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Synopsis

The Supreme Court recently held that washing and dry cleaning of clothes by a professional laundry service would amount to a manufacturing process, and such an establishment would be covered under the Factories Act, 1948.

"On a plain reading, 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," a bench of Justices B.R. Gavai and K.V. Vishwanathan said.

The court set aside the High Court of Bombay at Goa's order of September 6, 2021, which quashed a process issued by a court on a complaint by the authorities against a professional laundry service in the name and style of 'White Cloud' for violating the provisions of the 1948 Act.

The bench held that the reasoning of the high court—that a transformation has to ensue, a new article must come into being, and it should be commercially known as another and different article—is a totally erroneous finding.

It was alleged that the premises were being used as a factory without obtaining a valid factory licence in violation of Rule 4 of the Rules read with Section 6 of the Act of 1948.

It was allegedly found that the respondent, Namita Tripathi, operated and set up a laundry comprising six collection centres around Goa and one central processing unit; that it had 58 employees in the collection centres, including 10 workers at the central processing unit.

The respondent contended that, under the Act of 1948, washing and dry cleaning would not constitute a "manufacturing process"; that the "laundry business" is a service and not a manufacturing activity since the "product" of the business is intangible and that they are duly registered under the Shops and Establishments Act.

The court pointed out that a perusal of the definition of "factory" in the Act of 1948 would reveal that any premises, including the precincts thereof, where 10 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 covered therein.

The Act of 1948 defines "manufacturing process" to mean 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, it said.

Examining the object and reason of the 1948 Act, the bench noted that it was enacted to regulate the labour employed in factories. One of the reasons for the enactment of the Act of 1948 was to reinforce the provisions regarding the safety, welfare, and health of the workers.

The Act of 1948 was further amended in 1976 to strengthen the provisions regarding safety measures to promote the health and welfare of workers employed in factories. A further amendment was made in 1987 to deal with safeguards to be adopted against the use and handling of hazardous substances by the occupiers of factories and to lay down emergency standards and measures, the court pointed out.

"The conspectus of the legal provisions clearly demonstrate 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 bench said.

The court further said that Acts of this nature, which are social welfare legislation intended to benefit the large community of workers, ought to be interpreted in a manner that gives efficacy to the legislative intent.

Reverting to the statutory provisions, the bench said that it is clear on a plain reading of Section 2(k) of the Act of 1948 that "washing or cleaning" of any article or substance with a view to its delivery is clearly covered by the phrase "manufacturing process."

"Where the words of statute are clear, the plain meaning has to be given effect. 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," the bench said.

Applying the mischief rule, the court referred to the "manufacturing process" as defined in the Factories Act of 1934 under Section 2(g) thereof.

"It is very clear 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 said.

The court held that the high court had clearly ignored the plain language of the section and had been completely oblivious to the welfare nature of the statute. The high court extrapolated the definition of "manufacture" as is in vogue in the Central Excise Act, 1944, the bench said.

The court opined that the high court had been carried away by the interpretation given by courts concerning the Central Excise Act.

"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 bench said.

The court thus clearly found that "washing, cleaning," and the activities carried out by the respondent with a view to its use, delivery, or disposal were squarely attracted.

The contention of the respondent that dry cleaning does not make any product usable, saleable, or worthy of transport, delivery, or disposal has only to be stated to be rejected, the court said.

"Manufacturing process" has been defined to mean any process for washing or cleaning with a view to its use, delivery, or disposal, it said.

"The linen deposited with the launderer is, after washing and cleaning, delivered to the customer for use. The ingredients of the section are fully satisfied. There is nothing in the Act of 1948 that is repugnant to the subject or context, constraining us to jettison the definition," court held.

Rejecting the findings of the high court, the bench held that the activity carried out, which on facts was not disputed, 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).

The court noticed an additional factor in the case: the respondent was registered as a factory under the ESIC Act for the same premises.

"We have, however, not gone by the mere factum of registration but have independently arrived at the above conclusion based on the interpretation of the provisions of the Act of 1948," the court clarified.

Regarding the argument that the order issuing process was a cryptic order and did not reflect any application of mind, the bench said that in view of its categorical findings, any exercise of remitting the complaint and asking the magistrate to exercise his power afresh would be futile.

The court allowed the appeal by the state of Goa and restored the complaint in the court of JFMC, Goa.

Case Title: State of Goa & Anr Vs Namita Tripathi