Author Name:   Shastree

Analysi of key components of what constitutes in the definition of factory , discussion on exceptions.

An illustrative analysis of the definition of ‘Factory’ in The Factories Act, 1948

The definition of ‘Factory’ is given in section 2(m) of the Factories Act,1948. Section 2(m) defines the term ‘Factory’ as: - ‘Factory’ means: any premises or precincts thereof –

(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; or

(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, but 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.

Explanation III: For the purpose of this clause, the term, “ High Value Crops”, shall mean and include – (i) Plantation of fruits , vegetables, flowers in a green house or shed-net house;(ii) Plantation of exotic fruits, flowers and vegetables, (iii) Plantation of crops for the use of bio-technology, (iv) plantation of medicinal and aromatic plants and processing industry; (v) Production of mushroom and processing industry; (vi) Production of fruits by micro drip irrigation by use of plastic and mulching; (vii) Nurseries and processing industries where vegetables are produced in green house; (viii) Nursery of ornamental plants.

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 term factory; the Section 85 titled “Power to apply the Act to certain premises”. This section is contained in Chapter IX which is titled, “special provisions”.

Section 85 states that,
(1) 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 or so is ordinarily carried on , notwithstanding that – (i) the number of persons employed therein is 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,

(2) 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.

Explanation: For the purpose of this section “Owner” shall include a lesser 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 expanse of term only to textile and its related industry. Further referring to the definition stated in section 2(m) of the Factories Act,1948, which is discussed earlier, it can be inferred, that the following ingredients are mandatory to constitute a premises as “ factory” which are as follows: -

(i) If the premises is using power or working without the aid of power , the number of workers required to constitute a factory differ as follows –
(a) with the aid of power – 10 or more workers,

(b) without the aid of power – 20 or more workers.
(ii) A manufacturing process should be carried on,
(iii) 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 the case of Ardeshir vs State of Bombay , AIR 1962, S.C.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 doesnot indicate that the word ‘premises’ must be restricted to main building and not to 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). For any premises to be called a factory, the following conditions must be fulfilled:-

(1) As decided in the case of ‘Workmen, Delhi electricity Supply Undertaking /vs/ 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”.

(2) As decided in the case of “New Taj Mahal Cafe ltd Mangalore /vs/ Inspector of Factories, Mangalore,(1950) I.LLJ,273. that, “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 premise 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. But, the mere fact that the power is used in the premises is not sufficient, but power must be used in the aid of 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, according to section 2(k) defines manufacturing process as:- “Manufacturing process” means process for –(i) 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, or

(ii) Pumping oil, water, sewage or any other substance or,

(iii) Generating, transforming or transmitting, power, or

(iv) Composing types for printing the letter press, lithography, photogravure, or other similar process or book binding, or

(v) Constructing, re-constructing, repairing, refitting, or breaking up of ships or vessels ; or

(vi) Preserving or storing any articles in cold storage;

In this regard it becomes necessary to discuss some special circumstances that came up in some court cases :

(1) Preparation of food with aid of various electrical appliances in kitchen of a hotel is a manufacturing process: As decided in the case of “Poona Industrial Hotel /v/s I.C. Sarin , 1980, Lab IC 100.

(2) Selling of petrol or diesel by a petrol dealer or repairing of motor vehicle will not come within the term “manufacturing process”, as noted in the case of : “ National Service Centre and Petrol Pump /vs/ E.S.I Corporation , 1983 labI.C. 412(P&H) .

(3) The work of mere packing cannot be called as a manufacturing process; {ref-AIR 1955 NUC 2710}.

(4) 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 amount to manufacturing process, as noted in the case of “Baranagar Service Station /vs/ E.S.I Corporation (1987) 1 L.L.N 912(Cal)(Divisional Bench).& Lab I.C. 302.

(5) Decorticating groundnuts in electric mill is a manufacturing process (AIR 1959 Madras 30).

(6) Breaking up of boulders is a manufacturing process – as decided in case of “Larsen & Toubro /vs/ state of Orissa , 1992 Lab IC 1513 (Orissa- Divisional Bench).

(7) Transportation of goods on contract basis from one place to another by road with the assistance of transport carriers is not a manufacturing process- as decided in the case of regional Director E.S.I.C /vs/ Jaihind Roadways, Bangalore(2001),1 L.L.J 1187(Karnataka).

(8) Reading the definition of ‘Manufacturing process’ in the light of Supreme Court in “Workmen”, Delhi Electricity Supply Undertaking /vs/ 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 of “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 Bombay High Court and it has laid down in the definition of “manufacturing process’, that , in this definition , each of the words have got independent meaning which itself constitutes the manufacturing process.

Therefore we can conclude from these cases & 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 fulfill certain conditions as mentioned above and mainly manufacturing process should be carried on.

The author can be reached at: shastree85@legalserviceindia.com

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