maintained by the occupier
This is for your information.
Thanks & Regards,
Yogesh Kulkarni
Assistant Manager – HR
Krishidhan Seeds Pvt. Ltd.
Contact No. : +91 98908 45553
Email ID :
From India, Mumbai
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Dear All,
Following are my comments on your responses:
1. Mr. Kamal - Thank you for your post on "Occupier." I note and agree with your point that "No manager designated as a factory manager can escape from past liability."
2. Mr. KK Nair - I agree that a foreigner is not above the law. Also, kindly note that the Ex-Manager I am referring to in my question was nominated as the Factory Manager. It is the authorities who have issued a notice to the employer, which in turn has become a case, making the factory manager (Ex.) and the occupier jointly responsible for an offense, now in court. The occupier has stated that he is a foreigner and that the Factory Manager was responsible for compliances.
3. Mr. Nitin - Thanks for posting the definition of Occupier; it has added to the point. I agree that the ultimate control of the factory rests with the occupier. However, the question here is whether the factory manager, being responsible for compliances, can be sued/punished even after leaving the organization.
4. Mr. UK Singh - I think we have to wait and watch to see what happens in the end.
5. Mr. Saswatabanerjee - I note your point that the court is free to call back any retired employee (in this case, an ex-employee/factory manager). This is a valid point for the question raised, and all HR heads should take note of this.
6. Mr. Sham Shen Yadav - FYI: The HR head was nominated as the Factory Manager, hence the question and discussion. I note your valid point that "they cannot escape after leaving the organization."
7. Mr. Kamal Kant Yogi - Thank you for adding the definition of Occupier under Sec 12 and 13 of the Factories Act. I hope it helped everyone involved in the discussion.
8. Mr. Yogesh Kulkarni - Thanks for your input, with which I agree. This case occurred in a company where all systems are followed; however, this is a lapse in the system.
9. Mr. Devendra K Srivastava - I appreciate your participation and note the points.
I am contemplating this issue, and I will come back to this point further.
Thanks and regards,
K. Ramachandra
Bangalore
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Following are my comments on your responses:
1. Mr. Kamal - Thank you for your post on "Occupier." I note and agree with your point that "No manager designated as a factory manager can escape from past liability."
2. Mr. KK Nair - I agree that a foreigner is not above the law. Also, kindly note that the Ex-Manager I am referring to in my question was nominated as the Factory Manager. It is the authorities who have issued a notice to the employer, which in turn has become a case, making the factory manager (Ex.) and the occupier jointly responsible for an offense, now in court. The occupier has stated that he is a foreigner and that the Factory Manager was responsible for compliances.
3. Mr. Nitin - Thanks for posting the definition of Occupier; it has added to the point. I agree that the ultimate control of the factory rests with the occupier. However, the question here is whether the factory manager, being responsible for compliances, can be sued/punished even after leaving the organization.
4. Mr. UK Singh - I think we have to wait and watch to see what happens in the end.
5. Mr. Saswatabanerjee - I note your point that the court is free to call back any retired employee (in this case, an ex-employee/factory manager). This is a valid point for the question raised, and all HR heads should take note of this.
6. Mr. Sham Shen Yadav - FYI: The HR head was nominated as the Factory Manager, hence the question and discussion. I note your valid point that "they cannot escape after leaving the organization."
7. Mr. Kamal Kant Yogi - Thank you for adding the definition of Occupier under Sec 12 and 13 of the Factories Act. I hope it helped everyone involved in the discussion.
8. Mr. Yogesh Kulkarni - Thanks for your input, with which I agree. This case occurred in a company where all systems are followed; however, this is a lapse in the system.
9. Mr. Devendra K Srivastava - I appreciate your participation and note the points.
I am contemplating this issue, and I will come back to this point further.
Thanks and regards,
K. Ramachandra
Bangalore
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We do legal compliance audit for companies
However, if the company is not serious, or where the owners are knowingly committing or continuing the offense for business reasons (cost and profitability), then nothing will change.
From India, Mumbai
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However, if the company is not serious, or where the owners are knowingly committing or continuing the offense for business reasons (cost and profitability), then nothing will change.
From India, Mumbai
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Hi,
In your case, it is necessary to show that due diligence was done by the occupier, yet things still went wrong and there was no mens rea (no intent to violate the law). The court will probably release him from liability.
From India, Mumbai
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In your case, it is necessary to show that due diligence was done by the occupier, yet things still went wrong and there was no mens rea (no intent to violate the law). The court will probably release him from liability.
From India, Mumbai
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Dear All,
Thank you for steering the discussion to a proper conclusion. Mr. Saswatha Banerjee made a valid point as follows: "The court is free to summon any retired employee for questioning. Similarly, the labor department can do so in its investigations. In such instances, the company will be responsible for covering the expenses of his travel and accommodation if he has relocated to a different city."
I trust the team is in agreement with this viewpoint.
Regards,
K. Ramachandra
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Thank you for steering the discussion to a proper conclusion. Mr. Saswatha Banerjee made a valid point as follows: "The court is free to summon any retired employee for questioning. Similarly, the labor department can do so in its investigations. In such instances, the company will be responsible for covering the expenses of his travel and accommodation if he has relocated to a different city."
I trust the team is in agreement with this viewpoint.
Regards,
K. Ramachandra
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