Trader Storing Any Item In Refrigerator Is Not Manufacturing Process, Doesn't Make Its Premises A Factory: Bombay High Court

The Bombay High Court recently held that merely storing or preserving any item in a cold storage or more particularly a refrigerator would not amount to 'manufacturing process' and would thus not make a premise where such preserving and storing is taking place, a factory under the Factories Act.Single-judge Justice Jitendra Jain delivered the ruling while disposing of a first appeal filed by one Madhu Malti Enterprises, which challenged a September 8, 2015 order of the Employees' State Insurance (ESI) Court which held its activities of preserving and storing medicines in a refrigerator amounting to 'manufacturing process' and therefore, upheld the decision of the ESI Corporation asking it to contribute Rs 68,000 towards the 'welfare' of its employees. According to the Appellant, the ESI officials suddenly arrived at his shop in Mumbai's Mazgaon area for inspection on April 20, 2006, where around 10 persons were working. It was contended that their shop was registered under the Bombay Shops and Establishments Act and not under the Factories Act, yet the ESI Corporation, issued a show cause notice to the Appellant on September 20, 2006 and subsequently issued an ESI Code on May 9, 2007. The ESI Corporation, further demanded Rs 68,016 as contribution holding that since 10 persons were working on the shop and that the act of 'preserving and storing' the medicines in cold storage would amount to 'manufacturing process' the shop was deemed to be a 'factory' under the Factories Act. Aggrieved, the Appellants moved the ESI Court in 2009 and on June 29, 2011, the recovery order (of Rs 68,016) was stayed but by its detailed judgment on September 8, 2015, the ESI Court ruled against the Appellants and therefore, they moved through a First Appeal in the High Court. Justice Jain in his oder passed on February 2, noted the provision of section 2(k)(vi) of the Factories Act, 1948, which defines manufacturing process to mean any process for preserving or storing any article in cold storage."Definition of 'manufacturing process' means any process for preserving or storing any article in cold storage. In my view, the mere act of preserving or storing any article in cold storage would not amount to manufacturing process. The act of preserving or storing any articles in cold storage is preceded by 'process for' preserving or storing any articles in cold storage. It is the process for preserving or storing which amounts to manufacturing process and not the mere act of preserving or storing," Justice Jain said. The word “process” is not defined by the Factories Act or by the ESI Act but the word “process” would mean some activity should be carried out on the product and that activity should be for preserving or storing any article in cold storage, the judge noted. "Mere preserving or storing any article in cold storage would not amount to manufacturing process because it is not preceded in the instant case by any process. The Appellant is only a trader. He buys medicines from pharmaceutical companies, stores the same in refrigerator and sells to various druggist or chemist. There is no process involved in the activity of the Appellant prior to preserving or storing in cold storage nor it is the case of the Respondent that any such activity is being carried on. Therefore, in my view the mere act of preserving or storing medicines in cold storage in the facts of the present case of the Appellant who is merely a trader would not fall within the meaning of the term 'manufacturing process' and therefore the Appellant would not be liable to be registered and to make contribution under the ESI Act," the judge held. It is settled position, the judge pointed out, that in a process, new product may not come into existence but in manufacturing a new product should come into existence. Processing is a part of manufacturing. All processes need not amount to manufacture, but all manufacturing is a result of various processes.Admittedly in the instant case, Justice Jain noted, the appellant does not carry out any activity of any nature on the medicines which is already manufactured by pharma companies. "He merely stores medicines in refrigerator till he sells the same to a Chemist. In my view, merely storing of a medicines by a trader in refrigerator would not make act of storing a 'manufacturing process' as per Section 2(k) of the Factories Act, 1948," the judge ruled. The judge also made it clear that the present judgment was restricted only to the facts of the present case and the same should not be construed to mean that in all the cases of cold storage, there is no “manufacturing process.”As regards to the contention of the respondent ESI Corporation, that section 2(k) of the Factories Act refers to preserving or storing any article in cold storage, is concerned, the judge noted that the Appellant in the instant case, was storing the medicines in 365 litres refrigerator. "There is a difference between a cold storage and a refrigerator....

Trader Storing Any Item In Refrigerator Is Not Manufacturing Process, Doesn't Make Its Premises A Factory: Bombay High Court

Narsi Benwal

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