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ADDITIONAL LEARNING

S.G.SAI SARATH
15BBA0036

RULES AND REGULATION FOR ESTABLISHMENT OF FACTORIES


Rules and Regulations are also available for dealing with the agencies with
which our organisation interacts, to deal with its own employees, for proper
utilisation of public resources and for ensuring timely and efficient production
of vital items required by our armed forces, para-military units and other
customers.
Although the list of such Rules, Regulations and instructions are very large in
number.
The following is the frequently used list:

Factories Acts 1948:-


Our factories are production units employing a large number of workers.
Factories Acts 1948 provides in detail the facilities which are to be made
available to the workers. Provisions of this Act also lays down provisions
for providing safe working conditions for the workers.
This act also takes care of regulations in working hours of industrial
employees including payment to be made for overtime working.
This Act also provides for inspection by factory inspectors for proper
monitoring of the application of the provisions.

Payment of Wages Act 1936:-


Payment of wage act 1936 lays down the schedule of payment,
deductions which can be made from the salary of workers, etc.
The Payment of Wages Act regulates the payment of wages to certain
classes of persons employed in industry and its importance cannot be
under-estimated. The Act guarantees payment of wages on time and
without any deductions except those authorised under the Act.

Minimum Wages Act, 1948.


For contract workers, their wages are safeguarded by Minimum Wages
Act, 1948.
This Act provides for the lower limit for the wages which has to be
ensured for the contract worker. CONTRACT LABOUR(R&A) Act lays
down specific responsibility for the Principal Employer and various other
social security measures like provident fund, employees State Insurance,
etc. to be ensured for contract workers.
Contract labour (R&A) Act, 1970
The main instrument in ensuring non-exploitation of unorganized workers
serving in our organisation under the contractors.
The Object of the Contract Labour Regulation and Abolition) Act, 1970
is to prevent exploitation of contract labour and also to introduce better
conditions of work
The Contract Workmen are hired, supervised and remunerated by the
Contractor, who in turn, is remunerated by the Establishment hiring the
services of the Contractor.

Industrial Relations are governed by ID Act, 1947.


As per provisions laid out in this act Works Committee, etc. are constituted
which lays down the foundation of workers participation in certain areas of
decision making. However, in our organisation participative management is
further strengthened by forums like Joint Consultative Machinery, Productivity
Council, Safety Committees, etc.

Sales of Good Act


For any production unit, material plays a very important role. Raw and Semi-
finished material are procured by our factories for converting them into finished
products. In these transactions provision laid down in the Sales of Good Act
provide the guidance.

Indian Contract Act


The organisation enters into various types of contracts for purchase of
material/services, etc.
Indian Contract Act provides the conditions which are essential for a
valid and enforceable contract.

Pollution Control Act


To safeguard the environment we follow the law laid down by Pollution
Control Act of the State Govt. Which lays down criteria for
effluents/emission etc.
Central Civil Service (Conduct) Rules, 1964.
The employees of our organisation belong to Central Civil Service and
their conduct is to be governed by Central Civil Service (Conduct) Rules,
1964.
Provisions of this Rule ensure that the government servant discharges his
duty with loyalty and devotion at all times and does nothing which is
unbecoming of a Govt. servant.
It also mentions about certain sanctions etc. which are to be taken for
property transaction. Thus Conduct Rules ensures that Govt. servant
conduct is impeccable at all times and the general public has faith in the
Government machinery.
Conduct Rule also lay down guidelines for how to deal with public
representatives and how the govt. servant should conduct himself in
public.

Central Civil Services (Classification, Control & Appeal) Rules 1965.


To maintain proper disciplined environment in our factories, offices,
training centers, etc. we follow the provisions of Central Civil Services
(Classification, Control & Appeal) Rules 1965.
These rules are based on the principle of Natural justice and have
elaborate provisions regarding disciplinary authority, suspension,
enquiries, penalties, appeals, revision, etc

Financial matter
In financial matter, Rules laid down in GFR are applicable which lay
down basic principles for decision regarding financial transaction.
FRSR (Fundamental Rules & Supplementary Rules) are relevant in salary
fixation, allowance, etc.
For further guidance in financial matters, Financial Regulation is also
referred to. Matter regarding travelling allowances is dealt by TR Rules.
Delegation of financial power is enlisted in DFPR. Regarding financial
power of OFB /General Managers of factories under various heads
separate delegation has been obtained from Govt. and compiled.

CCS(Pension) Rules, 1972


Pension matters are dealt by CCS(Pension) Rules, 1972. These rules
provide for various kind of pensions like superannuation, family pension
etc.
In addition they deal with matter related to Voluntary Retirement,
commutation of pension and various other retirement matters.
Office work in our set ups are carried out according to Office Procedure
Manual. This Manual contains details of Noting, drafting, filing system,
etc. This ensures proper record keeping and monitoring of file movement.

The Employees Provident Funds and Miscellaneous Provisions Act, 1952.


The Employees provident Funds and Miscellaneous provisions Act,
1952 is enacted to provide a kind of social security to the industrial
workers. The Act mainly provides retirement or old age benefits, such
as Provident Fund, Superannuation Pension, Invalidation Pension,
Family Pension and Deposit Linked Insurance.
The Act provides for payment of terminal benefits in various
contingencies such as retrenchment, closure, retirement on reaching
the age of superannuation, voluntary retirement and retirement due to
incapacity to work.

Other rules and regulation to be followed by factory


In the field of Material Procurement Defence Procurement Manual and
Ordnance factory Board Purchase & Procurement Manual is available.
For accounting of labour and material we follow our Store Accounting
Procedure.
For leasing and licensing of facilities in estates we have a Land Lease
Policy, 1990 approved by the government. It provides for the method
adopted/criteria to be followed for leasing out land for market, school,
banks, etc.
Detailed instructions are issued by DOP&T based on rules in the matters
of recruitment, promotion, reservation etc.
CVC instructions received from time to time are followed for ensuring
transparency and impartiality in purchase matters.
In construction of building and other facilities, the standard rates and
estimates given in MES regulations are followed.
In most of our units ISO 9001 systems are incorporated to ensure quality
output, customer satisfaction and continued improvement in our methods.
Work is carried out on the production shop floor as per the Standing
instructions.
Types of Business Entities in India
In India, the following types of business entities are available:

Private Limited Company Liaison Office / Representative


Public Limited Company Office
Unlimited Company Project Office
Limited Liability Partnership (LLP) Branch Office
Partnership Joint Venture Company
Sole Proprietorship Subsidiary Company

Private Limited Company


A private company is a company which has the following characteristics:

shareholders right to transfer shares is restricted;


the number of shareholders is limited to 200; and
an invitation to the public to subscribe to any shares or debentures is prohibited.
A Private Limited Company is the most popular form of business entity used for
Foreign Investors in India, including USA investors in India. There are
various requirements for forming a private limited company in India. There are
various steps required to establish a business in India, before and after
incorporation, as mentioned hereinafter.

Public Limited Company


A public company is defined as a company which is not a private company. The
following conditions apply only to a public company:

It must have at least seven shareholders.


A public company is not authorized to start business upon the grant of the
certificate of incorporation. In order to be eligible to commence business as a
corporation, it must obtain another document called trading certificate.
It must publish a prospectus or file a statement in lieu of a prospectus before it
can start transacting business.
A public company is required to have at least three directors.
It must hold statutory meetings and obtain government approval for the
appointment of the management.
There are several other provisions contained in the Companies Act 1956 which
are applicable only to public companies and should be consulted.
Steps and procedure to start factory in India

Step 1.
Obtain director identification number (DIN) online from the Ministry of
Corporate Affairs portal (National)

Time to complete: 1 day

Cost to complete: INR 100

Procedure:The process to obtain the Director Identification Number (DIN) is


as follows:

Obtain the provisional DIN by filing application Form DIN-1 online. This
form is on the Ministry of Corporate Affairs 21st Century (MCA 21) portal.
The provisional DIN is immediately issued.
The application form must then be printed and signed and sent for approval
to the ministry by courier along with proof of identity and (address):
a. Identity proof (any of the following): Permanent Account Number card,
drivers license, passport, or voter card;
b. Residence proof (any of the following): drivers license, passport, voter
card, telephone bill, ration card, electricity bill, bank statement;
2. The concerned authority verifies all the documents and, upon approval,
issues a permanent DIN. The process takes about 4 weeks.

Step-2.
Obtain digital signature certificate online from private agency
authorized by the Ministry of Corporate Affairs (National)

Time to complete: 3 days

Cost to complete: INR 1,500

Procedure: To use the new electronic filing system under MCA 21, the
applicant must obtain a Class-II Digital Signature Certificate. The digital
signature certificate can be obtained from one of six private agencies
authorized by MCA 21 such as Tata Consultancy Services. Company
directors submit the prescribed application form along with proof of identity
and address. Each agency has its own fee structure, ranging from INR 400 to
INR 2650.
Step- 3.
Reserve the company name online with the Registrar of Companies
(ROC) (National)

Time to complete: 2 days

Cost to complete: INR 500

Procedure: Company name approval must be done electronically. Under e-


filing for name approval, the applicant can check the availability of the
desired company name on the MCA 21 web site.
The ROC in Mumbai has staff members working full time on name
reservations (approximately 3 but more if the demand increases). A
maximum of 6 suggested names may be submitted. They are then checked
by ROC staff for any similarities with all other names in India.

After being cleared by the junior officer, the name requests are sent to the
senior officer for approval.
Once approved, the selected name appears on the website. Applicants need
to keep consulting the website to confirm that one of their submitted names
was approved.
In practice, it takes 2 days for obtaining a clearance of the name if the
proposed name is available and conforms to the naming standards
established by the Company Act (1 day for submission of the name and 1
day for it to appear on the MCA website).

Step- 4.
Stamp the company documents at the State Treasury (State) or authorized
bank (Private)

Time to complete: 1 day

Cost to complete: INR 1,300 (INR 200 for MOA + INR 1,000 for AOA for
every INR 500,000 of share capital or part thereof + INR 100 for stamp paper
for declaration Form 1)

Procedure: The request for stamping the incorporation documents should be


accompanied by unsigned copies of the Memorandum and Articles of
Association, and the payment receipt.
The company must ensure that the copies submitted to the Superintendent of
Stamps or to the authorized bank for stamping are unsigned and that no
promoter or subscriber has written anything on it by hand. The Superintendent
returns the copies, one of which is duly stamped, signed, and embossed,
showing payment of the requisite stamp duty. The rate of stamp duty varies
from state to state.
According to Article 10 and Article 39 of the Indian Stamp Act (1899), the
stamp duty payable on the Memorandum and Articles of Association for
company incorporation in Mumbai, Maharashtra, is as follows:
a. Articles of Association: INR 1000/- for every INR 500,000/- of share capital
(or part thereof), subject to a maximum of INR 50,000,000;
b. Memorandum of Association: INR 200;
c. Form-1 (declaration of compliance): INR 100.

Once the memorandum and articles of association have been stamped, they
must be signed and dated by the company promoters, including the company
name and the description of its activities and purpose, father-s name, address,
occupation, and the number of shares subscribed. This information must be in
the applicants handwriting and duly witnessed.

Step- 5.
Get the Certificate of Incorporation from the Registrar of Companies,
Ministry of Corporate Affairs (National)

Time to complete: 5 days

Cost to complete: INR 14,133 (see comments)

Procedure: The following forms are required to be electronically filed on


the website of the Ministry of Company Affairs:
e-form 1; e-form 18; and e-form 32.
Along with these documents, scanned copies of the consent of the initial
directors, and also of the signed and stamped form of the Memorandum and
Articles of Association, must be attached to Form 1.

Step- 6.
Make a seal (Private)

Time to complete: 1 day

Cost to complete: INR 350 (cost depends on the number of seals required and
the time period for delivery)

Procedure: Although making a company seal is not a legal requirement for the
company to be incorporated, companies require a seal to issue share certificates
and other documents. The cost depends on the number of words to be engraved,
the number of seals required, and the time period for delivery. The cost can
range from INR 300 to INR 500.

Step- 7
Obtain a Permanent Account Number (PAN) from an authorized franchise
or agent appointed by the National Securities Depository Ltd. (NSDL) or
the Unit Trust of India (UTI) Investors Services Ltd., as outsourced by the
Income Tax Department (National)

Time to complete: 7 days

Cost to complete: INR 67 (INR 60 application fee + 12.36% service tax + INR
5 for application form, if not downloaded)

Procedure: Under the Income Tax Act, 1961, each person must quote his or her
Permanent Account Number (PAN) for tax payment purposes and the Tax
Account Number (TAN) for depositing tax deducted at source. The Central
Board of Direct Taxes (CBDT) has instructed banks not to accept any form for
tax payment (challan) without the PAN or TAN, as applicable. The PAN is a
10-digit alphanumeric number issued on a laminated card by an assessing
officer of the Income Tax Department.

Step- 8
Obtain a Tax Account Number (TAN) for income taxes deducted at source
from the Assessing Office in the Mumbai Income Tax Department

Time to complete: 7 days

Cost to complete: INR 57 (INR 50 application fee + 12.36% service tax)

Comment: The Tax Account Number (TAN) is a 10-digit alphanumeric


number required of anyone responsible for deducting or collecting tax. The
provisions of Section 203A of the Income Tax Act require that all persons who
deduct or collect tax at the source must apply for a TAN. The section also
makes it mandatory for the TAN to be quoted in all tax-deducted-at-source
(TDS) and tax-collected-at-source (TCS) returns, all TDS/TCS payment
challans, and all TDS/TCS certificates issued.

Step- 9
Register with the Office of Inspector, Shops, and Establishment Act
(State/Municipal)

Time to complete: 2 days


Cost to complete: INR 6,500 (INR 2000 + 3 times registration fee for trade
refuse charges)

Procedure: A statement containing the employer-s and manager-s names and


the establishments name (if any), postal address, and category must be sent to
the local shop inspector with the applicable fees.

Step- 10
Register for Value-Added Tax (VAT) at the Commercial Tax Office (State)

Time to complete: 12 days

Cost to complete: INR 5,100 (registration fee INR 5000 + stamp duty INR
100)

Procedure: Beginning April 1, 2005, the sales tax was replaced by the VAT,
which requires registration by filing Form 101.
The authorized representative signing the application must be available at the
Sales-Tax Office on the day of application verification. The applicant goes to
the Sales-Tax Office and up to the registration counter. The clerk at the counter
verifies that the applicant has all the required documents and gives the applicant
a token (waiting number). After a short wait, the applicant-s number is called
and the applicant approaches the desk of a sales-tax officer.

Step- 11
Register for Profession Tax at the Profession Tax Office (State)

Time to complete: 2 days

Cost to complete: No cost

Procedure: According to section 5 of the Profession Tax Act, every employer


(not being an officer of the government) is liable to taxation and shall obtain a
certificate of registration from the prescribed authority. The company is
required to apply to the registering authority using Form 1.

Depending on the nature of the business, the application should be supported


with such documents as proof of address, details of company registration
number under the Indian Companies Act (1956), details of the head office (if
the company is a branch of company registered outside the state), company
deed, certificates under any other act, and so forth.
Step-12
Register with Employees Provident Fund Organization (National)

Time to complete: 12 days

Cost to complete: No cost

Procedure: The Employees Provident Funds and Miscellaneous Provisions Act


(1952) applies to an establishment, employing 20 or more persons and engaged
in any of the 183 industries and classes of business establishments, throughout
India excluding the State of Jammu and Kashmir.

Step-13
Register for medical insurance at the regional office of the Employees
State Insurance Corporation (National)

Time to complete: 9 days

Cost to complete: No cost

Procedure: Registration is the process by which every employer/factory and


every paid employee is identified for insurance purposes and their individual
records are set up for them.

As per the Employees State Insurance (General), Form 01 must be submitted


by the employer for registration. It takes 3 days to a week for the Employer
Code Number to be issued. The- intimation letter- containing the Code
Number is mailed to the employer and that takes an additional couple of days.

Welfare Provision to be provided by factories are:


a) Housing e) Libraries
b) Schools f) Sports and recreation
c) Educational facilities g) Fair price shops
d) Grant of scholarships h) Co-operative Societies