Is the Factory Act Relevant for a Non-Operational Plant in Uttarakhand?

Dear Seniors, Our plant is situated in Uttarakhand and is currently under construction, not in production mode due to some reason. We obtained the factory license from the appropriate authority a few months ago. My query is, even though no production or manufacturing activities are taking place, would the Factory Act still be applicable to us?

Thank you.

If in your company 10 or more employees are working, then the Factory Act must be applicable.

Since you have not yet started the manufacturing process, the Factories Act would not apply to you.

Regards,
KK

Thank you very much for your prompt response. Yes, the manufacturing process is yet to start, maybe next year or so, and the employee strength is 80.

Definition of "Factory" Under the Factories Act, 1948

"Factory" is defined under Section 2(m) of the Factories Act, 1948 as follows:

Factory means (i) any premises, including precincts thereof, wherein 10 or more workers are employed on any day of the preceding 12 months and a manufacturing process is carried on with the aid of power; or (ii) wherein 20 or more workers are employed on any day of the preceding 12 months and a manufacturing process is carried on without the aid of power.

Applicability of the Factories Act

The Factories Act will apply where you have carried out the manufacturing process with 10 or more workmen on any day of the preceding 12 months. So, I think in your case, the Factories Act won't apply. However, please verify this with the relevant authorities to ensure compliance.

Regards.

"Factory" is clearly defined in section 2(m) of the "Factories Act 1948," but the applicability of the Act is still unclear. Around 80 employees are working, but no manufacturing process is currently taking place.

Dear, manufacturing does not only mean that some machines are moving on the premises. If it is so, the people sitting at the head office are not doing any manufacturing work. Even then, they are covered under the act. Dear, if your company is registered under the Companies Act and 80 employees are working there, you surely come under the Factory Act. You must follow.

Regards,
Satish

For Head Office/Corporate Office/Branch Offices where commercial activities are carried out, the Shop & Establishment Act is applicable, even if there is only one employee or multiple employees working there. Please correct me if I am wrong.

If you ever had confusion, why did you go for a license? Once you have taken the factory license, it means that you are covered under the Factory Act.

Regards,
Shekhar

If the manufacturing process has not started, then the Factories Act is not applicable. If it is under construction, you must follow the guidelines of the BOCW Act and the Contract Labour Act (if any contract labour is present).

Regards,
Ajay Kumar
[Phone Number Removed For Privacy Reasons]

As there are 80 employees working on the premises, what needs to be determined is whether any 'manufacturing process' as defined under the Factories Act is being carried out on the premises. The scope of 'manufacturing process' as defined under the Act is very broad and practically includes all types of organized industrial activities. Since the factual information regarding the activities being conducted on the premises is not available, a complete answer to the query cannot be provided.

Regards,
KK

If the 80 employees are doing work that fits the definition of the manufacturing process, which is quite broad, the act will apply.

If the factory is not commissioned and the manufacturing process is yet to start, what are the 80 employees doing? Why are so many employed? If the project is under construction, when will the erection of machinery start? You can apply for a factory license one month before the commissioning of the plant, not earlier. Even after commissioning, there are bound to be trial runs; only then does the actual manufacturing process start. All these things take a lot of time. Why are you in a hurry to implement the Factories Act? Unless there is a manufacturing process, the Act need not be implemented.

Best of luck.

Joga Rao

Actually, we are in a gas-based power project whose first phase is completed and ready for a trial run. Unfortunately, due to the unavailability of raw material (Natural GAS), it could not proceed. From our side, we have obtained all the permissions, clearances, NOC, licenses, etc., from the concerned authority at the relevant time. Regarding manpower, all 80 employees related to O&M and the commercial department were hired to operate the plant. However, the availability of GAS is tentative, and we can't say when the manufacturing process will start.

The Factories Act defines that the act is applicable when the manufacturing process is ongoing. In your case, even though a Factory license has been obtained, it may not be applicable as the manufacturing process has not yet started.

In my view, the act is not applicable. Kindly respond to my queries, please.

Regards,
S. Rajasekaran
DGM - HR

As Mr. Bhushan has stated that the factory license is issued to them, it clearly means that the factory is registered under the said act. Therefore, the Factory Act will be applicable with that effect irrespective of whether production activity is ongoing or not. It is also mentioned that there are 80 employees on the payroll; therefore, their compliance will be met as per the Factories Act and covered under the same.

Thanks,
Bijay

No doubt, in this case, the Factory Act applies. You have already obtained a factory license, which is known as "to work as a factory." Whether you have started production or not is not important. Obtaining permission to construct a factory or operate a factory indicates an intention for manufacturing activities. If production has not started, in your annual/half-yearly return, you should mention that the plant is under construction.

Your workforce exceeds 80, and various activities such as erection, painting, etc., may be ongoing on your premises. Therefore, your said factory falls under the purview of the Factory Act.

If any accidents occur, you will be treated according to the Factory Act regulations.

Thanks,
B.K. Sinha

You are saying that you have 80 workmen in your workplace, but you are also mentioning that there is no manufacturing process. Then, what work are all these 80 workmen doing?

Definition of Manufacturing Process

Please refer to Sec.2 (k) of the Factories Act 1948, which defines a Manufacturing Process as a process for:

- (i) Making, altering, repairing, finishing, packing, oiling, washing, cleaning, breaking up, or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery, or disposal.
- (ii) Pumping oil, water, sewage, or any other substance.
- (iii) Generating, transforming, transmitting power.
- (iv) Composing types for printing or bookbinding.
- (v) Constructing, reconstructing, repairing, refitting, or breaking up ships or vessels.
- (vi) Preserving or storing any article in cold storage.

If your so-called workmen have been engaged in any of the above activities, then it implies they have been involved in a manufacturing process. If they have been in a manufacturing process, then your plant will fall under the Factories Act as stated in Sec.2 (m) of the Act.

There are different sections in it, such as the definition of factories and the definition of the manufacturing process.

1. The definition of "manufacturing process" does not depend on, and is not correlated with, any end product being manufactured from the manufacturing process. It includes repairs, finishing, oiling, or cleaning processes with a view to their use, sale, transport, delivery, or disposal. It cannot be restricted to an activity that may result in manufacturing something or the production of a commercially different article. The "manufacturing process" cannot be interpreted narrowly concerning an act meant for purposes connected with social welfare; M/s Qazi Noorul Hasan Hamid Hussain Petrol Pump v. Deputy Director, Employee's State Insurance Corporation, 2003 LLR 476.

2. The definition of factories is similar to that mentioned in the above threads.

If your manufacturing process falls under the scope of either of these definitions, then the Factories Act 1948 must be applicable.

Regards,
Sunil Upreti

If your factory was under construction, you were under the Building and Other Construction Workers Act 1996. However, since you now have a valid factory license, it means you are covered under the Factories Act and will need to follow all its provisions. But why are you so worried? When the manufacturing process is yet to start, you likely do not have workers other than management staff. In that case, as per the definition of a worker under the Factories Act, you may not have any workers. Therefore, you have time to comply with all the provisions until you have those workers.

Regards,

Please go through this link: https://www.citehr.com/118308-all-ac...liances-3.html. You will find an Excel format file uploaded by Mr. Rajeev about the compliance to be maintained with respect to all labor acts, including the Factories Act 1948.

Regards,
Raja

Provisional License Requirement During Construction

In the rules of each government, it is well-established that a provisional license should be obtained while the factory is in the construction stage. The manufacturing process shall commence at a later stage.

For constructing a factory in any locality, one must first get approval from the Factories Department (Inspector of Factories) as per the Factories Act. However, during construction and before the commencement of the manufacturing process, the Factories Act will not apply. The Building & Other Construction Workers Act will only apply until the construction activities are ongoing. Once the manufacturing process is started on the premises, then the BOCW Act will cease, and the Factories Act will apply.

I hope your doubt is cleared. If you have any further queries, please do not hesitate to ask.

Regards

I feel that if the factory's license is already obtained and 80 persons are working on the premises, looking after support operations to make the factory ready for manufacturing activities, then initial compliances such as factory returns, attendance cum wages registers, shift timings, etc., have to be followed for those 80 employees. They should not wait for the factory to start the production activities (manufacturing process) in order to start complying.

Regards,
Patwardhan

The licensing authority is not innocent when it has issued the license after you applied for it and already have it in your possession. This implies that you have fulfilled the requirements to establish a factory or would be considered as having one. Hence, no other discussions would fit in for the acts already done, except the duties as demanded by the license shall be performed in order to retain the same.