Supreme Court To Examine Whether Laundry Business Comes Within The Ambit Of The Factories Act, 1948

A Bench comprising Justices L.Nageswara Rao and B.R. Gavai issued notice, but was not inclined to grant ex-parte stay of the order of the Bombay High Court, Goa, which had observed that laundry business does not come under 'manufacturing process' under the Factories Act.

"We cannot grant ex-parte stay. Serve the other side."

The respondent, sole proprietor of 'White Cloud' runs a laundry business in Panaji, Goa. 'White Cloud' is registered under Section 2(12) of the Employees State Insurance Act, 1948 as a 'factory' from 09.01.2003. But, the respondent has not registered the premise as 'factory' under the Factories Act asserting that 'laundry business' does not come under 'manufacturing process' as defined in the Factories Act, 1948. It is pertinent to note, that Section 2(14-AA) of the Employees State Insurance Act, 1948 ("ESIC Act") under which the respondent is registered defines 'manufacturing process' as under -

"2. Definitions

In this Act, unless there is anything repugnant in the subject or context,--

[...]

(14AA) "manufacturing process" shall have the meaning assigned to it in the Factories Act, 1948 (63 of 1948);"

The Standing Counsel for the State of Goa, Ms. Ruchira Gupta appearing before the Bench submitted that Telangana, Rajasthan and Bombay High Courts have held that laundry business comes within the ambit of 'manufacturing process'.

The only issue here is whether 'laundry business' comes within the Factories Act, because the manufacturing process has got a very wide definition. There are judgments of Telangana High Court, Rajasthan High Court and even Bombay High Court that laundry business comes within the 'manufacturing process', which is wide enough to cover laundry business.

The Bench enquired, "Have you filed those judgments? Let us see."

To substantiate her submission, Ms. Gupta referred to the judgment of the Punjab and Haryana High Court. The relevant portion is extracted hereinbelow:

"...The Full Bench adverted to the definition of the term 'manufacturing process' as used in the Factories Act and held that the definition is wide enough to include the dry cleaning process. Following that decision, it has to be held that the respondent's establishments where the dry cleaning process is carried on is within the mischief of the Employees' State Insurance Act and the provisions thereof apply to those establishments."

In the said judgment it was observed that the insertion of Section 2(14-AA) under Employees State Insurance Act' 1948 attracts the applicability of Section 2(k) of the Factories Act, 1948, which defines 'manufacturing process'. Ms. Gupta submitted that 'manufacturing process' was wide enough to include the process of repairing, washing or cleaning of any article with a view to its use and hence, would cover laundry business.

She apprised the Bench that the definition of manufacturing process under ESIC Act, as referred to in the order of the P&H High Court is the same and, in fact, has been adopted from the Factories Act.

Ms. Gupta also relied on Ravi Shankar Sharma v. State of Rajasthan And Anr. AIR 1993 Raj 117; Super Cleaners v. Employees State Insurance Corporation 2006 SCC OnLine Bom 1660; Employees' State Insurance Corporation, Hyderabad v. New Empire Tailors And Ors. 1984 SCC OnLine AP 199.

She submitted that the respondents had registered themselves as factories under the ESIC Act, but they have contended that the same does not obligate them to register under the Factories Act as well.

"My main limb of argument is that they registered themselves as factories under the ESIC Act. The respondents have taken a stand that just because they are registered as factories under the ESIC Act, does not mandate them to get registered under the Factories Act."

Background

On 20.05.2019, inspection was conducted at the premises of White Cloud wherein it was found that there were 10 workers employed and 20HP power machines were being used to wash and clean clothes. Considering that the factory falls under the purview of section 2m(i) of the Factories Act, 1948, the respondent was directed by the State authorities to comply with the provision of the said Act and submit compliance report within a period of 15 days. The respondent replied stating that 'washing and cleaning' can not be given such a wide import so as to include laundry business within the definition of 'manufacturing process'. Rejecting the response, on 12.06.2019, the petitioner herein (State of Goa) issued notice to comply with the provision of the Factories Act within 10 days. At the request of the respondent, personal hearing was conducted and the matter was then referred to the Law Department, Goa. Thereafter, a show cause notice was sent to the respondent seeking explanation of violation of the Factories Act and Rules therein and the respondent was directed to file its reply within 7 days. The respondent was firm on its stand. Consequently, on 16.08.2019 a complaint was filed before the JMFC, Panaji, Goa, who subsequently issued process against the respondent. An appeal was filed before the Bombay High Court at Goa by the respondent. On 06.09.2021, the High Court quashed the order passed by the JMFC.

The petition was drafted and argued by Advocate, Ms. Ruchira Gupta, Standing Counsel for the State of Goa in the Supreme Court. It was filed by Advocate-on-Record, Mr. Shishir Deshpande.

[Case Title: State of Goa And Anr. v. Namita Tripathi SLP(Crl) No. 1959/2022]