Scope of 'Factory' under the Indian Law

Huge buildings harboring a foray of complex machineries with numerous hands at work, is the general idea of a Factory in the common sense of the word, isn’t it? The scope that our law sets for this term, however, is quite broad. It not only spans across the concept of large machines out of the automation industry being installed in a premises, but even covers certain basic needs of ours, prepared by machines, or by hands, or partially by both and brings it under the applicability of various factory rules and regulations, underlying all of which, is the Factories Act of 1948. Let us have a look at the statutory definition laid out under the said Act, which essentially defines the circumference of “Factory” under the Indian Law.

• S. 2(m) - Factory

"Factory" means any premises including the precincts thereof- 

(i) whereon ten or more workers are working, or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on with the aid of power, or is ordinarily so carried on, or 

(ii) whereon twenty or more workers are working, or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without the aid of power, or is ordinarily so carried on,- 

but does not include a mine subject to the operation of [the Mines Act, 1952 (35 of 1952),] or [a mobile unit belonging to the armed forces of the Union, a railway running shed or a hotel, restaurant or eating place]. 

Explanation. I.- For computing the number of workers for the purposes of this clause all the workers in different groups and relays in a day shall be taken into account; 

Explanation. II.- For the purposes of this clause, the mere fact that an Electronic Data Processing Unit or a Computer Unit is installed in any premises or part thereof, shall not be construed to make it a factory f no manufacturing process is being carried on in such premises or part thereof;

From the above-mentioned definition, its ingredients can be conveniently drawn out as:

1. Premises (including Precincts):-

Premises is defined as a house or building, together with its land and outbuildings, occupied by a business or considered in an official context*.

Precincts, defined as the area within the walls or perceived boundaries of a particular building or place*, are also included in the definition.

As these terms suggest, the term premises includes open land, land with building(s), etc. Thus, the most essential characteristic/requirement for a Factory to exist is that it must occupy a fixed site, which falls within the definition of these two words.

2. Manufacturing Process:-

It is defined u/s 2(k) as any process for- 

(i) making, altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning, breaking up, demolishing, or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal, or 

(ii) pumping oil, water, sewage or any other substance; or

(iii) generating, transforming or transmitting power; or 

(iv) composing types for printing, printing by letter press, lithography, photogravure or other similar process or book binding; or

(v) constructing, reconstructing, repairing, refitting, finishing or breaking up ships or vessels;

(vi) preserving or storing any article in cold storage.

It is the most crucial requirement for any premises to fall under the definition of Factory. No establishment can be regarded as a factory where some sort of manufacturing process doesn’t take place.

Now there are broadly 6 categories of activities considered as Manufacturing process and they’re:

• Related to an article, for the purpose of  its –

o Usage
o Sale
o Transport
o Delivery
o Disposal

any process conducted for -

o Making
o Altering
o Repairing
o Ornamenting
o Finishing
o Packing
o Oiling
o Washing
o Cleaning
o Breaking up
o Demolishing
o Treating or Adapting (in any other manner except those stated above), such article.

• Pumping

o Oil
o Water
o Any other substance (added by Amendment of 1976)

• Related to Power, its:

o Generation
o Transformation
o Transmission

• Related to Printing:

o Composing types for Printing
o Printing by Letter Press
o Lithography
o Photogravure
o Book Binding
o Any similar process

• Related to Ships or Vessels, their:

o Construction
o Reconstruction
o Repair
o Refitting
o Finishing
o Breaking up

• In a Cold Storage,

o Reserving
o Restoring an article

Explanation II to s.2(m) clears the confusion regarding Electronic Data Processing Units (EDPU) or Computer units installed at premises. It lays down that merely upon installation of such units in any premises or its parts need not be construed as to make such premises a factory if no manufacturing process is carried out in there.

A few examples of Manufacturing Processes include Bidi making, Conversion of raw film into finished product to render it fit for screening in theatre, Preparation of Soap in Soap works, Salt manufacture in Salt works, Preparation of food in certain establishments, etc.

Thus, from this it clearly understood as to how wide the scope of Manufacturing Process is and how proportionally it would increase the scope of the term Factory.

3. No. of Workers employed in the preceding one year.

a. 10 or more, where Manufacturing Process is carried on with the aid of Power.

b. 20 or more, where Manufacturing Process is carried on without the aid of Power.

Power is defined u/s 2 (g) as electrical energy, or any other form of energy, which is mechanically transmitted and is not generated by human or animal agency.

• It is important to know that when calculating the number of workers, as per Explanation I, heed must be paid to all the workers working in different groups and relays in a particular day.

Relay & Shift are defined u/s 2(r). It lays down that where work of the same kind is carried out by two or more sets of workers working during different periods of the day, each of such sets is called a “group” or “relay” and each of such periods is called a "shift".

4. Exceptions

The definition clearly states that certain establishments or units are not to be included in the said definition. These include:

• Mines, subject to the Mines Act, 1952
• Any Mobile unit belonging to the Armed Forces of the Union
• A Railway running shed
• A Hotel
• A Restaurant and Eating places

5. Other Factories

Within this act, there is a Special Provision for the State to declare any premises a factory. The exact provision falls u/s 85 of the act. It is laid out as follows:

S. 85- Power to apply the Act to certain premises. 

(1) The State Government may, by notification in the Official Gazette, declare that all or any of the provisions of this Act shall apply to any place wherein a manufacturing process is carried on with or without the aid of power or is so ordinarily carried on, notwithstanding that -

(i) the number of persons employed therein is less than ten, if working with the aid of power and less than twenty if working without the aid of power, or 

(ii) the persons working therein are not employed by the owner thereof but are working with the permission of, or under agreement with, such owner: 

Provided that the manufacturing process is not being carried on by the owner only with the aid of his family. 

(2) After a place is so declared, it shall be deemed to be a factory for the purposes of this Act, and the owner shall be deemed to be the occupier, and any person working therein, a worker. 

Explanation.--For the purposes of this section, "owner" shall include a lessee or mortgagee with possession of the premises.

This section enables the State Government to enlist any premises where the no. of workers are less than described under the definition u/s 2(m) or where such workers are directly or indirectly employed by the owner. The only limitation being that only the family of the owner must not be involved in carrying out the Manufacturing Process.

6. Important Cases

• Ardeshir Bhiwandiwala v State of Bombay
AIR 1962 SC 29

In this landmark case, it was held by the Honorable Court that the Salt works where process of converting water into salt is carried out in open, falls under the scope of “Factory”. 

Thus, Premises in the definition of Factory u/s 2(m) includes open land as well. Also, salt conversion was upheld as a manufacturing process.

• Laxman Rao & Sons v Additional Inspector of Factories
AIR 1959 AP 142

In this case, it was held that establishments preparing food articles and drinks, and further catering them to the Public who visit them, would be a factory u/s 2(m), provided the minimum number of workers are satisfied. This was laid down, stating that the language u/s 2(k) was wide enough to include process of preparing food stuffs and other eatables supplied by the establishments as it satisfies the test of making, altering, otherwise treating or adapting any article or substance with a view to its use, sale or disposal.

• Hathras Municipality v Union of India
AIR 1975 All 364

It was held in this case that the Water Works run by the Municipal Board, Hathras, for supplying water to the town falls under the definition manufacturing process as it was pumping of water, covered u/s 2(k)(ii).

• V.P. Gopal Rao v State of Andhra Pradesh
AIR 1970 SC 66

Brief Facts: M/s Golden Tobacco Co Pvt Ltd was a company which dealt in Tobacco related activities, like selling, processing etc. Its head office and the main factory were situated in Bombay, and Cigarette manufacturing was carried out there. The Appellant was essentially the Manager of the Company’s premises in Eluru, Andhra Pradesh where sun-cured country tobacco leaves were purchased from the local producers and were further collected, processed, stored and transported to the main factory at Bombay. It was an established fact that there were easily over 20 workers at the premises in Eluru. Prosecution contended that it must fall under the definition of Factory. 

Issues:

(i) Whether the premises at Eluru was a factory or not?
(ii) Whether there were enough workers to attract the said provision of 2(m)?

Observation: It was duly observed as per the material on record that at the Company’s premises at Eluru, sun cured tobacco leaves were subjected to the process of moistening, stripping and packing.

Decision: Hence, the Court held that such treatment of the tobacco leaves constituted a Manufacturing process u/s 2(k)(i) and the premises constituted to be a Factory u/s 2(m) as there was prima facie evidence showing the relationship of employment between the Occupier and the Workers as the former admitted to the employment of more than 20 workers. Therefore, it was held as a Factory.

This was only a summarized review of the definition of Factory under the Indian Law, which is quite logical and effective as indicated from various cases highlighted up there. The definition seems quite flexible in covering any necessary establishment. However, a reasonable monitoring over the subject, with regard to the practical situation is always encouraged for constant check can only ensure updated laws and statutory definitions, in turn upon which such technical laws tend to rest.

 

Arjun Kohli 
on 21 July 2017
Published in Others
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