NATIONAL LAW INSTITUTE UNIVERSITY, BHOPAL

Session 2020 - 2021

LABOUR & INDUSTRIAL LAW II PROJECT

MANUFACTURING PROCESS: INCLUSIONS UNDER FACTORIES

ACT, 1948

SUBMITTED BY: SUBMITTED TO:

Aditya Wadhwa Asst. Professor, Mr. Mahendra Soni
2016 BALLB 14
Enrolment Id- A-1659
ACKNOWLEDGMENT:

I would like to take this opportunity to express my deep sense of gratitude to Asst. Prof.
Mahendra Soni for helping me in selecting the topic: “Manufacturing process: Inclusions under
Factories Act”. Without his unstinted support and encouragement, this project would not have
been possible. I would also like to express my gratitude to the library staff of National Law
Institute University, Bhopal for their assistance with reference materials and online access to
databases.

2|Page
TABLE OF CONTENTS

Introduction:....................................................................................................................................4

Literature Review:...........................................................................................................................5

Statement of Problem:.....................................................................................................................6

Objectives of Study:........................................................................................................................6

Hypothesis:......................................................................................................................................6

Research Questions:.........................................................................................................................7

Research Methodology....................................................................................................................7

A brief overview of factories act, 1948...........................................................................................8

Definition of a factory...................................................................................................................10

Concept of a factory.......................................................................................................................12

Meaning of manufacturing process...............................................................................................13

Case law anaylsis:..........................................................................................................................14

Manufacturing process as per judicial pronouncements:...............................................................15

processes not deemed to be manufacturing process as per judicial pronouncements...................17

Conclusion and Suggestions..........................................................................................................18

Bibliography:.................................................................................................................................19

3|Page
INTRODUCTION:

The industrial legislation paradigm has undergone tremendous changes in accordance with the
rapid growth of industrial town and factories. The Government of India, however, never
expressed an interest in framing a legislation particularly providing for factories which resulted
in the same statute being implemented which was enacted pre-independence. The aim behind
introducing such legislation was to counter the ills that plagued factory and industrial
administration in India. It expressly mentioned the minimum ages of those to be employed,
limited endless working hours and tried to ensure some safeguard in place for the workers and
their conditions in factories.1

Factories Act in India is a legislation which provides regime for the functioning of factory and
lays down the provisions for health, safety and welfare of labour force employed in a factory.
The Factories Act, 1934 was revised in 1948 to widen its scope and cover the ambits of
cleanliness, over time payments, health and many more. It was done to ensure that the workers
receive proper working conditions keeping in mind their health and safety so that more time and
labour is devoted in the working processes of the factory without the tension and fear of mishaps,
accidents and bodily harm.

To ensure the abovementioned goals are met, regard is given to regulating the working
conditions in factories, regulating health, safety welfare, and annual leave and enacting special
provision in respect of young persons, women and children who work in the factories. The act
covers all factories which employ 10 or more persons in any manufacturing process with the use
of power and all such factories which employ 20 or more persons in any manufacturing process
without the use of power.

The term “manufacturing process” has though been provided in the Factories Act itself,
however, the concept has witnessed various changes by way of amendments and judicial
pronouncements that have brought drastic changes thus, benefitting the targeted persons. It is

1
Kirthi Jayakumar, The First Labour Statute, myLaw (May 4, 2012), <http://version1.mylaw.net/index.
php/Article/The_first_labour_statute>.

4|Page
these changes that are review and explained in this project to better gauge the concept and
examine the inclusions under the Factories Act, 1948.

5|Page
 LITERATURE REVIEW:

 Sajana Bakshi, Mondaq, India - Definition Of Factory - A Critical Analysis, visited

on 6th October, 2020
 This article helped the researcher understand the definition existing in the provisions of
the Act, as well as understand issues related to enforcement and the changes that have
been brought by judicial decisions.

 Manjeet Kumar Sahu, Development of law relating to factories in India, visited on

6th September, 2020
 This article has helped the researcher develop an understanding regarding the nature of
the factories Act, its purpose and scope. The article also helped shed some light on the
jurisprudential developments of the concept of “manufacturing process” as well as the
role of the courts in updating the concept as per current times.

 Smriti Tiwari, The Factories Act, 1948, visited on 10th October, 2020
 This article traced the origin of factories act and helping the researcher in ascertaining the
objectives and importance of the legislation. The article further elaborated upon various
definitions that were required to make this project, identify the ingredients in them and
explain what they mean and how they are treated by courts.

 Mugdha Jain, All about Factories Act, 1948, visited on 12th October, 2020
 This article revolved around the fundamentals of application of factories act to an
establishment and helped the author in determining the situations in which said act is
applicable with application based examples. The article further highlighted where all these
provisions may not apply.

 In Re: Seshadrinatha Sarma (S.) MANU/TN/0257/1966

 This is a landmark case that deals with the definition of manufacturing process and
explains what is to be termed as manufacturing process and what are the factors to be

6|Page
 taken into consideration to determine the same. It was held that converting latex into
rubber-sheets using machinery falls under the ambit of manufacturing process.

STATEMENT OF PROBLEM:

As per the Factories Act, 1948, the definition of “manufacturing process” is essential to ascertain
applicability of the abovementioned Act. However; the bare reading of the provisions do not
provide for the elaborate concept as determined by courts and judicial decisions. The
understanding based on such a similar approach thus, remains only a partial understanding of the
ground reality.

OBJECTIVES OF STUDY:

The author plans to first examine the scope of the Factories Act, 1948. Further, the author plans
to understand the inclusions as provided in the definition of “manufacturing process”. Using such
information, the author wishes to trace the changes made to the definitions and provisions and
examine whether the same help in fulfilling the purpose of the Act. Towards the end, the author
plans to offer a critique based on the judicial decisions and international practices.

HYPOTHESIS:

The definition of “manufacturing process” under the Factories Act, 1948 is a vital part of the
legislation but the same has undergone major transformations by way of judicial pronouncements
which have expanded the scope and ambit of the inclusions allowed as per the existing
definition.

RESEARCH QUESTIONS:

 What are the inclusions as provided under the definition of “manufacturing process”
under the Factories Act, 1948?
 Whether said definition is exhaustive in nature?
 Are there any amendments to the said definitions?

7|Page
  How have the courts interpreted the words mentioned in the definition?
 What is the current understanding of the inclusions in the definitions?
 Has the definition been updated with the change in labour practices and scientific
discoveries?

RESEARCH METHODOLOGY

For the purpose of making this project, the author has relied on various sources such as books on
the matter, scholarly articles and websites with relevant information. Further, the author has used
the doctrinal method of research for this project.

8|Page
A BRIEF OVERVIEW OF FACTORIES ACT, 1948

The Factories Act, 1948 is a beneficial legislation that provides for the health, safety and welfare
of the workers in factories2. The act improves the working conditions and provides protection to
the exploited workers in industries. The act further prescribes an instructional machinery and
strict observance of rules and directions by the concerned individuals.

The main objective of the Act, as stated in its Preamble, is to consolidate the law regulating the
labour in factories. This is done by regulating the working conditions in factories, regulating
health, safety and welfare and enacting special provision in respect of specific persons who are
employed in the factories3:

 Working Hours:

The act provides for regulations wherein no adult worker is required or allowed to work in a
factory for more than 48 hours in a week and further, specifies a mandatory weekly holiday.

 Health:

The Act further, lays down that every factory should be kept clean and the workers are
required to take all necessary precautions. The factories should have enough ventilation,
proper drainage system, adequate lighting & temperature etc. There are also requirements
pertaining to adequate drinking water and sufficient latrine and urinals at convenient places.

 Safety:

There also exist regulations for fencing of machinery and prohibition of young person’s
working with dangerous machine or in confined spaces.

 Welfare:

For the welfare of the workers, the Act provides that in every factory adequate and suitable
facilities for washing should be provided and maintained for the use of workers.

2
Ravi Shankar Sharma v. State of Rajasthan & Ors. (1991 (6) R.Cr.C. 156)
3
Manjeet Kumar Sahu, Development of law relating to factories in India, visited on 6th October, 2020.

9|Page
APPLICABILITY OF FACTORIES ACT, 1948

The Act is applicable to any factory wherein 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 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 this does not include a mine, or a mobile unit belonging to the
armed forces of the union, a railway running shed or a hotel, restaurant or eating place.

10 | P a g e
DEFINITION OF A FACTORY

According to the Black Law Dictionary, Factory is a term that includes all buildings and
premises wherein, or within the close or curtilage 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 meaning can also be derived from common understanding of the word we all have heard
growing up. However, the legal meaning of the same has been provided under Section 2(m) of
Factories Act, which states that 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
12 months and in any part of which is manufacturing process is being carried on with the aid
of power as is ordinarily so carried on; or

ii. Whereon twenty or more workers are working or were working on any 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.

A factory shall not include a mine subject to the operation of the Mines Act 1952 or a mobile
unit belonging to the armed forces of the Union, a railway running shed or hotel, restaurant or
eating places.

It can be thus, the following ingredients can be inferred to be mandatory to constitute a premises
as "Factory":-

i. If a premises is using power or working without the aid of power:

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.

11 | P a g e
The Oxford Dictionary defines the term “precinct” as Follows

i. the area within the walls or perceived boundaries of a particular building or place
ii. area in a town designated for specific or restricted use, especially one which is closed to
traffic

Therefore, the term "precincts" generally means any closed area surrounded by walls or
boundaries. This implies that a building (premise) would include a precincts as well; however,
where the premises are lands, they would not have precincts. Thus, it covers both buildings and
lands4.

The following conditions must be fulfilled in order that any premises may be held as a factory:-

i. Carrying of a manufacturing process in any part of the premises of the establishment

ii. Employment of ten or more or twenty or more workers depending on use/ non-usage of
power respectively.

4
State of Bombay vs. Ardeshir Hormosji Bhiwandiwala, (1956) I L.L.J 26.

12 | P a g e
CONCEPT OF A FACTORY

Section 2(m) provides for various ingredients that must be considered while decided whether a
premises is to be considered a factory or not. There are various situations that may fall into the
category of the wordings of the section however, the courts have decided otherwise as even
though such situations would fall under the phrase of the section; the same do not fulfil the
criteria in their spirit.

An example of this can be when with the usage of power in a factory. The section provides for
power being used in such premises however, it is this power when used in aid of manufacturing
process that satisfies the test of the section5.

Further, the place of manufacturing must be given more focus as premises may not be termed as
a factory simply because the manufacturing took place over a large, open area. In the Kent Vs
Astelt6, the work of slate cutting happening over a large are of land. This was conducted mostly
on open ground and only a shed had been constructed in a small part of the land. The courts held
that such a premise was not a factory as manufacturing was being constructed in open areas.

It was also held in Ardeshir V State of Bombay7, that the word "premises" was a generic term
that meant open land or land with buildings or buildings alone. The expression "premises
including precincts" did not necessarily mean that premises must always had precincts. The word
'including'; is not a term restricting the meaning to the word "premises" but it is a term which
enlarges its scope. The word including, hence, in no way indicates that the worked "premises"
must be restricted to main building and be not taken to cover open land as well.

5
New Taj Mahal Café Ltd, Mangalore Vs Inspector if Factories, Mangalore, (1950) I L.L.J 273.
6
Kent Vs Astelt (1819) LR case
7
Ardeshir V State of Bombay, AIR 1962 SC 29

13 | P a g e
MEANING OF MANUFACTURING PROCESS

Manufacturing process is an important ingredient for any premises to qualify as a factory. The
Factories Act defines manufacturing Process under Section 2(k) as:

“any process for-

i. making, altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning,
breaking up, demolishing or otherwise treating or adopting 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;
or
vi. preserving or storing any article in cold storage”

Under the present definition, even transporting, washing, cleaning, oiling and packing which do
not involve any transformation as such which is necessary to constitute manufacturing process in
its generic sense are nonetheless treated as manufacturing process. The definition is artificially
projected beyond the scope of natural meaning of what the words might convey thus covering
very wide range of activities.

Madras HC in the case of In Re Seshadrinatha Sarma8, held that to constitute manufacture

there should not be essentially some kind of transformation of substance and the article need not
become commercially as another and different article from that at which it begins its existence so
long as there as there has been an indisputable transformation of substance by use of machinery
and transformed substance is commercially marketable.

8
Re Seshadrinatha Sarma, 1966 (2) LLJ 235

14 | P a g e
 A divion bench of A.P. HC held that to determine whether certain premises is factory, it is
necessary that it should carry on manufacturing process and it does not require that the process
should end in a substance being manufactured 9. Further, it has been observed by another court
that manufacturing process merely refers to particular business carried on and does not
necessarily refer to the production of some article. The works of laundry and carpet beating were
held to involve manufacturing process. A process employed for purpose of pumping water is
manufacturing processes. Each of the words in the definitions has got independent meaning
which itself constitutes manufacturing process.

CASE LAW ANAYLSIS:

The definition though clearly lays down specific instances that are considered to constitute
manufacturing processes however, it is imperative to discuss certain judicial pronouncements
that have had a considerable impact on the meaning of the abovementioned term:

 It was held in the case of Poona Industrial Hotel /v/s I.C. Sarin 10, that preparation of food with
the aid of various electrical appliances in a hotel kitchen is a manufacturing process,
 In another case National Service Centre and Petrol Pump vs E.S.I Corporation 11, the court
concluded that selling of petrol or diesel by a petrol dealer or repairing of motor vehicle will not
come within the term “manufacturing process”.
 Further, simply packaging work has been decided to not constitute as a manufacturing process12.
 The business of sale of diesel oil and other related products in addition to service/repair of cars,
by employing more than 20 workers amounted to manufacturing process13.
 The act of breaking up boulders was deemed to be a manufacturing process as held by the Orissa
Divisional Bench in the case of Larsen & Toubro v. state of Orissa14.
 The courts further held that transporting goods on a contract basis from one destination to
another by roadway using assistance from carriers was not a manufacturing process15.
9
Alkali metals Pvt. Ltd. v. ESI Corpn. 1976 Lab IC 186.
10
Poona Industrial Hotel vs I.C. Sarin , 1980, Lab IC 100.
11
National Service Centre and Petrol Pump /vs/ E.S.I Corporation, 1983 labI.C. 412(P&H).
12
ref-AIR 1955 NUC 2710
13
Baranagar Service Station vs E.S.I Corporation (1987) 1 L.L.N 912(Cal)(Divisional Bench).& Lab I.C. 302.
14
Larsen & Toubro vs state of Orissa , 1992 Lab IC 1513.
15
Regional Director E.S.I.C vs Jaihind Roadways, Bangalore(2001),1 L.L.J 1187.

15 | P a g e
16 | P a g e
 MANUFACTURING PROCESS AS PER JUDICIAL PRONOUNCEMENTS:

 Sun-cured tobacco leaves subjected to processes of moistening, stripping, breaking up, adaption,
packing with a view to transport to company’s main factory for their use in manufacturing
cigarettes16.
 The operation of peeling, washing etc., of prawns for putting them in cold storage is a process
with a view to the sale or use or disposal of the prawns17.
 Stitching old gunny bags and making them fit for use.
 In paper factory, bankas grass packed into bundles manually and dispatched to the factory.
 Work of garbling of pepper or curing ginger.
 Process carried out in salt-works in converting sea water into salt.
 Conversion of latex into sheet rubber.
 A process employed for the purpose of pumping water.
 The work done on the bangles of cutting grooves in them which later would be filled with
colouring, is clearly a stage in ornamentation of the bangle with a view to its subsequent sale.
 Preparation of soap in soap works.
 The making of Bidis.
 The raw film used in preparation of movies is an article or a substance and when by the process
of tracing or adapting, after the sound are absorbed and the photos imprinted, it is rendered fit to
be screened in a cinema theatre, then such a change would come within the meaning of the term
treating or adapting any article substance with a view to its use.
 Composing is a necessary part of the printing process and hence, it is a manufacturing process. It
cannot be said that the definition should be confined to the process by which impression is
created on the paper and to no other process preceding and succeeding the making of the
impression on the paper to be printed. Everything that is necessary before or after the complete
process would be included, within the definition of the word “manufacturing process”. The
definition takes in all acts which bring in not only some change in the article or substance but

16
V.P. Gopalarao v. Public prosecutor, AIR 1970 S.C. 66.
17
R.E.D’souza v. Krishnan Nayyar, 1968 F.J.R. 469.

17 | P a g e
 also the act done for the protection and maintenance of such article by packing, oiling, washing,
cleaning etc.18
 Preparation of food and beverages and its sale to members of a club19.
 Receiving products in bulk, in packing and packing as per clients requirements.
 Construction of railway – Use of raw materials like sleepers, bolts, loose rails etc. to adaptation
of their use for ultimately for laying down railway line20.

18
P. Natrajan v. E.S.I Corpn (1973) 26 FLR 19.
19
CCI v. ESIC, 1992 LAB IC 2029 Bom.
20
Lal Mohmd. V. Indian Railways Construction Co. Ltd.

18 | P a g e
 PROCESSES NOT DEEMED TO BE MANUFACTURING PROCESS AS PER
JUDICIAL PRONOUNCEMENTS

There does not exist any definite or precise test that can be prescribed for determining the
question whether a particular process is a manufacturing process. Each case must be judges on its
own facts regard being had to the nature of the process employed, the eventual result achieved
and the prevailing business and commercial notions of the people. In deciding whether a
particular business is a manufacturing process or not, regard must be had to the circumstances of
each particular case. To constitute a manufacturing process, there must be some transformation
i.e., article must become commercially known as something different from which it acquired its
existence.

As per judicial pronouncements, the following processes are not manufacturing processes:

 Exhibition of films process.

 Industrial school or institute imparting training, production cloth, not with a view to its sale.
 Receiving of news from various sources on a reel in a tale-printer of a newspaper office, is not a
manufacturing process is as much as news is not the article or substance to which Section 2(k)(i)
has referred.
 Any preliminary packing of raw material for delivering it to the factory21.
 Finished goods and packing thereof.22

21
V. Mohamed Haneef And Co. And Ors. vs Regional Director, Employees, AIR 1969 Mad, 155.
22
F. Hare v. State AIR 1955, 2710.

19 | P a g e
CONCLUSION AND SUGGESTIONS

The Factories Act is one of the key legislations under the labour laws in India and has a great
impact on the welfare of the marginalized groups that otherwise would have suffered at the
hands of the occupiers. This legislation not only ensures adequate safety measures are enforced
in a factory but also provides for various health and more pressing matters.

The application of the act ensures that the owners/occupiers are kept in check and have to
conform to the mandatory requirements laid down in the act. The target group of this socially
beneficial legislation are workers, most of them migrants, who are unable to fight back due to
various economic and social reasons. Many do not even possess enough knowledge of their
rights and the course of action they may resort to if those are taken away.

The legislation acts as a harbinger of justice for such aggrieved persons and therefore, the ambit
of its applicability needs to be as wide as possible. This provides for two conflicting interests at
the same time – on the one hand you have workers who need to be protected and on the other,
you need to protect the ease of doing business which generally deals with as less regulations as
possible. However, in essence, the two interest line up together as any enterprise with unhappy
workers who are in constant fear of losing a limb or their life will never contribute the best they
could. Therefore, understanding the applicability and attempting to widen the scope of its
application is the need of the hour.

After analysing various articles and judicial pronouncements, it becomes clear that the words
used in the act are not what they seem to be on the face of it. Most, if not all, have been taken up
by courts and explained with relevant background information surrounding such cases.
Therefore, even though the legislature made an attempt to explicitly provide for instances that
may constitute manufacturing processes, they haven’t been able to it really well.

The author suggests including, but not limiting, certain industries and enterprises that have been
determined as factories in application to ensure there is more clarity and transparency. This will
not only help businesses in functioning and registering with appropriate authorities, but will also
provide more information to the workers regarding the benefits that have been provided to them.

20 | P a g e
 BIBLIOGRAPHY:

Several sources of legal literature, among others, shall be referenced while making this
research project, including:

 Manjeet Kumar Sahu, Development of Law Relating to Factories in India, 2(2) BRICS LJ
(2015).
https://www.researchgate.net/publication/299561274_dEvELoPmEnT_oF_Law_RELaTInG_To
_FaCToRIES_In_IndIa
 Kydd, J.C. A History of Factory Legislation in India 12 (Calcutta University Press 1920),
available at https://archive.org/details/historyoffactory00kydduoft
 Mughda Jain, Latestlaws, All about Factories Act, 19th November, 2020
https://www.latestlaws.com/articles/all-about-factories-act-1948-by-mugdha-jain/
 Sajana Bakshi, Mondaq, India - Definition Of Factory - A Critical Analysis, visited on 6 th
October, 2020
https://www.mondaq.com/india/employee-rights-labour-relations/235222/defintion-of-factory-a-
critical-analysis
 Smriti Tiwari, The Factories Act, 1948, visited on 10th October, 2020
http://www.legalserviceindia.com/legal/article-149-the-factories-act-1948.html

21 | P a g e