Vicarious Liability under the Factories Act, 1948

Background

The urge to enact a protective labour legislation was felt way back in the British era as a result of which the Factories Act, 1881¹ was enacted. This Act underwent major modifications in 1891² and 1934³ and finally to cope up with the changing times, the Factories Act, 1948⁴ was promulgated to be effective from 1-4-1949. It is worthwhile to note herein that as per the Constitution of India⁵, the legislative competence for welfare legislations was placed in the Concurrent List, thereby, empowering both the State and Centre to legislate on the said field which enabled the respective States to carry out statutory amendments as per their requirement. Subsequent hereto, inter alia, two significant amendments have been brought in the Factories Act, 1948, namely, the Amendment Act of 1976⁶ whereby contractual workers were brought within the purview of “workers” and the Amendment Act of 1987⁷ which was the aftermath of the Bhopal Gas tragedy incident whereby provisions related to hazardous processes were introduced.

Penal provisions in the Factories Act, 1948

This Act was enacted primarily with the object of protecting workers engaged in factories against industrial and occupational hazards by seeking to impose upon owners or occupiers certain obligations for protecting workers and securing for them employment in conditions conducive to their health and safety.⁸

Chapter X of the Factories Act, 1948, deals with “penalties and procedure” whereunder Sections 92⁹ and 96-A¹⁰ of the Factories Act, 1948 entails liability on occupier and manager of the factory for violation of any provisions thereof. In sharp contrast to Sections 93¹¹, 95¹² and 96¹³ of the Factories Act, 1948 where liability has been imposed on the actual offender, Sections 92 and 96-A imposes vicarious liability upon the occupier and manager of the factory as general penalty and penalty for violation of Sections 41-B¹⁴, 41-C¹⁵ and 41-H¹⁶ which pertains to hazardous processes respectively. While offence under Section 92 of the Factories Act, 1948 is summons triable in nature since maximum two years of imprisonment can be imposed, Section 96-A is graver in nature as it is warrant triable making the offence punishable with imprisonment that may extend up to seven years.

It is interesting to note that another section resting outside Chapter X of the Factories Act, 1948 imposes penal consequences for violation thereof which is Section 26¹⁷ of the Factories Act, 1948 that prescribes punishment for a person selling or letting for hire a machine driven by power and installed in a factory not having sufficient casing.

The sum and substance of the penal provisions denote that the true intent of the legislature while enacting this Act was to ensure protection of the workers from the arbitrary tyranny of the employers and in doing so, the legislature has propounded strict remedies in case of any violation made by the employer. However, it is also important to note that the courts also made it abundantly clear that although the Factories Act, 1948 is primarily made for the welfare and safety of the employees, the same should not also be used as a tool of harassment of the employer.¹⁸

Concept of vicarious liability

The term “vicarious liability” is derived from the Latin word “vice”, which means “in place of”. Vicarious liability, an important concept of law of torts, in sharp contrast to strict liability, tends to fix the liability on one person for act committed by some other person with whom the former has a special relationship.

Vicarious liability under Indian criminal jurisprudence is unknown and inapplicable. The normal rule in the cases involving criminal liability is against vicarious liability.¹⁹ Criminal liability stands on the basic rule of “actus non facit reum nisi mens sit rea”²⁰ but the company, although being a separate juristic person, is ineligible to bear a mind of its own other than its directors, secretaries and key managerial persons. The major Criminal Code of this country i.e. erstwhile the Penal Code, 1860²¹, now replaced by the Nyaya Sanhita, 2023²², does not recognise vicarious liability.

However, the exception to the above is only tenable when the criminal vicarious liability is fastened by way of a specific provision in the statute itself. Unless the statute categorically enumerates that for the acts of the company, the directors or persons in control of its day-to-day affairs are also to be made liable along with the company itself, the principle of vicarious liability is non est in the eyes of criminal law. Some noteworthy statutes in this respect are the Income-tax Act, 1961²³, the Securities and Exchange Board of India Act, 1992²⁴, the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015²⁵, the Negotiable Instruments Act, 1881²⁶ and the Prevention of Corruption Act, 2013²⁷ which make the company and the key managerial personnel thereof responsible for the illegal acts of the corporations.

The highest Court of the land has also upheld the school of thought that it is cardinal principle of criminal jurisprudence that there is no vicarious liability unless statute specifically provides so.²⁸ The Supreme Court, even in a matter involving the Negotiable Instruments Act, 1881 where there is provision for vicarious liability, did not hesitate to hold that for maintaining a prosecution under Section 141²⁹ of the Negotiable Instruments Act, 1881 arraigning of the company as an accused is sine qua non failing which prosecution against the directors will amount to a futile exercise.³⁰

Occupier and manager of factory — People under fire

The Factories Act, 1948, can be deemed to be a unique legislation insofar as the imposition of vicarious liability is concerned. As already discussed, Sections 92 and 96-A of the Factories Act, 1948 imposes vicarious liability upon the occupier and manager of the factory for any violations and/or non-compliances committed thereof. Before diving deeper into the issue, we must know the ambit of the term “occupier” under the Factories Act, 1948.

Section 2(n)³¹ of the Factories Act, 1948 defines an “occupier” as the person who has ultimate control over the affairs of the factory and in respect of a company, any one of the directors shall be deemed to be the occupier thereof. The specific mandate of nominating only one of the directors of the company as occupier has been upheld by the Supreme Court of India in J.K. Industries Ltd. v. Chief Inspector of Factories and Boilers³².

The legislature was extremely mindful and conscious of the fact that making one of the directors vicariously liable for not only incident within the factory but also for any statutory non-compliances, will be considered to be of harsh in nature and may not be well received by the industrialists, but considering the safety and welfare of the workers to be of paramount importance, the legislature went ahead with such Amendment³³ immediately after the Bhopal Gas tragedy incident. The infringements committed under the Factories Act, 1948 have been brought within the scope of criminal jurisdiction with a clear objective of imparting effective and speedy relief and the main intention is to impose conditions on establishments of this kind, on broad grounds of social welfare, and not at all merely to punish the persons in charge of such establishment for violations thereof.

Unlike most other Acts providing for vicarious liability of the directors together with the company itself for any offence committed, the Factories Act, 1948 does not mandate arraigning the company as an accused for maintaining a prosecution against the occupier or the manager. The occupier and manager of a factory can be lawfully prosecuted under the provisions of Sections 92 and 96-A of the Factories Act, 1948 irrespective of the fact whether the company has been made an accused or not.

There seems confusion and contradictory judgments of various High Courts as to whether the Factories Act, 1948 mandate arraigning of the company as an accused or not. While the Karnataka High Court has negated the requirement,³⁴ the Orissa High Court has upheld the decision of the Supreme Court rendered in Aneeta Hada v. Godfather Travels & Tours (P) Ltd.³⁵ and held that non-arraigning of company as an accused in a prosecution initiated under the Factories Act, 1948 would vitiate the entire proceedings.³⁶

The general principles of mens rea has limited applicability to the offences punishable under Sections 92 and 96-A of the Factories Act, 1948. The joint liability of the occupier and the manager under the said provisions is absolute and independent of the proof of existence of a guilty mind. The liability to provide a safe and secure work environment to the workers entails exclusively upon the occupier and manager of the factory and any violation thereof would lead to penal consequences upon them irrespective of existence of mens rea. What can be reasonably gathered from the Statement of Objects and Reasons of the Factories Act, 1948³⁷ that, if incontrovertible proof of the element of mens rea is to be added to the other factors that the prosecuting agency would have to prove for proving an offence under the Factories Act, 1948, the same will virtually defeat the purpose of the Factories Act, 1948.³⁸ This view is further fortified by the landmark judgment of the Supreme Court in J.K. Industries case³⁹.

Exceptions to vicarious liability under the Factories Act, 1948

From the aforesaid discussions, it can be reasonably inferred that the principle of mens rea has no application for an offence punishable under Sections 92 and 96-A of the Factories Act, 1948, and that the occupier and manager of a factory are vicariously liable for any violation of the provisions of the Factories Act, 1948.

Nevertheless, the legislature did not lose sight of the fact that for every incident and/or non-compliance within the factory premises, the occupier and manager ought not to be held liable. Keeping this in mind, the legislature inserted two crucial provisions that act as statutory exceptions to the vicarious liability of the occupier and manager:

(i) Section 97⁴⁰ r/w Section 111⁴¹; and

(ii) Section 101⁴².

The legislature is conscious of the fact that every incident within the factory premises cannot be the fallout of the inadequacy of the safety provisions supposed to be arranged by the occupier and manager. In order to address those incidents where there are extraneous issues involved, the Factories Act, 1948 provides that if the worker concerned or any other worker has been negligent of his duties to work in a safe manner in order to comply with the provisions laid down thereunder and as a consequence of which an incident occurs, the person actually responsible for it will be held liable rather than the occupier or the manager. The “passing on” defence is an approved form of exception to the principle of strict liability provided all the prerequisites are duly fulfilled.⁴³

Section 101 of the Factories Act, 1948 provides that the occupier or the manager can get himself discharged from the liability by making a complaint against the actual offender but prior to which he is required to give at least three clear days of notice to the prosecution. Once the complaint is made and notice is served and the alleged offender is brought to the Court, the Court shall proceed to hear the matter and all the parties will be entitled to cross-examine the prosecution witness as well as the complainant which in this case would be the manager/occupier.⁴⁴ Once the offence is proved against the occupier/manager/alleged offender, the Court will begin hearing of the complaint made by the occupier/manager against the alleged offender and if being satisfactorily proved, the Court will discharge the occupier and manager of their liability and convict the real offender.

Section 97 r/w Section 111 of the Factories Act, 1948 provides for penalty of the workers in case of contravention of the provisions of this Act. From the materials-on-record and evidence of the witnesses, if it appears to the Court that the alleged contravention is attributable to the negligent conduct of the worker concerned or any other worker then the occupier and the manager will be absolved of their liabilities under the Factories Act, 1948.

On numerous occasions, various High Courts of the country did not hesitate to rule in favour of the statutory shield given to the occupier and the manager via the provisions of Sections 97 and 111 of the Factories Act, 1948. In cases where the worker has entered a confined space without breathing apparatus bereft of express permit from the occupier,⁴⁵ where worker started working at height without safety belt and helmet in spite of the same being supplied by occupier,⁴⁶ accident by truck of workers resting in a prohibited place,⁴⁷ the degree of negligence committed by the worker concerned was duly considered by the courts and subsequently quashed the entire criminal proceedings initiated against the occupier and the manager.

The most striking feature of Section 111 is the prerequisite of the element of mens rea. The use of the word “wilfully” therein shows that to invoke the provisions of Section 111 one has to establish the existence of mens rea. In fact, the most significant distinction between Sections 97 and 111 of the Factories Act, 1948 is that while the former provides for general provisions relating to contravention by a worker whereas Section 111 lays down the obligation of the workers to not “wilfully” engage in any action/inaction that will endanger the health and safety of the workers.

Shift of paradigm under the Occupational Safety, Health and Working Conditions Code, 2020⁴⁸.

The Factories Act, 1948 is all set to be repealed by the Occupational Safety, Health and Working Conditions Code, 2020. The view and objective of the legislature have undergone a radical transformation insofar as the vicarious liability of the occupier and manager is concerned. While under the Factories Act, 1948, there were penal provisions prescribing imprisonment as general penalty for offences, under the Occupational Safety, Health and Working Conditions Code, 2020, imprisonment as general penalty for offences has been deleted and substituted with higher pecuniary fines.⁴⁹ Most significant introduction in the Code would be that of “offences by companies”⁵⁰ wherein the person responsible for conducting the affairs of the company together with the company has to be made an accused mandatorily for maintaining a valid prosecution. This introduction will be in parity with similar enactments like that the Contract Labour (Regulation and Abolition) Act, 1970⁵¹, the Negotiable Instruments Act, 1881, etc. In fact, subsequent to this change, it can be reasonably inferred that ratio laid down in judgment like Aneeta Hada case⁵² will be applicable to offences under the Code too.

Conclusion

With the impending repeal of the Factories Act, 1948 and enactment of the Occupational Safety, Health and Working Conditions Code, 2020, the concept of vicarious liability in labour laws in India is waiting to undergo a major change keeping in view the necessity of the day. The legislature has endeavoured to strike a balance between the health, welfare and safety of the workers and the need of encouragement to the employers to set up more industries for bolstering the economy. The legislature has also tried to bring in uniformity in the provisions of different Acts imposing vicarious liability. It can be safely concluded that in the upcoming times, vicarious liability under the Code will be subjected to thorough judicial scrutiny and it has to pass the test of relevance in the changing society.