By Aniruddh Shastree
The definition of ‘Factory’ is given in section 2(m) of the Factories Act, 1948. According to Section 2(m), the term ‘Factory’ means: (i) whereon 10 or more workers are working, or were working, on any day of the preceding 12 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; (ii) whereon twenty or more workers are working, or working on any day of the preceding 12 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.
It does not include (i) a mine subject to the operation of the Mines Act, 1952, or (ii) a mobile unit belonging to the armed forces of the Union of India, (iii) a railway running shed, or (iv) a hotel, (v) a restaurant, (vi) eating place, (vii) poly house or (viii) green house engaged in the activity of floriculture or pomology or high value crops.
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 purpose of this clause, the mere fact that an electronic data processing unit or a computer unit is installed in any premises or a part thereof, shall not be construed to make it a factory if no manufacturing process is being carried out in such premises or a part thereof.
In addition to the above stated definition of Factory, the Section 85 of Chapter IX of the Factories Act, 1948, extends the application of the Act to certain premises. Section 85 is titled “Power to apply the Act to certain premises”. This section is contained in Chapter IX which is titled, “special provisions”.
Section 85
Section 85 states that the State Government may, by notification in the official gazette, declare that all or any of the provisions of the Act shall apply to any place wherein a manufacturing process is carried with or without the aid of power, notwithstanding that (i) the number of persons employed therein is less than 10, if working with the aid of power and less than 20 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 only with the aid of his family.
After a place is so declared, it shall be deemed to be a factory for the purpose of this Act, and the owner shall be deemed to be the occupier, and any person working therein, a worker. For the purpose of this section “Owner” shall include a lessor or mortgagee with possession of the premises.
According to Black’s Law Dictionary, factory is a term that includes all buildings and premises wherein, or within the cartilage of which, steam, water, or any mechanical power is used to move or work any machinery employed in preparing, manufacturing, or finishing cotton, wool, hair, silk, flax, hemp, jute or tow.
This definition seems to be confined to defining the expanse of the term only to textile and its related industry. Further, referring to the definition stated in Section 2(m) of the Factories Act, 1948, it can be inferred that the following ingredients are mandatory to constitute a premises as “factory”:
- If the premises is using power or working without the aid of power, the number of workers required to constitute a factory differs as follows: (a) with the aid of power — 10 or more workers; (b) without the aid of power — 20 or more workers.
- A manufacturing process should be carried on.
- Work should be carried on in precincts.
The case law of K.V.V. Sharma, AIR 1953 Mad 269, stated precincts as “a space enclosed by walls or fences. A place solely used for some purpose other than the manufacturing process carried on in a factory or a workshop does not constitute a factory.”
In Ardeshir v. State of Bombay, AIR 1962 SC 29, it was held that the word ‘premises’ is a generic term meaning open land or land with buildings or building alone. The expression “premises including precincts” does not necessarily mean that the premises must always have precincts. Even buildings need not have any precincts. The word ‘including’ is not a term restricting the meaning of the word ‘premises’ but is a term which enlarges its scope.
The use of the word including, therefore, does not indicate that the word ‘premises’ must be restricted to main building and not be taken to cover open land as well. Though some of the provisions of the Act cannot be applicable to salt works where the process of converting sea water into salt is carried on in the open, there is nothing in the Act which makes it uniformly compulsory for every occupier of the factory to comply with every requirement of the Act.
An occupier needs to comply with such provisions of the Act which applies to the factory he is working; hence, salt works should come within the meaning of the word ‘premises’ used in the definition in Section 2(m).
Judicial Tests for a Factory
As decided in Workmen, Delhi Electricity Supply Undertaking v. Management, AIR 1973 SC 365, “Factory” is a premise where manufacturing process is carried on. No manufacturing process was held to take place either in the sub-stations or in the zonal stations of the Delhi Electricity Supply Undertaking, because the workmen employed therein have no part in any manufacturing process.
As decided in New Taj Mahal Cafe Ltd., Mangalore v. Inspector of Factories, Mangalore, (1950) I.L.L.J. 273, in order that any premises may be held as a factory, the following conditions must be fulfilled: (a) a manufacturing process must be carried on in any part of the premises of the establishment; and (b) where a manufacturing process is carried on with the aid of power, ten or more workers must be working and where manufacturing process is carried on without the aid of power, twenty or more workers must be working in that establishment. The mere fact that power is used in the premises is not sufficient, but power must be used in aid of the manufacturing process.
Manufacturing Process
An important necessity for any premises to be regarded as a ‘factory’ is that a “manufacturing process” should be conducted within the premises. In the Factories Act, 1948, Section 2(k) defines manufacturing process as process for:
- Making, altering, repairing, oiling, washing, cleaning, ornamenting, finishing, packing, breaking up, or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal.
- Pumping oil, water, sewage or any other substance.
- Generating, transforming or transmitting power.
- Composing types for printing the letter press, lithography, photogravure, or other similar process or book binding.
- Constructing, re-constructing, repairing, refitting, or breaking up of ships or vessels.
- Preserving or storing any articles in cold storage.
Examples from Case Law
- Preparation of food with the aid of various electrical appliances in the kitchen of a hotel is a manufacturing process: Poona Industrial Hotel v. I.C. Sarin, 1980 Lab IC 100.
- Selling of petrol or diesel by a petrol dealer or repairing of motor vehicle will not come within the term “manufacturing process”: National Service Centre and Petrol Pump v. E.S.I. Corporation, 1983 Lab I.C. 412 (P&H).
- The work of mere packing cannot be called a manufacturing process: AIR 1955 Nag 2710.
- The business of sale of diesel oil, motor spirit, lubricant, servicing of cars and lorries, repairing vehicles and charging batteries with the aid of power, by employing more than 20 workers/labourers, amounts to manufacturing process: Baranagar Service Station v. E.S.I. Corporation, (1987) 1 LLN 912 (Calcutta Division Bench) & Lab I.C. 302.
- Decorticating groundnuts in an electric mill is a manufacturing process: AIR 1959 Madras 321.
- Breaking up of boulders is a manufacturing process: Larsen & Toubro v. State of Orissa, 1992 Lab IC 15 (Orissa Division Bench).
- Transportation of goods on contract basis from one place to another by road with the assistance of transport carriers is not a manufacturing process: Regional Director, E.S.I.C. v. Jaihind Roadways, Bangalore, (2001) 1 L.L.J. 1187 (Karnataka).
Reading the definition of ‘Manufacturing process’ in the light of the Supreme Court decision in Workmen, Delhi Electricity Supply Undertaking v. Management, (1974) 3 SCC 108, the word ‘or’ in Section 2(k)(iii) must be read as ‘and’. In other words, to satisfy the definition “manufacturing process”, there should be a process of generating, transmitting and transforming of power. So a sub-station where only transforming and transmitting of power is done is not covered.
A contradictory judgement was passed by the Bombay High Court and it laid down in the definition of “manufacturing process” that, in this definition, each of the words has an independent meaning which itself constitutes the manufacturing process.
Therefore, we can conclude from these cases and the definition that if a manufacturing process is not carried on within the premises, it cannot be regarded as a factory, and to regard an establishment or premises as a factory, it should fulfil certain conditions as mentioned above and mainly manufacturing process should be carried on.