Introduction:

In a major ruling titled The State of Goa and Anr. vs. Namita Tripathi the Hon’ble Supreme Court of India (“Hon’ble SC”) clarified that washing, dry-cleaning, etc. of clothes would amount to ‘manufacturing process’ and any premise where such laundry work is being carried on would be treated as a ‘factory’, under the provisions of the Factories Act 1948 (“Factories Act”) provided that premise employees a minimum number of person as provided under the Act.

 

Brief Facts:

The Respondent (“Employer”) was involved in the business of laundry services. An inspection was carried out on the premises of the Company in the year 2019 by the labour authorities, and it was discovered that the Employer was in serious non-compliance with the Factories Act, and the Goa Factories Rules, 1985. These non-compliances included unapproved factory plans, absence of registration and license for use of the premises as a factory.

As a result of the inspection, the authorities served a notice to the Employer with a cover letter titled “occupier of the respondent” to report compliance with the Factories Act within 15 days.

Pursuant to the inspection, an opportunity was presented to the Employer by the Chief Inspector of Factories and Boilers (“Inspector”), where the Employer contented that their business of washing and dry cleaning would not constitute a “manufacturing process”; and that “laundry business” is a service and not a manufacturing activity as required under the Factories Act. However, the replies by the Company were held to be unsatisfactory by the Inspector. Resultantly the Inspector held that the Employer was liable for offences punishable under the Factories Act, and summons were issued to the Employer.

Aggrieved by the complaint and the summons the Employer reached out to the Hon’ble High Court of Bombay at Goa (“Hon’ble HC”) to quash and set aside the complaint and the summons.

The Hon’ble HC quashed the summons against the Employer while observing that to constitute or manufacture, there must be a transformation, and mere use of labour and machinery will not make it manufacture unless it gives birth to a new article. Thus, the Hon’ble HC confirmed that dry cleaning is not within the definition of manufacturing process, Factories Act will not apply.”

Aggrieved by this order the appellants reached out to the Supreme Court.

Issues Before the Hon’ble SC:

Whether washing and dry-cleaning of clothes amounts to a ‘manufacturing process’, and whether the premises where laundry is set up is a factory?

Analysis by the Hon’ble SC:

After analysing the definition of ‘factory’, and ‘manufacturing process’ as provided under the Factories Act, the SC observed that any premises including the precincts thereof where ten or more workers are working and in any part of which a manufacturing process is being carried on with the aid of power would be considered as “factory”. Further, “manufacturing process” means any process for making, altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning, breaking up, demolishing, or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal.

The SC observed that on a plain reading of the Factories Act, it is clear 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.

Further, the Hon’ble SC applied the ‘Rule of Plain Meaning’ and observed that “we have no doubt in our mind 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”. Admittedly, they employed more than 9 workers in the centralized processing unit and also used the aid of power”. In this regard the Hon’ble SC placed reliance on Jeewanlal Ltd. & Ors. v. Appellate Authority under the Payment of Gratuity Act & Ors.[1]

Furthermore, the Hon’ble SC also applied the Rule of Mischief and observed that the original Factories Act of 1934 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 as discussed in the Statement of Objects and Reasons set out hereinabove. Dealing with Mischief Rule the Hon’ble SC put reliance upon Steel Authority of India Ltd. & Ors. v. National Union Waterfront Workers & Ors.[2]

Decision of the Hon’ble SC:

On the basis of the above analysis and observations, the Hon’ble SC held that the Factories Act defines “manufacturing process” to include any process for washing or cleaning with a view to its use, sale, transport, delivery or disposal. The clothes deposited with the launderer are, after washing and cleaning, delivered to the customer for use, which fulfils the ingredients of the ‘manufacturing process’. Resultantly laundry services squarely attract the applicability of the Factories Act

Consequently, the SC allowed the appeal, and set aside the impugned order of the Hon’ble HC, and restored the complaint filed against the Employer by the Inspector.

 

Future Insights for Employers:

The judgment comes as a big development in the labour jurisprudence, as it has paved the way for the applicability of the Factories Act on entities involved in the business of laundry services.

As a result, the entities involved in laundry services would be required to register themselves under the Factories Act and take necessary licenses and permits to run their business. Further, the owners or managers of the laundry services could now be summoned and punished accordingly for violation of the Factories Act and the rules/regulations made thereunder.

Therefore, it becomes crucial for such business owners to take appropriate steps to save their business interests and galvanize themselves against penal punishments.


[1] (1984) 4 SCC 356

[2] (2001) 7 SCC 1


Authors

 

Gyanendra Mishra

Partner

 

Maruti Nandan

Associate

 

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