There have been differences of opinion about the applicability of the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 to such operations or civil constructions carried out within a factory premises which is part of the factory covered under the Factories Act.
This is mainly due to the lack of clarity in the definition of construction work as given in section 2(d) of the BOCW Act, which excludes building and construction work to which the provisions of the Factories Act and Mines Act will apply. Obviously, when construction work is carried out within the factory premises, it is natural that the employer will take it for granted and say that they are under the coverage of Factories and therefore, no cess is payable as per the BOCW Act.
However, it should be understood that the Factory license is given to work connected with manufacturing activities, and for a factory which is meant for the manufacture of, say, cement, it is for the manufacturing of cement that the license is issued. Similarly, the Factories Act provides for the health, welfare, and safety of workers employed in the factory, and these workers are the workers employed for manufacturing and not those who are employed for the construction of buildings.
Therefore, such construction activities will come under the purview of the BOCW Act, and cess as per the Welfare Fund Act should be paid. The Supreme Court verdict is attached for reference.
From India, Kannur
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4766This is mainly due to the lack of clarity in the definition of construction work as given in section 2(d) of the BOCW Act, which excludes building and construction work to which the provisions of the Factories Act and Mines Act will apply. Obviously, when construction work is carried out within the factory premises, it is natural that the employer will take it for granted and say that they are under the coverage of Factories and therefore, no cess is payable as per the BOCW Act.
However, it should be understood that the Factory license is given to work connected with manufacturing activities, and for a factory which is meant for the manufacture of, say, cement, it is for the manufacturing of cement that the license is issued. Similarly, the Factories Act provides for the health, welfare, and safety of workers employed in the factory, and these workers are the workers employed for manufacturing and not those who are employed for the construction of buildings.
Therefore, such construction activities will come under the purview of the BOCW Act, and cess as per the Welfare Fund Act should be paid. The Supreme Court verdict is attached for reference.
From India, Kannur
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Respected Madhu ji,
You have rightly said that there are differences of opinion about the applicability of the Building and Other Constriction Workers (Regulation of Employment and Conditions of Service) Act, 1996 to such operations or civil constructions carried out within a factory premises which is part of the factory covered under Factories Act.
In light of the landmark judgement of the Hon'ble Supreme Court in Lanco Anpara Power v/s State of Uttar Pradesh & Ors rendered in Civil Appeal No 6223 of 2016 (reported in (2016) 10 SCALE 99), unfortunately you can not take the benefit of exclusion carved out under Section 2(1)(d) of the BOCW Act. Now you have no option but to obtain Registration Certificate under BOCW Act and also to pay Cess.
The Hon'ble SC, while coming to its conclusion, adopted a purposive interpretation to Section 2(1)(d) of BOCW Act giving primacy to the 'superior purpose' contained in the BOCW Act and the Welfare Cess Act, such purpose being the welfare of the unorganised labour class involved in construction activity. The Hon'ble SC further held that a literal interpretation as desired by the construction companies would result in a situation where the construction workers would be deprived of the benefits of both the BOCW Act and the Factories Act, which could not have been the legislative intent and therefore could not be accepted by the Courts.
The entire judgment of Lanco Anpara (supra) revolved around the issue as to whether the provisions of the BOCW Act could be made applicable on those establishments, which intended to construct a factory and for which they had obtained a license under the Factories Act and where the manufacturing process had not commenced.
However there is a recent judgement of HC at Chhattisgard WPC No. 2636 of 2010 delivered on 16.02.2018. According to this judgement, what I understood is, if you take up an expansion project in the premises of the running factory, the provisions of BOCW would not be attracted including payment of cess. once the manufacturing process starts in an establishment, thereafter the provisions of BOCW Act cannot be made applicable and the provisions of BOCW Act would stand excluded
This decision of HC at Chhattisgard is based on decision of the Hon’ble Supreme Court in Arnit Das vs. State of Bihar reported in (2000) 5 SCC 488.
From India, Mumbai
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You have rightly said that there are differences of opinion about the applicability of the Building and Other Constriction Workers (Regulation of Employment and Conditions of Service) Act, 1996 to such operations or civil constructions carried out within a factory premises which is part of the factory covered under Factories Act.
In light of the landmark judgement of the Hon'ble Supreme Court in Lanco Anpara Power v/s State of Uttar Pradesh & Ors rendered in Civil Appeal No 6223 of 2016 (reported in (2016) 10 SCALE 99), unfortunately you can not take the benefit of exclusion carved out under Section 2(1)(d) of the BOCW Act. Now you have no option but to obtain Registration Certificate under BOCW Act and also to pay Cess.
The Hon'ble SC, while coming to its conclusion, adopted a purposive interpretation to Section 2(1)(d) of BOCW Act giving primacy to the 'superior purpose' contained in the BOCW Act and the Welfare Cess Act, such purpose being the welfare of the unorganised labour class involved in construction activity. The Hon'ble SC further held that a literal interpretation as desired by the construction companies would result in a situation where the construction workers would be deprived of the benefits of both the BOCW Act and the Factories Act, which could not have been the legislative intent and therefore could not be accepted by the Courts.
The entire judgment of Lanco Anpara (supra) revolved around the issue as to whether the provisions of the BOCW Act could be made applicable on those establishments, which intended to construct a factory and for which they had obtained a license under the Factories Act and where the manufacturing process had not commenced.
However there is a recent judgement of HC at Chhattisgard WPC No. 2636 of 2010 delivered on 16.02.2018. According to this judgement, what I understood is, if you take up an expansion project in the premises of the running factory, the provisions of BOCW would not be attracted including payment of cess. once the manufacturing process starts in an establishment, thereafter the provisions of BOCW Act cannot be made applicable and the provisions of BOCW Act would stand excluded
This decision of HC at Chhattisgard is based on decision of the Hon’ble Supreme Court in Arnit Das vs. State of Bihar reported in (2000) 5 SCC 488.
From India, Mumbai
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Sorry, sir, I didn't get the judgment, but the given citation is about a criminal case. Can you please clarify? Moreover, in the Lanco Anpara Power case, it is an extension and not construction of a new factory building because the Factories Act will be applicable once the factory is functional.
From India, Kannur
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From India, Kannur
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Respected Madhu ji,
You are correct. The SC judgment in Arnit Das vs. State of Bihar reported in (2000) 5 SCC 488, as mentioned in the judgment of HC at Chhattisgarh WPC No. 2636 of 2010, pertains to a criminal case. However, I am attaching the judgment of HC at Chhattisgarh WPC No. 2636 of 2010 for your reference and study.
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From India, Mumbai
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You are correct. The SC judgment in Arnit Das vs. State of Bihar reported in (2000) 5 SCC 488, as mentioned in the judgment of HC at Chhattisgarh WPC No. 2636 of 2010, pertains to a criminal case. However, I am attaching the judgment of HC at Chhattisgarh WPC No. 2636 of 2010 for your reference and study.
.................................................. .................................................. .................................................. .............
From India, Mumbai
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Hi,
AT LAST, I WISH TO SAY THE LATEST PRACTICES AND LEGAL APPLICABILITIES ARE LIKE THIS. THE BOCW ACT AND RULES APPLY ALWAYS TO ALL WORKERS WORKING IN CONSTRUCTION ACTIVITIES OF FACTORY PREMISES, OR NEW FACTORY CONSTRUCTION ON A SITE, OR EXPANSION AND EXTENSION OF ALREADY EXECUTED FACTORIES. THIS ALSO APPLIES TO WORKERS FIXING NEWLY IMPORTED MACHINERY IN THE FACTORY.
FOR ANY CONSTRUCTION WORK, THE CESS ACT APPLIES, AND THE EMPLOYER HAS TO PAY CESS AT ONE PERCENT OF THE TOTAL CONSTRUCTION COST TO THE GOVERNMENT AUTHORITIES RESPONSIBLE FOR PLAN APPROVAL.
ANY CONSTRUCTION WORKER INVOLVED IN THE CONSTRUCTION SITE WORKS OF A FACTORY PREMISES IS ENTITLED TO ALL THE BENEFITS OF THE B.O.C.W. ACT AND ALL THE BENEFITS OF THE WORKMEN'S COMPENSATION ACT (NOW KNOWN AS THE EMPLOYEES COMPENSATION ACT). THIS APPLIES LIKE A WIFI CONNECTION, PROVIDING RESCUE AND PROTECTION TO THE CONSTRUCTION WORKER IN CASE OF DEATH, SEVERE INJURY, OR PERMANENT DISABILITY, BENEFITING THE WORKER'S FAMILY. THIS APPLIES NOT ONLY TO THOSE WORKING ON THE FACTORY CONSTRUCTION BUT ALSO TO ANY WORKER REGISTERED AS A BENEFICIARY UNDER THE BOCW ACT, WORKING OFF-PREMISES.
THANK YOU.
From India, Nellore
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AT LAST, I WISH TO SAY THE LATEST PRACTICES AND LEGAL APPLICABILITIES ARE LIKE THIS. THE BOCW ACT AND RULES APPLY ALWAYS TO ALL WORKERS WORKING IN CONSTRUCTION ACTIVITIES OF FACTORY PREMISES, OR NEW FACTORY CONSTRUCTION ON A SITE, OR EXPANSION AND EXTENSION OF ALREADY EXECUTED FACTORIES. THIS ALSO APPLIES TO WORKERS FIXING NEWLY IMPORTED MACHINERY IN THE FACTORY.
FOR ANY CONSTRUCTION WORK, THE CESS ACT APPLIES, AND THE EMPLOYER HAS TO PAY CESS AT ONE PERCENT OF THE TOTAL CONSTRUCTION COST TO THE GOVERNMENT AUTHORITIES RESPONSIBLE FOR PLAN APPROVAL.
ANY CONSTRUCTION WORKER INVOLVED IN THE CONSTRUCTION SITE WORKS OF A FACTORY PREMISES IS ENTITLED TO ALL THE BENEFITS OF THE B.O.C.W. ACT AND ALL THE BENEFITS OF THE WORKMEN'S COMPENSATION ACT (NOW KNOWN AS THE EMPLOYEES COMPENSATION ACT). THIS APPLIES LIKE A WIFI CONNECTION, PROVIDING RESCUE AND PROTECTION TO THE CONSTRUCTION WORKER IN CASE OF DEATH, SEVERE INJURY, OR PERMANENT DISABILITY, BENEFITING THE WORKER'S FAMILY. THIS APPLIES NOT ONLY TO THOSE WORKING ON THE FACTORY CONSTRUCTION BUT ALSO TO ANY WORKER REGISTERED AS A BENEFICIARY UNDER THE BOCW ACT, WORKING OFF-PREMISES.
THANK YOU.
From India, Nellore
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Dear Mr Madhuji & Mr. Koregaonkarji, The case WPC No. 2636 of 2010 had reported by me quite sometime back. Self has remained part & parcel to the case.
From India, Mumbai
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From India, Mumbai
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Yes, the High Court judgment in L&T case is very clear, and this distinguishes the building and construction activities in a proposed factory premises from the one in a factory premises which has already started manufacturing activity.
Now my interpretation is still spinning around the exclusion part of the definition of building and other construction work as per Section 2(1)(d) of BOCW Act, which says that construction activities to which the provisions of the Factories Act apply. A factory is registered to manufacture a given product. The operations may include allied activities like storage of materials, warehousing, etc., but in no case can it include construction of a building. As such, building construction is not an operation covered by the Factories Act.
The definition of a worker under the Factories Act covers only workers who are employed for manufacturing and allied activities. When the Factories Act is mandated for ensuring the health, safety, and welfare of the workers in the Factory, will the occupier take care of the health, welfare, and safety of the workers engaged in construction? I don't think anybody will extend it to them. If the arrangement is such that the occupier purchases the required materials, engages workers, and gets the building constructed, then there will be a direct employer-employee relationship between the workers and the occupier, and certainly, it will be the occupier who would ensure the health, safety, and welfare of these workers. In such a situation, the provisions of the BOCW Act will not apply.
However, in reality, the arrangement is that there will be a builder who will undertake to construct a building as per the specifications of the occupier, and that builder will bring in materials, manpower, machines, etc. Here the occupier does not know who all are engaged in the work, how many are engaged in the work. In this arrangement, the construction workers are workers of the builders, and as such, their health, safety, and welfare matters will be taken care of by the builders. In order to compensate for it, the occupier will pay a certain amount, say, one percent of the cost of construction, towards cess.
Therefore, what is important is whether the builders have ensured the health, safety, and welfare of their workers by paying them minimum wages, providing them medical aid, and other facilities required by the law. This would include PF, ESI, Bonus, etc. If the factory occupier is ready to bear it, the question of payment of cess or welfare fund does not come up, whereas if it is borne by the builders, it is their responsibility to establish that the workers' health, safety, and welfare were taken care of. Since the activity of construction of the building is carried out for the occupier, and in the absence of records to show that the construction workers were given PF, etc., the occupier should pay a certain amount, say, one percent of the cost of construction, to the Welfare Fund constituted for the construction workers.
From India, Kannur
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Now my interpretation is still spinning around the exclusion part of the definition of building and other construction work as per Section 2(1)(d) of BOCW Act, which says that construction activities to which the provisions of the Factories Act apply. A factory is registered to manufacture a given product. The operations may include allied activities like storage of materials, warehousing, etc., but in no case can it include construction of a building. As such, building construction is not an operation covered by the Factories Act.
The definition of a worker under the Factories Act covers only workers who are employed for manufacturing and allied activities. When the Factories Act is mandated for ensuring the health, safety, and welfare of the workers in the Factory, will the occupier take care of the health, welfare, and safety of the workers engaged in construction? I don't think anybody will extend it to them. If the arrangement is such that the occupier purchases the required materials, engages workers, and gets the building constructed, then there will be a direct employer-employee relationship between the workers and the occupier, and certainly, it will be the occupier who would ensure the health, safety, and welfare of these workers. In such a situation, the provisions of the BOCW Act will not apply.
However, in reality, the arrangement is that there will be a builder who will undertake to construct a building as per the specifications of the occupier, and that builder will bring in materials, manpower, machines, etc. Here the occupier does not know who all are engaged in the work, how many are engaged in the work. In this arrangement, the construction workers are workers of the builders, and as such, their health, safety, and welfare matters will be taken care of by the builders. In order to compensate for it, the occupier will pay a certain amount, say, one percent of the cost of construction, towards cess.
Therefore, what is important is whether the builders have ensured the health, safety, and welfare of their workers by paying them minimum wages, providing them medical aid, and other facilities required by the law. This would include PF, ESI, Bonus, etc. If the factory occupier is ready to bear it, the question of payment of cess or welfare fund does not come up, whereas if it is borne by the builders, it is their responsibility to establish that the workers' health, safety, and welfare were taken care of. Since the activity of construction of the building is carried out for the occupier, and in the absence of records to show that the construction workers were given PF, etc., the occupier should pay a certain amount, say, one percent of the cost of construction, to the Welfare Fund constituted for the construction workers.
From India, Kannur
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Dear Madhuji,
There is absolutely no hesitation in paying cess at 1%, if the contractor gets it from the Principal Employer. The issue lies in definition because contractors do not add up 1% extra against cess while quoting rates for any work within factory or mine premises.
The facility of EPF, ESI, and Bonus remains intact in the absence of B&OCW. The Lanco Anpara case is purely a B&OCW one, as it was a greenfield project. Therefore, one should not view both cases in a similar line, as they are legitimately different. At the same time, a bigger sum was paid as cess for the Tata Steel Project because the project was a greenfield one.
As of the current date, no verdict has been reached in the case of M/s Sterelite Ltd, as all cases have been declared disposed of along with the M/s Lanco Anpara case.
From India, Mumbai
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There is absolutely no hesitation in paying cess at 1%, if the contractor gets it from the Principal Employer. The issue lies in definition because contractors do not add up 1% extra against cess while quoting rates for any work within factory or mine premises.
The facility of EPF, ESI, and Bonus remains intact in the absence of B&OCW. The Lanco Anpara case is purely a B&OCW one, as it was a greenfield project. Therefore, one should not view both cases in a similar line, as they are legitimately different. At the same time, a bigger sum was paid as cess for the Tata Steel Project because the project was a greenfield one.
As of the current date, no verdict has been reached in the case of M/s Sterelite Ltd, as all cases have been declared disposed of along with the M/s Lanco Anpara case.
From India, Mumbai
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Dear Madhu T.K.,
With reference to the BOCW Act, I would like to know if it is applicable in the case of expansion (further construction of new buildings, canteens, etc.) carried out in a factory that is already operational. Additionally, could you please provide information on the procedure for paying the 1% cess, where to make the payment, and how to calculate the amount on which the cess is applicable?
I am eagerly awaiting a response from a senior professional like yourself.
Thank you.
From India, Mumbai
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With reference to the BOCW Act, I would like to know if it is applicable in the case of expansion (further construction of new buildings, canteens, etc.) carried out in a factory that is already operational. Additionally, could you please provide information on the procedure for paying the 1% cess, where to make the payment, and how to calculate the amount on which the cess is applicable?
I am eagerly awaiting a response from a senior professional like yourself.
Thank you.
From India, Mumbai
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This is what we have been discussing. When the Supreme Court verdict says that the activities connected with the construction of a building within a factory premises will come under the purview of BOCW Act and cess as applicable should be paid, the Chhattisgarh HC verdict says that it is not applicable to extensions or such construction activities in a factory which has already started manufacturing.
Now, the answer to the second part of your question is that there will be a Welfare Fund Board constituted in your state following the BOCW Act. The cess at the rate of 1% of the cost of the project is payable to that Building and Other Construction Workers' Welfare Fund Board.
From India, Kannur
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Now, the answer to the second part of your question is that there will be a Welfare Fund Board constituted in your state following the BOCW Act. The cess at the rate of 1% of the cost of the project is payable to that Building and Other Construction Workers' Welfare Fund Board.
From India, Kannur
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