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Lovely professional university Social security and labour welfare Assignment 1

Topic: Factories Act 1948

Submitted to: Kriti Mam

Submitted by: Mudita Raina Gagandeep kaur Varsha Yadav

Factories Act 1948


Case 1: Gateway Auto Services, Bombay vs. Regional Director
Gateway Auto Services is a firm registered under the Indian Partnership Act having its office at Apollo Pier Road, Bombay. The appellant supplies petroleum products such as fuel and lubricants to its customers and undertakes lubrication service effect from June 15, 1968 from its then owners M/s. Bombay Garage Private of motor vehicles. The establishment was purchased by the appellant with Limited, Chowpaty, Bombay.

Problem recognised: The officer of the Employees' State Insurance


Corporation visited the establishment of the appellant and found that the total number of employees working under the direct control and supervision of the appellant exceeds 20. According to the officer of the Corporation the appellant establishment is a "factory" within the definition of the word "factory" defined in the Employees' State Insurance Act, 1948 - hereinafter referred to as the Act. The Corporation, therefore, called upon the appellant to pay the necessary employer's special contribution as well as the employees contribution fund as required under the law. the appellant failed to comply with this notice and, therefore, the recovery proceedings commenced under this Act. The appellant aggrieved by this recovery proceeding filed an application under the Act challenging the right of the Corporation to recover the contribution. The main allegations of the appellant in the said application are that its establishment is not covered by the definition of the word "factory" given under the Act and, therefore, the appellant is not liable to pay any contribution under the Act. According to the appellant its establishment supplies petroleum products such as fuel and lubricants to its customers and undertakes lubrication service of motor vehicles. Such services do not involve any manufacturing process and, therefore, the establishment cannot be said to be an establishment carrying on manufacturing process at its establishment. According to the appellant the establishment is registered under the provisions of the Bombay Shops and Establishments Act, 1948, and, therefore, the provisions of the Employees' State Insurance Act, are not applicable to the appellant. The provisions of the Act are applicable to all factories as defined in S. 2(12) of the Act. No activity in the establishment is carried on with the aid of the power. It is also alleged by the appellant that the appellant does not use the power either manufacturing or for processing or for adapting or otherwise treating any article or substance but is merely used to drive compressors which supply compressed aid for operating service hoists and pressure and oil pray guns used in lubrication services and for

apply of petrol. So far as the petrol services are concerned, it is alleged by the appellant that the process of pumping with the aid of power is used merely to pump out petrol for delivery and sale.

Ruling of the court: The Corporation contested the present proceedings and
denied the allegations of the appellant. According to the Corporation the establishment of the appellant is fully covered by the definition of "factory" given in the Act. when the Inspector visited the premises of the appellant it is found that the service station as well as the petrol pump were carrying on their activities with the aid of the power. The service station as well as the petrol pump are fully covered within the definition of manufacturing process given as in the Indian Factories Act, 1948 and, therefore, the appellant is a factory and covered by the provisions of the Act. The Corporation also denied that the total number of employees working at the establishment of the appellant is less than 20. According to the Corporation the number of employees exceeds 20. The Corporation also averred that the plea of limitation is false and cannot be sustained in view of the provisions of the Act. The Corporation, therefore, submitted that the application be rejected. The Judge framed as many as 6 issues. Both the parties led oral and documentary evidence in support of their respective claims. On appreciation of the oral and documentary evidence the learned Judge of the Employees' Insurance Court, Bombay, by his order the Application was dismissed the application filed by the appellant.

Solution: It is not disputed before me that there are two departments in the
establishment of the appellant: (1) Service station (2) Petrol pump. It is also no more in dispute that both these departments are under the direct control and supervision of the appellant. It is no more in dispute that the total number of employees in both the departments exceeds 20. It is also undisputed that so far as the service station is concerned, with the aid of the power the vehicle has got to be hoisted. Therefore, part of the lubrication work is undoubtedly done with the aid of the power. The petrol pump where the petrol is pumped out from the under-ground storage tanks is operated with the aid of the power in order to deliver it to the customers. It is, therefore, clear that in both these activities the power is used by the appellant-establishment. On these admitted facts, the law posed the consideration that refer to certain definitions as well as the meaning of the words used in these definitions. Section 2(12) of the Act defines the word "factory" meaning any premises including the precincts thereof where on twenty or more persons are employed or were employed for wages 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 but does not include a mine subject to the operation of the Mines Act, 1952 or a railway running shed.

Recommendations : by going through the case I should Recommend that the


concept of the factory should be cleared that it should not lead to any confusion further and the court should listen to both the parties and judge accordingly.

Conclusion: So far as the evidence led by the parties is concerned, I do not


think that it is necessary to refer to the same in detail. But, however, I may make a passing reference to the same. On behalf of the appellant-establishment one Nilkanth Annekar is examined. On behalf of the Corporation three witnesses were examined. The appellant also sought to rely upon the affidavit of Nilkanth Annekar which was filed in this case. From his evidence it is clear that the appellant-establishment carries on the business of supplying petroleum products and also lubrication service at its premises. The evidence of this witness shows that there are in all 24 employees working under the direct control and supervision of the appellant. In view of this admitted position if we look at S. 2(12) of the Act which defines the word "factory" it is clear that the appellant-establishment is covered by the provisions of the Act. I do not think it necessary to refer to the evidence of the witnesses examined on behalf of the Corporation. In the result, the appeal fails and the same is dismissed with costs.

Case 2: Qazi Noorul Hasan Hamid Hussain ... vs. Deputy Director
Petitioner, running a petrol pump (public retail outlet) for dispensing petrol/diesel has challenged an order dated October 17, 2002 issued by Deputy Director, Employees' State Insurance Corporation, Regional Office, Kanpur directing petitioner to make contribution under the Act.

Problem recognised: An inspection was made on the business premises of the


petitioner, on which it was found that there were sixteen employees named in the notice issued in pursuance of the inspection of which an information was given to the petitioner on November 7, 1993 covering the establishment under the Act. The matter appears to have rested without any further progress. A notice was sent to the petitioner in pursuance of the aforesaid inspection demanding contribution from August, 1993 to May, 2000. Petitioner submitted his reply to the Regional Manager, Employees' State Insurance Corporation objecting the demand of contribution on the ground that the petitioner does not

carry out any manufacturing operation and is engaged in dispensing petrol/diesel/mobil oil, that is, petroleum products in retail, as an agent of Bharat Petroleum Corporation under a licence issued for sale of its petroleum products. No notification was published covering the establishment under the Act in accordance with Section 1(5) of the Act and that the petitioner is not liable to pay contribution under Section 40 of the Act and Regulations 29 and 31 of the Employees' State Insurance Regulations, 1950. An assessment has been made on ad-hoc basis merely to harass the petitioner. It is significant to note that the petitioner did not challenge the number of employees who were found to have been employed by the establishment during inspection made in the year 1993. The objections have been decided by the Deputy Director of the Corporation by his impugned issued under Section 45A of the Act authorising him to determine the contribution after giving reasonable opportunity of hearing to the principal or immediate employer or the person in charge of the factory or establishment. It has been found by him that the establishment employs more than ten employees in which a pumping machine is used by force of electric power to dispense petrol/diesel and thus the establishment is covered under the definition of "factory" under Sub-section (12) of Section 2 of the Act in which manufacturing process is carried out with the aid of power employing more than ten persons.

Ruling of the court: According to Sri Ashok Khare, senior advocate, the
words "pumping oil, water, sewage or any other substance" should be used for the purpose of manufacturing and not for dispensing for retail purposes. According to him, the words "pumping oil" can be referred only in respect of refineries for such activities whether oil is either processed or manufactured employing some manufacturing process and it has been already observed at the time of inspection that all the task carried in that area comes under the Factories Act 1948 so the petitioner is liable to pay the compensation.

Solution: As the court suggested"Petrol pump and service station is a work place where persons are employed and power is used in the process of its activities. It is not materially different from the other activities of a manufacturing place strictly so called. In the circumstances, we will not be justified in giving a very narrow construction to the definition of "manufacturing process" so as to restrict its application only to a work place where by virtue of the manufacturing process, a commercially different article is produced. Having regard to the scope of the provisions of the Act and the need for securing the conditions of employment conducive to the health, safety and

welfare of the labour, we cannot restrict its applicability with such narrow and restricted approach. The definition of "manufacturing process" is so widely worded in order to project the scope beyond the normal and natural meaning attributed to it in other enactment. Understanding the words "manufacturing process" in a narrow sense, if it brings about a particular result, not necessarily a commercially different product, then it should be understood that there is manufacturing process. In the case of a service station, washing, cleaning or oiling a car brings about a particular result in either as a lubricated or cleansed vehicle. That result itself shall, in our opinion, be treated as enough to bring the process within the meaning of the Act. We are also unable to agree with the learned single Judge that the words "pumping oil, water, sewage, or any other substance" in Clause (ii) of Section 2(k) is to be read in any restricted way so as to make that provision confined to refer to pumping of oil from refineries and water from underground the earth and so on. Even giving a literal meaning, we cannot restrict the scope of it to pumping of oil from refineries. As normally understood, it would include pumping process involved in a petrol pump."

Recommendations : By going through the case I should Recommend that the


concept of the factory should be cleared that it should not lead to any mishapening further and should also take care of the welfare and security of the workers.The court should listen to both the parties and judge accordingly.

Case 3: Rohtas Industries Ltd vs Ramlakhan Singh


Problem recognised: The services of Respondent Ramlakhan Singh who was
working as sectional officer in the Waste Paper department of the paper factory of the appellant at Bihar State was terminated with immediate effect by a notice, with an offer of one months wages in lieu of notice. The respondent assails the order of his termination by making a complaint u/s. 26(2) of the Bihar Shops & Establishments Act, 1953. The appellant contested on merits, as well as on the technical ground that it was not maintainable under the Bihar Act as the respondent was not an employee within the meaning of s. 2(4) of the Act. The Labour Court, by its order dated 29-5-1972, held that the respondent was not a factory worker within the meaning of s. 2(1) of the Factories Act, 1948 and hence was an employee within the meaning of the Bihar Act.

Ruling of the court: The Writ Petition filed by the appellant in the Patna High
Court against the said order was dismissed asking him to agitate this point after the final decision was made by the Court. The Labour Court, on merits, decided

the matter on 28-2-1973, allowed the petition of the respondent and ordered his reinstatement with full back wages. A fresh writ petition challenging the said orders was also dismissed by the Patna High Court. Allowing the appeal by special leave, the Court, HELD: Only a. person who is an employee u/s 2(4) of the Bihar Shops and Establishments Act, 1953, could file an application u/s 26(2). clause (1) of s. 2 of the Factories Act, 1948, together with clause (k) and (m) thereof, it is clear that a person to be a worker within the meaning of the Factories Act must be a person employed in the premises or the precincts of the factory. Judgement: This is an appeal by special leave of the respondent was, an employee of M/s Rohtas Industries Ltd., the appellant. The appellant runs a Paper Factory at Bihar, wherein paper is manufactured for sale from raw materials such as bamboo, cotton rags and waste paper etc. The respondent was appointed and employed in the Waste Paper Department of the Paper Factory and had been working as Sectional Officer in the said Department .The management received information from one of its dealers, that the respondent was acting against the interest of the Company and was divulging its secrets and confidential matters to outsiders for monetary considerations. Thereupon the management terminated the services of The respondent by a notice dated the 10th of June, 1970 with immediate effect, and according to its case, it had offered one month's wages' in lieu of notice. The respondent assailed the order of his termination by making a complaint in writing to the Labour Court, Patna under section 26(2) of the Bihar Shops & Establishments Act, 1953-hereinafter called the Bihar Act. His case was that he was discharged from service without any rhyme and reason, no domestic enquiry was held to prove any charge against him, nor was be offered any wages in lieu of one month's notice. The appellant contested the respondent's petition of complaint on merits as well as on the technical ground that it was not maintainable under the Bihar Act inasmuch as the respondent was not an employee within the meaning of section 2 (1) of the said Act.

Solution: The final decision was made . The Labour Court, decided the matter
and allowed the petition of the respondent and ordered his reinstatement with full back wages. The appellant challenged the orders of the Labour Court by a fresh writ petition but the Patna High Court dismissed it

Remmodation: In the factories act there should be a clear and the defined
area of working and they should easily differentiate between the worker and the non workers.

Case 4 :The Kumbakonam Milk Supply ... vs The Regional Director


Kumbakonam Milk Supply Cooperative Society through its Secretary, aggrieved by the order on the file of the District Judge, Thanjavur, has filed the above appeal under Section 82(2) of The Employees' State Insurance Act, 1948.

Problem:

According to the appellant, it is a society registered under the Co-operative Societies Act and their main object is to purchase milk from its members and to sell the same.. While so a memo was issued claiming Rs. 87,101/- towards E.S.I. contribution for the period between 1-4-79 and 31-1284. Again, on 26-5-86 it received another notice demanding Rs. 1,11,488.40 towards E.S.I. contribution. It is further stated that on receipt of the said notices, the appellant sent a reply stating that it is a society and not an industry, that no manufacturing process is being carried out and that the persons working in the society are not employees within the meaning of Section 2(9) of the Employees' State Insurance Act, 1948 (hereinafter referred to as "the Act").

Ruling of the court:It is further stated that since their explanation was not
satisfactory, the society filed E.S.I.O.P. No. 33/87 before the District Court under Section 75(1) of the Act. Before the District Court, the Accountant of the Society was examined and were marked in support of their claim. On the side of the Employees' State Insurance Corporation, their Inspectors were examined as marked in support of their defence. The learned District Judge, after framing necessary issues and after considering the evidence, both oral and documentary, and after holding that the appellant society is an organisation under the Act, and hence it is liable to pay its contribution, dismissed the O.P., filed by the society. The District Court also permitted the society to approach the Corporation for modification of the quantum, if there is any variation in the contribution. Questioning the said award, the society has preferred the above appeal.

Solution: It is equally fallacious to conclude that because the employees had


gone away there is no liability to contribute. It has to be carefully remembered that the liability to contribute arose from the date of commencement of the establishment and is a continuing liability till the closure. The very object of establishing a common fund under Section 26 for the benefit of all the employees will again be thwarted if such a construction is put. Both the decisions referred to above make it clear that even if the employees had gone away, the liability to contribute arises from the date of commencement

of the establishment and it is a continuing liability till it is closed. Accordingly, we reject the contrary argument of the learned counsel for the appellant. The Employees' State Insurance Act is a piece of social welfare legislation enacted primarily with the object of providing certain benefits to employees in case of sickness, maternity and employment injury and also to make provisions for certain other matters incidental thereto. In an enactment of this nature, the endeavour of the Court should be to interpret the provisions liberally in favour of the persons for whose benefit the enactment has been made.

Recommendation: In the light of the statutory provisions of the


Employees' State Insurance Act, 1948 and the Factories Act, 1948, coupled with the factual details available in the case on hand, we do not want to take a different view than that taken by the District Judge, and hence we are in agreement with the conclusion arrived at by the learned District Judge. There is no merit in the appeal. Accordingly, both the substantial questions of law referred to above are answered in the negative. Consequently, the appeal is dismissed.

Case 5:Gujarat Electricity Board vs State Of Gujarat


Problem: According to the petitioner, it is engaged in the business of
generation, supply and distribution of electrical energy and for that purpose it has thermal power stations at several places. At the thermal power stations, the work of generation of electricity is done. The petitioner has also got several substations where conversion of high voltage into low voltage is done with the help of transformers and other devices which are installed at such sub-stations. No generation of electricity is done at the sub-stations. The petitioner contends that the sub-stations, whether big or small, are not factories and therefore the provisions of the Factories Act, 1948 cannot apply to the sub-stations. Since the office of the Factories Inspector was raising an objection in this connection and was insisting that the said sub-stations should be registered as factories even though no manufacturing activity was done at such-substations, the petitioner had addressed a letter dated 13th November, 1978 to respondent No. 1 State and had requested the Government to instruct the Chief Inspector of Factories not to compel the petitioner to get the sub-stations registered as factories under the said Act.

Ruling of court: In the case the Management of Delhi Electric Supply


Undertakes the another Bench of the Supreme Court also consisting of three judges has an occasion to consider the aforesaid definitions of "manufacturing process" and "factory". After considering and distinguishing a Calcutta decision, and also considering the decision in Nagpur Electric Light and Power Company Limited (supra), the Supreme Court of the judgment has propounded as under : "Section 2(12) referred to the Employees' State Insurance Act. It is clear from this decision that the factory must occupy a fixed site or premises. The evidence on record clearly shows that several substations and zonal stations are left unattended. This will not be the case if a manufacturing process takes place in those premises. A perusal of the nature of the work that the concerned workmen have to do even as enumerated in their statement of claim before the Tribunal clearly shows that they have no part in any manufacturing process. Their functions appear to be to maintain the existing lines of generation, transmission and transformation of power in their respective areas, to attend to installation and other incidental matters when a new connection has been given to a consumer.

Solution:They have to attend to daily complaints from the consumers, keep


regular reports and attend to the defects in the consumers' premises. They have to go out for field work and they have to sit on office for maintenance and preparation of the relevant records. It cannot be said that any manufacturing process either takes place in the sub-stations or in the zonal stations and they do not satisfy the definition of "factory" under sec. 2(m) of the Factories Act." Thus before reaching the said conclusion regarding the said definitions, the facts of the case and activities carried on at sub-stations have been closely examined by the Supreme Court as also the aforesaid decisions. The Supreme Court in this decision has not considered the said definitions divorced from the facts of the case. By doing so, it has clearly pointed out that the said definitions require to be construed in the light of the facts of the case and the activities carried on at sub-stations. Considering from this angle, it does not seem that there is any real conflict between the aforesaid two Supreme Court decisions

Case 6:Industrial Dispute--Workers in bidi factory


Problem:The appellant employed workmen in his bidi factory who had to
work at the factory and were not at liberty to work at their houses; their attendance were noted in the factory and they had to work within the factory hours, though they were not bound to work for the entire period and could come and go away when they liked; but if they came after midday they were not supplied with tobacco and thus not allowed to work even though the factory closed at 7 p.m.; further they could be removed from service if absent for 8 days. Payment was made on piece rates according to the amount of work done, and the bidis which did not come upto the proper standard could be rejected. The respondent workmen applied for leave for 15 days and did not go to work, for which period the appellants did not pay their wages; in consequence the concerned workmen applied to the Payment of Wages Authority for payment of wages to them. The appellant's contention that the respondent workmen were not his workmen within the meaning of the Factories Act, was rejected and the claim for payment of wages was allowed. The question therefore was whether the appellants were workmen within the meaning of the Factories Act. Held, that the nature of extent of control varies in different industries and cannot by its very nature be precisely defined. When the operation was of a simple nature and could not be supervised all the time and the control was at the end of day by the method of rejecting the work done which did not come up to proper standard, then, it was the right to supervise and not so much the mode in which it was exercised which would determine whether a person was a workman or an independent contractor.

Ruling of court :

The Judgment of the Court was delivered by Wanchoo, J.-This is an appeal by special leave in an industrial matter. The appellant is the manager of a biri factory in Nagpur. Respondents 2 to 4 are working in that factory. They applied for leave for fifteen days from December 18, 1955, to January 1, 1956, and did not go to work during that period. The appellant did not pay their wages for these days and in consequence they applied to the Payment of Wages Authority (hereinafter called the Authority) for payment to them of wages which had been withheld. Their claim was that they were entitled to fifteen days' leave in the year under ss. 79 and 80 of the Factories Act, 1948. The Authority allowed the claim and granted them a sum of Rs. 90/16/- in all as wages which had been withheld for the period of leave. There upon, the appellant filed an application under Act. The respondents contended that they were workers within the meaning of the Factories Act and were entitled to the sum awarded to them by the Authority.

The High Court on a consideration of the circumstances came to the conclusion that respondents for 2 to 4 were workers under s. 2(1) of the Factories Act and therefore the order of the Authority was correct and dismissed the petition. The appellant then applied for a certificate to appeal to this Court which was refused. He then obtained special leave from this Court and that is how the matter has come up before US. The main contention of the appellant is that respondents 2 to 4 are not employed in the factory within the meaning of that word in sec 2(1). Reliance in this connection is placed on two decisions of this Court, namely: 1. Dharangadhara Chemical Works Ltd. v. State of Saurashtra and Shri Chintaman Rao v. The State of Madhya Pradesh 2. (2). In Dharangadhara Chemical Works This Court held with reference to s. 2 (s) of the Industrial Disputes Act, which defined "workman" that the word "employed" used therein implied a relationship of master and servant or employer and employee and it was not enough that a person was merely working in the premises belonging to another person.

Solution: Sec. 2(1) defines a worker to mean a person employed, directly or


through any agency, whether for wages or not, in any manufacturing process, or in cleaning any part of the machinery or premises used for a manufacturing process or in any other kind of work incidental to, or connected with, the manufacturing process, or the subject of the manufacturing process. A distinCtion was also drawn between a workman and an independent contractor. The prima facie test whether the relationship of master and servant or employer and employee existed was laid down as the existence of the right in the employer not merely to direct what work was to be done but also to control the manner in which it was to be Saturday. According to the appellant, it is a society registered under the Co-operative Societies Act and their main object is to purchase milk from its members and to sell the same. The said work was being done for the last 45 years. While so, on 14-5-85, a memo was issued claiming Rs. 87,101/- towards E.S.I. contribution for the period between 1-4-79 and 31-12-84. Again, on 26-5-86 it received another notice demanding Rs. 1,11,488.40 towards E.S.I. contribution. It is further stated that on receipt of the said notices, the appellant sent a reply stating that it is a society and not an industry, that no manufacturing process is being carried out and that the persons working in the society are not employees within the meaning of Section 2(9) of the Employees' State Insurance Act, 1948 (hereinafter referred to as "the Act"). It is further stated that since their explanation was not satisfactory, the society filed E.S.I.O.P. No. 33/87 before the District Court under Section 75(1) of the Act. Before the District Court, the Accountant of the Society was examined and

were marked in support of their claim. On the side of the Employees' State Insurance Corporation, their Inspectors were examined and marked in support of their defence. The learned District Judge, after framing necessary issues and after considering the evidence, both oral and documentary, and after holding that the appellant society is an organisation under the Act, and hence it is liable to pay its contribution, dismissed the O.P., filed by the society. The District Court also permitted the society to approach the Corporation for modification of the quantum, if there is any variation in the contribution. Questioning the said award, the society has preferred the above appeal.

Conclusion: It is equally fallacious to conclude that because the employees


had gone away there is no liability to contribute. It has to be carefully remembered that the liability to contribute arose from the date of commencement of the establishment and is a continuing liability till the closure. The very object of establishing a common fund under Section 26 for the benefit of all the employees will again be thwarted if such a construction is put." Both the decisions referred to above make it clear that even if the employees had gone away, the liability to contribute arises from the date of commencement of the establishment and it is a continuing liability till it is closed. Accordingly, we reject the contrary argument of the learned counsel for the appellant.