Are Road Construction Companies Exempt from the Factories Act? Seeking Guidance on Legal Requirements

Dear seniors, I am presently associated with a road construction company that takes on projects involving highways. As you know, for road construction, certain licenses are required to be obtained from authorities to execute the project. To the best of my knowledge, we are supposed to obtain a labor license, BOCW registration certificate, and consent from the pollution department, etc.

Establishing RMC and Stone Crusher Plants

Given that we operate in the field of road construction, we are required to establish an RMC plant and a stone crusher plant at the site location on a temporary basis until the completion of the project.

Applicability of the Factories Act

In my opinion, since we have registered under BOCW, we are not covered under the Factories Act, and therefore, we are not required to obtain a factory license for the RMC and stone crusher plant. It is also important to note that we produce materials for the purpose of road construction and not for commercial purposes. Furthermore, the workers we employ are solely for construction activities and not for running any factory; hence, the Factories Act does not apply, and no license under the Factories Act is necessary.

If anyone has a copy of a High Court judgment that mentions when the BOCW Act is applicable for construction companies, and the Factories Act will not be enforced, please share it.

I kindly request all seniors in the group to provide your valuable advice on this matter.

Regards, Praveen Kr. Singh

Dear P.K. Singh, it is true that the word "premises" found in the definition clause of Section 2(m) of the Factories Act, 1948, must have a fixed site. However, as held by the Constitutional Bench of the Supreme Court in Ardeshir H. Bhiwandiwala (AIR 1962 SC 29), the term "premises" not only covers buildings but even open land can also be a part of the premises. This view was reaffirmed in Lal Mohammed & Others v. Indian Railway Construction Co. Ltd [1999 (1) LLJ. 317].

Manufacturing Processes in Road Construction

It is undeniable that preparing ready-mix concrete on a large scale and stone crushing are manufacturing processes or activities. When constructing a long stretch of highway, it will require a considerable amount of time as you may need to undertake construction works like bridges, culverts, subways, service roads, etc., in addition to laying down the road. Therefore, it is necessary to have these Ready-Mix Concrete (RMC) plants and stone crushing units in a conveniently accessible location where people can gather to work, materials can be stored, and crushed stones and RMC can be dispatched quickly along the construction stretch, not at every kilometer.

Obtaining a Factory License

In my opinion, you should obtain a factory license under the Factories Act, even if you already have a license under the Building and Other Construction Workers (BOCW) Act. A BOCW license is not required for construction carried out within an existing factory premises.

Thank you.

Dear Sir, it is true that we are preparing ready-mix concrete and stone crushing on a large scale, but it is for the purpose of construction activity only and not for any commercial purpose. The workmen are engaged by us for construction activities and not for running any factory.

In your view, BOCW is not applicable to us. Then why did our client advise us to register under BOCW and deposit the cess amount? As per Section 2(1)(d) of the BOCW Act, both acts cannot be applicable to us. Please refer to the judgment of the High Court of Chhattisgarh at Bilaspur (WPC No. 2636 of 2010).

Regards, P. K. Singh

Dear P.K. Singh,

I have gone through the judgment referred to, and it reaffirms the legal position of the application of the BOCW Act, 1996, to premises under construction with the intention of using it as a factory later under the Factories Act, 1948, with reference to the exclusion clause of the definition of the term "building and other construction work" as defined under Section 2(1)(d) of the BOCW Act, 1948.

Your Question is Different

According to the definition of the term "manufacturing process" as defined under Section 2(k) of the Factories Act, 1948, the RMC Plant and Crusher Unit run by your company engage in a manufacturing process only. Hence, the premises where they are situated would be a "factory" as defined under Section 2(m) of the Act if they satisfy the conditions stipulated in subsections (i) and (ii) of Section 2(m), and the workmen employed therein would be "workers" of the factory run by the construction company.

Application of the Factories Act

The proximity of these units to the highway under construction, their functioning being co-terminous with the construction work for which all the formalities under the BOCW Act have already been complied with, and their end products being exclusively used only for the particular construction work cannot be valid reasons for the non-application of the Factories Act, 1948 to them. I believe that a dispassionate re-reading of the provisions of both enactments in the backdrop of their purpose and scope is required.

Construction of road is covered under the definition of "building and other construction work" of BOCW Act.

The RMC Plant or Stone Crushing unit is a separate establishment for the purpose of the Factories Act as you are carrying out the manufacturing process in the said premises.

The 1% cess is correctly charged on the work order for the construction of the road. The BOCW Act is not applicable to premises where the Factories Act is applicable, and the construction of the building is part of an existing factory.

Dear Sir, As you mentioned, the construction of roads falls under the definition of "building and other construction work" as per the BOCW Act, whereas the RMC Plant or Stone Crushing unit is considered a separate establishment.

I would like to inform you that we have set up these plants specifically for the purpose of utilizing materials in construction activities, particularly for road construction. Once our road projects are completed, which typically takes 1-2 years, we will be required to dismantle the plants from their current location and relocate them as needed. These plants are intended for temporary use and are not utilized for any commercial purposes. It's worth noting that we have not secured separate premises for these plants; they are established at the same site where other construction activities for the highway are taking place.

Furthermore, we have obtained the necessary Clearances to Establish (CTE) and Consent to Operate (CTO) from the pollution department for setting up these plants. Interestingly, during the process of obtaining these approvals, no one has requested a factory license.

Regards, P. K. Singh

Dear P.K. Singh,

It is quite natural for everyone to take things for granted when no statutory directions are issued by the competent authority. I think that no Factories Inspector has visited the plants so far.

Registration and Compliance Under the Factories Act

As far as I know, for obtaining CTE or CTO from the Pollution Board, the registration certificate under the Factories Act, 1948 is not required. If it were one of the requisite preconditions, the authorities would have asked you. Therefore, it cannot be a valid argument to take the plants out of the coverage of the Factories Act, 1948 in case they have the requisite number of workers just because they are owned and run by a Construction Company exclusively for its construction projects.

Nature of RMC Plants and Crusher Units

That apart, as I said earlier, the manufactured end products of the RMC Plants and the Crusher Units are for their use in your construction work, which you undertake to do for someone else for profit only. Whether you have registered them under the Factories Act or not, they are factories, and the workmen employed therein are workers of the factory only and not construction workers.