Supreme Court rules washing, cleaning, and dry-cleaning as ‘Manufacturing Process’ under Factories Act, 1948

Supreme Court: In an appeal concerning the question that whether the process of ‘Dry cleaning of clothes’ constitutes ‘manufacturing process’ as defined under the Factories Act, 1948 (‘Act of 1948’), the division bench of BR Gavai and KV Viswanathan*, JJ. held that washing, cleaning, and dry-cleaning activities fall within the definition of ‘manufacturing process’ under the Factories Act, 1948, even if these processes do not result in the creation of a new tangible product. The Court further clarified that the laundry business qualifies as a ‘factory’ under Section 2(m) of the Act, 1948, provided that it employs 10 or more workers, and the laundry work is carried out with the aid of power-operated machines.

Background

Pursuant to the inspection conducted in the premises of the respondent wherein the business of Professional Laundry Service was carried on, it was found that the respondent did not possess factory approved plans as required under Rule 3 of the Goa Factories Rules, 1985 (‘Rules’) read with Section 6 of the Act of 1948; that the premises were being used as a factory without obtaining a valid factory license in violation of Rule 4 of the Rules read with Section 6 of the Act of 1948 and that the respondent had not submitted any application for registration and grant of license in violation of Rule 6 of the Rules read with Section 6 of the Act of 1948. An inspection report was drawn up and the same was furnished by a covering letter with the “occupier of the respondent” to report compliance within 15 days.

The averments in the complaint allege that the respondent has violated the provisions of the Act of 1948 since being a factory they have not complied with the provisions of the Act of 1948. This position is disputed by the respondent on the ground that their premises do not constitute a factory as defined in the Act of 1948.

As per the respondent under the Act of 1948, washing and dry cleaning would not constitute “manufacturing process”; that “laundry business” is a service and not a manufacturing activity since the “product” of the business is intangible; that what is rendered is a service and that they are duly registered under the Shops And Establishments Act.

By the impugned order, the Bombay High Court quashed the order passed by the Judicial Magistrate First Class (‘JMFC’), after holding that a perusal of the order issuing process did not reflect any application of mind. By the said order, the JMFC had issued process to the respondent pursuant to the complaint filed by the appellants alleging violation by the respondent of the provisions of the Act of 1948 and thereby committing offences punishable under Section 92 thereof. Aggrieved, the State filed the present appeal.

Analysis and Decision

The Court examined the scheme of the Factories Act of 1948, with particular emphasis on the definition of ‘factory’ under Section 2(m) and the definition of ‘manufacturing process’ under Section 2(k). It was noted that any premises, including the precincts thereof, where ten or more workers are employed and where any part of the premises is used for a manufacturing process with the aid of power, will be a factory. The definition of ‘manufacturing process’ was further clarified to include any process involved in making, altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning, breaking up, demolishing, or otherwise treating or adapting an article or substance for the purposes of its use, sale, transport, delivery, or disposal.

After examining the object and purpose of the Act of 1948, the Court noted that the Act of 1948 is a welfare statute aimed at ameliorating the conditions of the workmen employed in factories. It is a beneficial legislation intended to protect workers from occupational hazards by seeking to impose upon owners and occupiers’ certain obligations for protecting the workers and securing their employment in conditions conducive to their health and safety.

The Court reiterated that Acts of this nature which are social welfare legislation and intended to benefit the large community of workers ought to be interpreted in a manner to give efficacy to legislative intent.

After a plain reading of Section 2(k) of the Act of 1948 that the Court concluded that any process involving washing or cleaning any article or substance with a view to its use, sale, transport, delivery or disposal would be covered within the meaning of manufacturing process.

The Court said that the business of laundry carried on by the respondent involving cleaning and washing of clothes including dry cleaning would be squarely covered by the expression “manufacturing process” which means any process for washing or cleaning with a view to its use, sale, transport, delivery or disposal.

Further, the Court noted that, the respondent employed more than 9 workers in the centralized processing unit and also used the aid of power.

Applying the mischief rule of Interpretation, the Court highlighted that Section 2(g) of the 1934 Act did not have the words ‘washing, cleaning’ and they have been specifically brought in the Act of 1948 with a clear object of bringing into the fold of the Act undertakings excluded from the scope of the 1934 Act.

The Court held that the High Court’s reasoning—that a transformation must occur, resulting in the creation of a new article that is commercially recognized as a different article—was a completely erroneous conclusion. The Court emphasised that the High Court had clearly overlooked the plain language of the relevant section and failed to consider the welfare-oriented nature of the Statute. Furthermore, the Court pointed out that the High Court had erroneously applied the definition of ‘manufacture’ as it is understood under the Central Excise Act, 1944, which was not applicable in this context.

The Court remarked that “the High Court has been carried away by the interpretation given by courts while interpreting the Central Excise Act”.

The Court emphasised that where a statute under consideration itself defines for the purposes of the said Act a certain phrase, a court of law is bound to apply the term as defined except in exceptional cases where the opening part of a definition, ‘anything repugnant in the subject or context’ applies.

The Court held that activity carried out by the respondent was clearly covered by the definition of “manufacturing process” under Section 2(k) which, in turn, would bring the premises in question of the respondent under the definition of “factory” under Section 2(m). Thus, the Court refused to quash the complaint lodged against the respondent.