Concept of Factories and Manufacturing Process under OHSC Code 2020

This article titled ‘Concept of Factories and Manufacturing Process under OHSC Code 2020’ is authored by Alankrita Katiyar and co-authored by Sanjana Dayal and discusses the concept of factories and manufacturing process under OHSC Code, 2020.

I. Introduction

Labour law falls underneath the scope of the concurrent list, thus, both Parliament and State Legislatures might make laws regulating labour. It was found by the National Commission on Labour (2002) that the present laws were complex and exhausting with inconsistent definitions[1]. Therefore, they advised consolidation of the central labour into broad categories:

1. Industrial Relations
2. Wages
3. Social Security
4. Safety
5. Welfare and Working Conditions

In the year 2019, the Ministry of Labour and Employment introduced four bills so as to consolidate twenty-nine central laws. The Occupational Safety, Health and Working Conditions Code, 2020 is thus, one of the three labour codes, which will consolidate the central laws to improve the convenience of compliance and ensure infirmity.

It replaces a bunch of labour laws, which includes the following:

1. The Factories Act, 1948;
2. The Plantations Labour Act, 1951;
3. The Mines Act, 1952;
4. The Working Journalists and other Newspaper Employees (Conditions of Service and Miscellaneous Provisions) Act, 1955;
5. The Working Journalists (Fixation of Rates of Wages) Act, 1958;
6. The Motor Transport Workers Act, 1961;
7. The Beedi and Cigar Workers (Conditions of Employment) Act, 1966;
8. The Contract Labour (Regulation and Abolition) Act, 1970;
9. The Sales Promotion Employees (Condition of Service) Act, 1976;
10. The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979;
11. The Cine Workers and Cinema Theatre Workers Act, 1981;
12. The Dock Workers (Safety, Health and Welfare) Act, 1986; and
13. The Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996.

The key changes brought includes the legal terms such as Appropriate Government, Establishment, Factory, Contract Labour, Occupier and Manufacturing process. The further major changes include duties of the employer, the responsibility of Government, Inter-State Migrant Workers etc[2].

It is pertinent to note here that the code would not be applicable to the Central Government, State Government and any ship of war. At the same time, it would apply to the contract labours employed through contractors in the offices where the State of Central Government are principal employers.

In furtherance to this, the code additionally sets up occupational safety boards at the national as well as state-level in order to advise the central and state government in the terms of the standards, rules and regulations that are to be framed under the OHSC Code. It also contains schedules including the following:

1. List of industries involving hazardous processes;
2. List of matters requiring standards with relation to health & safety pf the workers;
3. List of notifiable diseases in whose regard the concerned authorities shall be communicated.

II. Key definitions under OHSC Code, 2020[3]

1. Appropriate Government

It would include the following:

1. 1. The establishments carried on by or under the authority of the Central Government or concerning any such controlled industry as may be specified in this behalf by the Central Government;
   2. the establishment of railways including metro railways, mines, oil field, major ports, air transport service or telecommunication service, banking company or any insurance company established by a Central Act or a corporation or other authority established by a Central Act;
   3. Central public sector undertaking or subsidiary companies set up by the Central public sector undertakings or autonomous bodies owned or controlled by the Central Government, including the establishment of contractors for the purposes of such establishment, corporation or other authority, Central public sector undertakings, subsidiary companies or autonomous bodies;
   4. A factory, motor transport undertaking, plantation, newspaper establishment and establishment relating to beedi and cigar concerned to the State Government where it is situated.

It is further provided that t in the case of Central Public Sector Undertakings the appropriate Government shall continue to be the Central Government even if the holding of the Central Government reduces to less than fifty per cent, equity of the Central Government in that Public Sector Undertakings after the commencement of this Code[4].

2. Contract Labour: A worker who shall be deemed to be employed in or in connection with the work of an establishment when he is hired in or in connection with such work by or through a contractor, with or without the knowledge of the principal employer and includes inter-State migrant worker. It excludes a worker (other than part-time employee) who is regularly employed by the contractor for any activity of his establishment and his employment is governed by mutually accepted standards of the conditions of employment (including engagement on a permanent basis) and gets periodical increment in the pay, social security coverage and other welfare benefits
   [5].
3. Contractor: Relating to an establishment, it means a person, who:

1. 1. undertakes to produce a given result for the establishment, other than a mere supply of goods or articles of manufacture to such establishment, through contract labour;
   2. supplies contract labour for any work of the establishment as mere human resource.

The definition includes a sub-contractor as well[6].

4. Employee: A person employed (whether expressly or impliedly) on wages by an establishment to do any skilled, unskilled, manual, operational, supervisory, managerial, administrative, technical, clerical or other work
   [7].
5. Employer: A person who employs, whether directly or through any person, or on his behalf, or on behalf of any person, one or more employees in his establishment, and includes, inter alia, the person/authority which has the ultimate control over the affairs of the establishment and contractor[8].
6. Establishment: It includes the following:

1. 1. a place where any industry, trade, business, manufacturing or occupation is carried on in which ten or more workers are employed;
   2. motor transport undertaking, newspaper establishment, audio-video production, building and other construction work or plantation, in which ten or more workers are employed;
   3. factory, for the purpose of Chapter II of the Code, in which ten or more workers are employed
   4. a mine or port or vicinity of the port where dock work is carried out[9].

7. Hazardous Process: Any process or activity in relation to specific industries as mentioned in Schedule I of the OSH Code, where, unless special care is taken, raw/intermediate/finished/bye-products, etc., as the case may be, would:

1. 1. Cause material impairment to the health of the persons engaged in or connected herewith; or
   2. Resulting in pollution of the general environment[10].

8. Principal Employer: It would include:

1. 1. any person responsible for the supervision and control of the establishment where contract labour is employed or engaged;
   2. the owner or the occupier of the factory and where a person has been named as the manager of the factory, the person so named
      [11].

9. Wages: It comprises of all remuneration such as salaries, allowances or otherwise, expressed in terms of money or capable of being so expressed which would be payable to a person in respect of his employment, whether express or implied, or of work done in such employment and includes basic pay, dearness allowance and retaining allowance[12], if any.

However, it would not include the following:

1. 1. bonus;
   2. value of accommodation or light, water, medical attendance;
   3. employer contribution towards any pension or provident fund;
   4. conveyance allowance;
   5. sum paid to the employed person to defray special expenses;
   6. house rent allowance;
   7. overtime allowance;
   8. gratuity, etc.[13]

10. Worker: Any person employed in any establishment to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied, and includes working journalists and sales, promotion employees.

It excludes the following:

1. 1. Person subject to the Air Force Act, 1950, or the Army Act, 1950, or the Navy Act, 1957;
   2. who is employed in the police service or as an officer or other employee of a prison;
   3. who is employed mainly in a managerial or administrative capacity;
   4. who is employed in a supervisory capacity drawing wage exceeding eighteen thousand rupees per month or an amount as may be notified by the Central Government from time to time
      [14].

III. Factory and Manufacturing Process

1. Factory

The definition and concept of the factory have been defined in Section 2 (w) of the Code. Factory means any premises that include precincts. Precincts are spaces enclosed by walls or fences. The expression premises includes precincts that envisage premises that have precincts and those which does not have precincts.

The word including is not a term restricting the meaning of the word premises but is a term that is wider in its scope. But where premises are lands they would have no precincts [15].

“Factory” means any premises which include the precincts

1. Where 20 or more workers are working or were working on any day of the preceding twelve months, in which a manufacturing process is carried on with the aid of power or;
2. Where 40 or more workers are working or were working on any day of the twelve months preceding, in which a manufacturing process is being carried out without the aid of power
   [16].

While it has to be taken on note carefully that Factory will never include a mobile unit belonging to the armed forces of the Union, a railway running shed or a hotel, restaurant or eating place.

2. Manufacturing Process

The aspect of the manufacturing process has been defined in Section 2(zi) of the Code. The Code has mentioned and defined various processes which will cover under the manufacturing process. The term manufacturing process comes under the definition of the factory also. Hence to be a factory it is important that the manufacturing process are carried on.

Below are the things which will be included in the manufacturing process are as follows:

1. altering, making, repairing, ornamenting, finishing, oiling, packaging, washing, cleaning, breaking up, demolishing, or treating or we can say adapting any article or substance to its use, sale, transport, delivery or disposal; or
2. water, pumping oil, sewage or any other substance; or
3. generating, transforming or transmitting power; or
4. composing, printing, printing by letterpress, lithography, offset, photogravure screen printing, three Dimensional or four Dimensional printing, prototyping, flexography or other types of the printing process or bookbinding; or
5. constructing, reconstructing, repairing, refitting, finishing or breaking up ships or
6. storing or preserving any article in cold storage; or
7. such any other processes as the Central Government notify;

If things will fall under this list, then only it will be considered as a manufacturing process in the Code[17].

IV. Judicial Pronouncements on Factory and Manufacturing Process

There are some of the most important judgements that have been pronounced by Indian Courts from time to time to clear out its stand on the factory and manufacturing process which form an important aspect of this code. Below are some of the landmark judgements that have been discussed and laid down:

1. State of Bombay v. Ardeshir Hormusji Bhiwandiwala, 1956[18]

The lands would be deemed to be included in the premises and such lands in which a process of manufacturing of salt work is carried on would be deemed to be considered as a factory. For as to cover establishment under the expression factory it is not necessary that the manufacturing process has to be carried on the whole building, place or premises but it will be more than sufficient for the purposes if the manufacturing process is being carried on in any part of that establishment.

2. Indraprastha Medical Corp. v. NCT Delhi2006[19]

The question that was raised in front of the court was that whether a hospital comes under the ambit and definition of the factory? A hospital that provides medical treatment to people suffering from diseases is not a factory in accordance with Section 2(m) of the factories act which is read with Section 2(k).

The main work of the hospital was not to make, alter, repair etc. It was not the same in which articles were adopted or produced. Activities of washing, cleaning, preserving articles in cold storage etc. were incidental. It was held by the respected Court that only the main activity of establishment has to be seen in order to bring the establishment under the definition of factory.

3. P Gopala Rao v. Public Prosecutor, Andhra Pradesh, 1970[20]

Ms Golden tobacco Pvt. ltd. had their head office and main factory at Bombay where they manufactured cigarettes. Appellant was the manager as well as occupier of the company’s premises at Eluru in Andhra Pradesh where sun-cured country tobacco is generally purchased from the local producers which were collected, processed, stored and then transported to the company’s factory which is located at Bombay.

The question before the supreme court in the appeal was whether the company’s premises in Andhra Pradesh constituted a factory within the meaning of section 2(m) of the factories act. The material on record had shown that in the company’s premises in sun-cured tobacco leaves were subjected to the process of moistening, stripping and packing.

It was held by the Supreme Court in this case that the court considered the definition of factory contained in section 2(m) of the act and held that manufacturing processes were carried on in the premises. The definition was widely worded. The moistening was a result of an adaptation of the tobacco leaves. All these processes were manufacturing processes.

4. Uttaranchal Forest Development Corporation v. Jabar Singh and others, 2007[21]

Hon’ble Supreme Court considered the definition of factory and manufacturing process which is contained in section 2(m) and 2(k) of the Factories Act.

It was observed by the Court that the cutting trees by axe and changing the shape of the timber into logs by using hand-driven saw both fall within the definition of the first part of the manufacturing process as ‘cutting’ which would be included in making and breaking up process that is included in the said definition.

Lastly, the conversion of trees into logs is admittedly for sole purposes of sale, disposal, use and last but not the least for transport all of which is falling within the ambit of the third part of the definition.

5. Hotel New Nakanda v. Regional Director ESI Corp., 2010[22]

Supreme Court held in this case that for holding an establishment to be a factory it should be first established that some work or process is carried on in any part of the establishment which amounts to the manufacturing process as defined under section 2(k) of the factories act, 1948.

Further, the use of power in the manufacturing process should be direct and proximate. The word “manufacturing process” being carried on with the aid of power does not mean a very indirect application of power such as the use of an electric bulb for providing light in the work area.

Unless the links are established, it is shown that some process or work is carried on in establishment which had qualified as a manufacturing process, the mere presence of a refrigerator and a grinder even though connected to the main power line may not necessarily lead to the inference that the establishment is necessary to be a factory.

6. Prabhulal Potadia v. State, 1966[23]

Facts of the Case

Factories Inspector along with chief inspector of factories inspected a brick kiln at about 8 am. They found a number of persons working in 2 kilns that were actually in operation and the smoke was coming out of six chimneys provided in the kilns. They also found a 5 horsepower diesel engine pump working for supplying water to the process. The pump was being used for pumping water to the moulding section.

About 50 workers, men, women and children were found working in the field. They found that the usual amount of workers employed were about 300 in number. During the time of their inspection, they found six workers were charging coal into the kiln, three were unloading sand from the truck, three were carrying sand to the moulding section and several other workers were found engaging in doing another miscellaneous work.

Factories Inspectors found the kiln to be a ‘factory’ in accordance with the meaning of the Indian Factories Act, 1948, but the same was being run without any registration’ and without obtaining a legitimate and valid licence.

Held/Judgement by the Court

It was held that a 5 H. P. Diesel engine pump was supplying water to the manufacturing process of bricks. The pump was used for pumping water to a section of moulding. It can be clearly admitted that the use of water forms an important part in the moulding bricks from out of clay.

Thus, it can never be doubted and analyzed that the aid of power was taken in supplying water to the manufacturing process of bricks.

In the present case, the prosecution has been able to prove that the kiln in question is a factory within the meaning of the act, as the essential element, that is, the premises were being used for a manufacturing process and the requisite number of workers were engaged in such process and that the relationship of the employer and the employee existed between the management and the workers that are the kiln of the petitioner, though a factory within the meaning of the act which was admittedly run without any registration and without any required written approval of the chief inspector of factories that is an important aspect.

V. Conclusion

It can’t be denied that the Occupational Safety, Health and Working Conditions Code, 2020 would be beneficial to the labours in numerous ways as it has come at zero hour when the rights of the workers, duties of the employer etc. were the burning topics of debates continuously.

During the pandemic, the inter-state migrant workers were the most vulnerable; nevertheless, the OHSC Code has addressed the issues at the fore. In furtherance to this, the Code has definitely shifted the labour laws towards simplification. It wouldn’t be wrong to say that OHSC Code has indeed all the ingredients to be declared as an all-rounder.

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References

[1] Report of the National Commission on Labour, Ministry of Labour and Employment, 2002, Available Here.

[2] Monika Tapariya, OSHWC, September 2020, Available Here.

[3] The Occupational Safety, Health and Working Conditions Code, 2020 No. 37 of 2020, Available Here.

[4] Section 2 (d).

[5] Section 2 (m).

[6] Section 2 (n).

[7] Section 2 (t).

[8] Section 2 (u).

[9] Section 2 (v).

[10] Section 2 (za).

[11] Section 2 (zz).

[12] Melissa Cyrill, India’s OHSC, 2020: What is it and how should Company Prepare? Available Here.

[13] Section 2 (zzj).

[14] Section 2 (zzl).

[15]Definition of Factory under the OSHWC Code, 2020, Available Here.

[16] Section 2(w).

[17] Section 2(zi).

[18] State of Bombay v. Ardeshir Hormusji Bhiwandiwala AIR 1956 BOM 219.

[19] Indrapastha Medical Corp. v. NCT Delhi, 130 (2006) DLT 292.

[20] V.P Gopala Rao v. Public Prosecutor, Andhra Pradesh (AIR 1970 SC 66).

[21] Uttaranchal Forest Development Corporation v. Jabar Singh and others, (2007)2 SCC 112.

[22] Hotel New Nalanda v. Regional Director, ESI Corp., (2010) 1 SCC (L&S) 424.

[23] Prabhulal Potadia v. State (1966 CriLJ228).

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