Does Our Small Factory in Gujarat Need to Comply with the Factory Act? Seeking Advice

We have started a new factory in Gujarat with 5 workers requiring 600 HP. Do we fall under the Factory Act? Kindly advise me.

Thank you.
Regards

Clarification on the Factory Act

The Factory Act does not specifically mention "workmen" but rather uses the term "employee." Please refer to the definition of "Employee" under the Factories Act.

Definition of Worker Under the Factories Act, 1948

The Factories Act of 1948 does not refer to an employee or provide a definition of an employee. Instead, it only refers to a worker under Section 2(l). A factory that employs five workers does not fall under the scope of the Act unless there is a specific notification by the State Government that covers factories employing less than 10 workers using power or 20 workers without using power.

Regards,
B. Saikumar
HR & Labour Law Advisor

As per the Factories Act 1948, Sec 2(m), if there are fewer than 10 employees, it does not fall under the Factories Act. However, a factory license can be obtained voluntarily. Alternatively, one can approach the state labor department for an establishment license under the Shops and Establishment Act.

Regards

As per Section 7 of the Factories Act, 1948, you are required to give a written notice to the Chief Inspector of Factories at least 15 days before starting to use any premises as a factory. This notice should contain the following information:

1. The name and situation of the factory.
2. The name and address of the occupier.
3. The name and address of the owner of the premises or building (including the precincts thereof).
4. The address to which communications relating to the factory may be sent.
5. The nature of the manufacturing process to be carried out in the factory during the next twelve months.
6. The total rated horsepower installed or to be installed in the factory.
7. The name of the manager of the factory for the purposes of this Act.
8. The number of workers likely to be employed in the factory.
9. Any other particulars as may be prescribed.

Your attention is drawn to point 8 regarding the number of workers likely to be employed in the factory. Since you are starting a factory where there is always a chance of employing more workers, and considering that the corresponding total rated horsepower installed is 600 H.P in the factory, I suggest you obtain a license for at least 20 workers to start with.

Regards,
BS Kalsi
Member since Aug 2011

Your statement is that, "You are going to start a factory in Gujarat and your question is whether it will be coming under the Factories Act?"

Factors Constituting a Factory

To constitute a factory, three factors are necessary: premises, manufacturing activity, and the number of workers engaged. You are using electrical power of 600 HP. However, the type of manufacturing you are having in the new unit is not mentioned by you.

In case you manage with only 5 workers (in my opinion, a workforce of 5 does not correspond to the power installed by you; there must be a greater number of workers required than what you have stated), then you will not be required to get registered under the Factories Act.

Regards,
Adv. K. H. Kulkarni

I quote a HC judgment:

"The Fundamental Concept of a Factory
The fundamental concept is that any premises, whether land, building, or both, where a manufacturing process is carried on, would be a factory. It may be covered or not covered by the Labour Welfare Legislations, depending upon the number of employees and the use of power."

Your premise will not be considered a factory unless the government declares it so under Section 85 of the Factories Act.

Regards,
Varghese Mathew

In my view, the Factories Act is applicable on its own to any premises once it carries out a manufacturing process within the meaning of Sec.2(k) and employs the minimum number of persons in such a process as stipulated under Sec.2(m). Such premises ipso facto qualify to be a factory under Sec.2(m) of the Act.

Regards,
B. Saikumar

I fully agree with Sh. Saikumar that the most important factor for becoming a factory is to examine whether any "Manufacturing Process" as defined under Sec. 2(k) of the Factories Act, 1948, is carried out on the premises. In today's changing socio-economic scenarios and in the age of automation, the employment of a number of workers to run a factory hardly matters. The time has gone when running the factory mainly depended on the skill and proficiency of the manpower employed. In my view, there is a dire need to change the stipulation of the number of workers, i.e., 10 workers using power or 20 workers without using power in the Factories Act.

The views of the members are solicited.

Regards,
BS Kalsi
Member since Aug 2011