ITM SCHOOL OF LAW - MOOT COURT EXERCISE BEFORE THE HON BLE SUPREME COURT OF INDIA AT NEW DELHI C.A. No. 3237/1998 & 3247/1998 (Under Art. 136 of the Constitution of India) IN THE MATTER OF INDIAN OIL CORPORATION LTD.....APPELLANT Vs THE CHIEF INSPECTOR OF FACTORIES & ORS. RESPONDENTS MEMORANDUM ON BEHALF OF THE APPELLANT MOST RESPECTFULLY SUBMITTED UPINDER SINGH 12LLB081 COUNSEL FOR THE APPELLANT
P a g e 2 TABLE OF CONTENTS S.NO. PARTICULARS PAGE NO. 1. LIST OF ABBREVIATIONS 3 2. INDEX OF AUTHORITIES A. CASES REFERRED B. STATUTES REFFERED C. BOOKS & REPORTS REFERRED D. WEBSITES 4 4 4 4 4 3. STATEMENT OF JURISDICTION 5 4. SYNOPSIS OF FACTS 6 5. ISSUES RAISED 7 6. SUMMARY OF ARGUMENTS 8 7. WRITTEN PLEADING 9-12 8. PRAYER 13
P a g e 3 LIST OF ABBREVIATIONS & And AIR All India Reporter Anr. Another Art. Article HC High Court Hon ble Honourable i.e. That is LLJ Labour Law Journal Ltd Limited Ors. Others Raj Rajasthan SC Supreme Court SCC Supreme Court Cases SCR Supreme Court Review UOI Union Of India u/a Under Article v. Versus
P a g e 4 INDEX OF AUTHORITIES PRIMARY SOURCES CASES REFERRED 1. Central Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguly ; 1986 SCR (2) 278 2. Som Prakash Rekhi v. Union of India ; 1981 SCR (2) 111 3. Mahabir Auto Stores & Ors. v. Indian Oil Corporation & Ors.; 1990 SCR (1) 818 4. J.K. Industries Ltd. v. The Chief Inspector of Factories & Boilers& Ors. ; (1997) I LLJ 722 SC 5. Ravi Shankar Sharma v. State of Rajasthan ; AIR 1993 Raj 117 STATUTES REFFERED 1. Constitution of India, 1950 2. Factories Act, 1948 3. Companies Act, 1956 SECONDARY SOURCES WEBSITES REFERRED 1. www.manupatra.com 2. www.westlaw.com 3. www.indiankanoon.org 4. www.advocatekhoj.com
P a g e 5 STATEMENT OF JURISDICTION The Appellant humbly approach the Hon ble Supreme Court of India under Art. 136 of the Constitution of India, 1950. Article 136: Special leave to appeal by the Supreme Court (1) Notwithstanding anything in this Chapter, the Supreme Court may, in its discretion, grant special leave to appeal from any judgment, decree, determination, sentence or order in any cause or matter passed or made by any court or tribunal in the territory of India. (2) Nothing in clause (1) shall apply to any judgment, determination, sentence or order passed or made by any court or tribunal constituted by or under any law relating to the Armed Forces.
P a g e 6 SYNOPSIS OF FACTS 1. Indian Oil Corporation Ltd. is a Government Company which is engaged in the supply and distribution of petroleum & petroleum products all over India through the large number of storage facilities established by the Company at many places. 2. In 1992, the Company established a new storage unit at Namkun in Ranchi District with the object of increasing the storage space already existing in that place. The same was done with the prior permission of the Central Government. 3. In the same year, the Depot Manager of the new storage facility made an application to the Inspector of Factories for obtaining a license for the new unit. 4. However, the license was not granted by the Inspector on the ground that such an application is to be made by the occupier of the factory & in case of a Company, the occupier is a Director of the Company & not the Depot Manager. 5. Based on this refusal, the Appellant filed a writ petition before the Patna High Court & also reported the matter to the Ministry of Petroleum & Natural Gas. 6. After that, the Inspector passed an order allowing the Company to start its operation at the new unit temporarily till the Court passed an order & again reiterated his stand as to occupier of the factory. 7. During this period, the Government again brought to the notice of the Chief Inspector of the Factories of the State that necessary notifications have been issued by them for appointment of the Depot Manager as the occupier but the same was again rejected by the Inspector. 8. The High Court decided the matter in the favour of Inspector & held that the Depot Manger of the Company could not be regarded as the occupier of the new unit as the Company came under the clause (ii) of the first proviso given in Sec. 2 (n) of the Factories Act, 1948. 9. Aggrieved by the said order, the Appellant has approached this Hon ble Court by the way an SLP.
P a g e 7 ISSUES RAISED [I]. WHO IS TO BE DEEMED OCCUPIER OF A FACTORY OF A GOVERNMENT COMPANY INCORPORATED UNDER THE COMPANIES ACT?
P a g e 8 SUMMARY OF ARGUMENTS [I]. THAT THE DEPOT MANANGER OF THE FACTORY OF THE GOVERNMENT COMPANY IS TO BE DEEMED OCCUPIER OF THAT FACTORY. The decision of the High Court failed to appreciate the fact that the Appellant Company was owned & controlled by the Government. Lifting the corporate veil of the Company reveals that Company is an organ of the Government itself. Legal entity has been given for better management of the affairs. Majority of the shareholding of the Company is with the Government. It also controls the working of the Company. Hence, the Company owned & controlled by the Government. The test for determining the occupier of the Factory is the person having the ultimate control over the affairs of the factory. Hence, the Appellant Company would come under clause (iii) to the first proviso of Sec. 2(n) & the Depot Manager appointed by the Government would deemed to be the occupier of the factory.
P a g e 9 WRITTEN PLEADINGS [I]. THAT THE DEPOT MANANGER OF THE FACTORY OF THE GOVERNMENT COMPANY IS TO BE DEEMED OCCUPIER OF THAT FACTORY. It is most respectfully submitted before this Hon ble Court that the decision of the High Court of not recognising the Depot Manager as the occupier of the factory was based on three grounds, the first one being that the storage units were owned by the Company & not the Central Government, second that the clause (ii) of the first proviso of Sec. 2 (n) of the Factories Act, 1948 did not make any distinction between Private & Government Companies, the third & the last one being that the Depot Manager was not appointed by the Government. But the Hon ble High Court failed to appreciate the fact that the Appellant Company, besides being a Government Company was largely owned & controlled by the Government itself. 1.1 THAT THE APPELLANT COMPANY IS OWNED & CONTROLLED BY THE GOVERNMENT. It is most respectfully submitted before this Hon ble Court that the Appellant Company is a Government Company in accordance with Sec. 617 of the Companies Act, 1956 which defines a Government Company as one in which more than fifty one percent paid-up share capital is held by the Government & in the present case the Government has a shareholding of 91.5 percent in the Company. Besides this, the articles of association of the Company also points that the Central Government has control over all the major decisions of the Company including increase & reduction of capital, appointment & removal of its Chairman & Directors, their powers & most importantly the working of the Company. The President of India also has the powers to control the functioning of the Company by giving directions & instructions by the powers conferred to him u/a 144 of the Constitution of India.
P a g e 10 This Hon ble Court had applied the principle of lifting the corporate veil in the case of Central Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguly 1 in order to find out whether the Appellant Company was an agency or instrumentality of the State for the purpose of Article 12 of the Constitution. Thus, it will relevant here also for the Court to apply the same principle in order to find out the true nature & character of the Company. The test for determining the true nature of the Company, as laid down by this Court in the case of Som Prakash Rekhi v. Union of India 2 was to find the reason for creation of the legal entity & the ability of this entity to affect legal relations by the virtue of power vested in it by law. In the present case, the facts stated above clearly show that even though this organisation has been given the identity of a Company but the power to take all the major decisions still lies with the Government & the Government has formed this Company for better management of the business. It will relevant here to mention the case of Mahabir Auto Stores & Ors. v. Indian Oil Corporation & Ors. 3, where this Hon ble Court held the Indian Oil Corporation as an organ of the State based on the fact that the Corporation was subject to the policies, directions, instructions & guidelines issued by the Ministry of Energy. Thus, the Appellant Company is an organ of the State & the Government has the ultimate control over the functioning of the Company. 1.2 THE TEST OF ULTIMATE CONTROL FOR BEING THE OCCUPIER. Sec. 2 (n) of the Factories Act, 1948 defines the term occupier as a person having ultimate control over the affairs of the factory. The Sec., by the way of first proviso, further explains the ultimate control in the context of a firm, a company & a factory owned or controlled by the Government. Where in the case of Company, any one of its directors are to be deemed as occupiers, on the other hand, in case of a Government owned factory, the occupier is a person so appointed by the Government for managing the affairs of the factory. Furthermore, this Court has also held in the case of J.K. Industries Ltd. v. The Chief Inspector of Factories & 1 1986 SCR (2) 278 2 1981 SCR (2) 111 3 1990 SCR (1) 818
P a g e 11 Boilers& Ors 4, that the litmus test for finding out the occupier of the factory is the person who has the ultimate control over the affairs of the factory. In the present case, as already proved above, the ultimate control over the Appellant Company is that of the Central Government so, the person appointed by the Government shall be deemed to be the occupier of the Company rather than any one of the Directors of the Company. Thus, the Appellant Company would come under the purview of clause (iii) of the first proviso instead of the second clause. The counsel on behalf of the Appellant would also like to contend that the words used in the third clause of the proviso to the Sec. show that the intention of the Legislature was to include factories of different organisational forms run by the Government in its ambit rather than just including Government Companies. Thus, the word Government Company has not been expressly used in this clause. Also, Factories Act, 1948 is a piece of welfare legislation which has been formed with the objective of protection & welfare of the workers & hence, beneficial construction should be given to its provisions rather than giving them a narrow meaning. This was held in the case of Ravi Shankar Sharma v. State of Rajasthan 5. Further, the intention of the Legislature for creating separate provisions for Government Companies & Private Companies is that the Government runs its factories for the welfare of the public all around the country & all those factories could not be managed by a single director. Also, it is the Government only which implements the provisions of the Factories Act for the welfare of the workers & itself runs the factories for providing benefits to the people at large. So, it is unlikely that the Government would contravene the provisions of the Act. In addition to this, it will also be relevant to mention here that the Inspector of Factories has actually has recognised the Depot Manager as the occupier of the Factory when an application was made by him earlier for the renewal of the license of the older unit. 4 (1997) I LLJ 722 SC 5 AIR 1993 Raj 117
P a g e 12 Thus, the High Court has been mistaken as to the true nature & the control of the Company. Hence, the Depot Manager appointed by the Government should be recognised as the occupier of the Factory as he has the ultimate control over the factory.
P a g e 13 PRAYER Therefore in the light of the facts presented, issues raised, arguments advanced, reasons given and authorities cited, the counsel for the Appellant humbly pray before this Hon ble Supreme Court that may be pleased to - 1. Strike down the judgement passed by the Hon ble High Court of Patna; and 2. Hold that the Depot Manager is the occupier of the Factory; and/or 3. Pass any other order as this Hon ble Court may deem fit and proper. Place: New Delhi All of which is most respectfully submitted COUNSEL FOR APPELLANT