Industrial Compliance

Definition of Factory under Factories Act 1948

Every individual or entity engaged in the manufacturing process must set up a factory to carry out such process together with adhering to the Factory Compliance prescribed by the Factories Act 1948 to avoid any penalties in respect of the same. Most industries suffer from punitive actions consequential to non-compliance under the concerned legislations due to the lack of clarity about their establishment falling under the ambit of “factory” under the said Act. This article discusses the Definition of a Factory under Factories Act 1948^[1]  to provide clarity about the essential elements of a factory as per the statute and help to avoid any confusion in this regard. 

What is the definition of Factories under the Factories Act?

As per the act definition of factories can be understood through the following analysis –

As per section 2(m) of the Factories Act 1948, a factory can be defined as premises or precincts-

• Where a minimum of 10 workers are working on any day of the preceding 12 months or is ordinarily being carried on
• Where  at least twenty or more workers are working at present or were working on any day in the previous 12 months and in any part where the manufacturing process is being carried on without any power or aid or is ordinarily being carried on

Key Considerations related to Factory under Factories Act

Considering the following pointers is necessary for a better understanding of the Factory under the Factories Act 1948

• For computations of the number of workers in the Factory, the workers in different relays and groups on a particular day must be taken into account.
• A manufacturing process shall be carried out on the premises to be construed as a factory, and the installation of electronic data processing unit or computer unit cannot suffice for the same.
• The term High-Value Crops with regard to the clause means and includes –

(i) Plantation of fruits, flowers or vegetables in a shed-net house or greenhouse

(ii) (Plantation of exotic vegetables, flowers and fruits

(iii) Plantation of crops for the purpose of being used for biotechnology

(iv) Plantation ofaromatic plants, medicinal, as well, and processing industry

(v) Production of processing industry and mushroom

(vi)Production of fruits through micro drip irrigation by use of plastic and mulching

(vii) Processing industries and nurseries where vegetables are produced in a greenhouse

(viii) Nursery of ornamental plants

Exclusions from the definition of Factory under Factories Act 1948

The following are not included in the definition of Factory

• Mines under the Mines Act 1952
• Mobile Unit belonging to armed forces of Union of India
• Railway running Shed
• Hotel
• Restaurant
• Eating Joint
• Poly house 
• Green House engaged in the activity of pomology, floriculture or high-value crops.

Special Provisions regarding the Definition of Factory under Factories Act 1948

Chapter IX of the Factories Act 1948 deals with the special provisions under the said legislation. The special provisions with reference to the definition of Factory are provided in Section 85 of the Act, which discusses the extension of the application of the term Factory.

The section states that the State Government has the power to declare through a notification in the official gazette about the provisions of this Act being applicable to any premises where the manufacturing process is being carried out, provided that:

• The no. of workers employed therein are more than 10 working with the aid of power and less than 20 working otherwise.
• The employees, even after not being employed by the owner, are working with the owner’s permission or under any agreement with the owner in this regard, provided that the manufacturing process is not carried on with the aid of the family.

After such declaration, the said premises will be deemed as a factory, its owner as the occupier and any person working therein as a worker.

According to this section, “Owner” shall include a mortgagee or lesser having possession of the premises.

Definition of Factory under Factories Act 1948: Judicial Approach

The following judgements throw light on the definition of a factory under the Factories Act 1948

 Ardeshir V State of Bombay

The main issue raised in this case was whether salt works come under the purview of premises under the Factories Act 1948, discussing this issue becomes important because the existence of a premise is an essential condition for the definition of a Factory under the Factories Act 1948 and the below mentioned judgements can help provide a clear view of the meaning of Factory under Factories Act 1948.

The Apex Court held that the word “premises” is a generic term that means an open land or any land with buildings or buildings alone. The expression “premises including precincts” doesn’t necessarily mean that premises must always have precincts. Even buildings need not give any precincts. The word ‘including’; is not restricted to the word “premises” but enlarges its scope. The use of the word including does not indicate that the worked “premises” must be restricted to the main building and not be taken to cover open land. However, some provisions of the Act do not apply to salt works that include the conversion of seawater into salt in the open. Nothing in the Act makes it uniformly compulsory for every factory occupier to comply with every requirement of the Act. An occupier must comply with such provisions of the Act, which apply to the Factory he is working in. Therefore, salt works fall within the meaning of the word “premises” used in the definition in Section 2(m). Salt works thus are covered under the ambit of word Premises

New Taj Mahal Cafe Ltd Mangalore vs Inspector of Factories, Mangalore,(1950) I.LLJ,27

This case discussed the conditions that must be fulfilled for premises to be considered a factory under Factories Act 1948. The conditions for the same are-

(a) There must be a manufacturing process being carried on in part of the premise of the establishment

(b) The establishment where the manufacturing process is being carried on with the aid of power, a minimum of 10 workers must work in such establishment. If the process is being carried on without the aid of power, then the no. of workers should be at least 20. Only the use of power on the premises is insufficient, but power must also be used to aid the manufacturing process.

Another essential pre-requirement for any premises to be considered a ‘factory’ is that a “manufacturing process” should be conducted within the premises.

Section 2(k) of the Factories Act, 1948, defines the manufacturing process as the process to

(i) Make, alter, repair, oil, wash, clean, ornament, finish, pack, break up, or otherwise treat or adapt any article or substance with regards to the use, sale, transport, delivery or disposal, or

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

(iii) Generate, transform or transmit power

(iv) Compose types for printing the letterpress, lithography, photogravure, or other similar process or book binding

(v) Construct, reconstruct, repair, refit, or break up ships or vessels

(vi) Preserve or store any articles in cold storage

Conclusion

India is a country possessing an immense capacity for businesses and individuals to prosper. Therefore, aspiring business owners must understand the terminology and essential definitions that may affect their business. As an entrepreneur, it is important to know the right definition of a factory in order to ensure that all the mandated norms are met, and the business follows compliance set by the authorities concerned.

Read our Article: All about the Factories Act, 1948 in India