Storing Medicines in Refrigerators Not a "Manufacturing Process," Rules Court
In a significant ruling, the Bombay High Court has clarified that the mere act of storing medicines in a refrigerator by traders does not constitute a "manufacturing process" under the Factories Act, 1948, thereby exempting such traders from registration and contribution obligations under the Employees' State Insurance Act, 1948 (ESI Act). The judgment, delivered by Justice Jitendra Jain, came in response to an appeal by Madhu Malti Enterprises against an order of the ESI Court.
The appellant, a trader distributing medicines from pharmaceutical companies, challenged the ESI Court's decision, which had deemed the storage of medicines in a refrigerator as a continuation of the manufacturing process. The ESI Court's ruling had extended the definition of a manufacturing process to include preservation and storage until the final sale.
Justice Jain, however, disagreed with this interpretation, emphasizing that the term "manufacturing process" requires a series of actions or processes on an article that go beyond mere storage. The court highlighted that the definition of "manufacturing process" in Section 2(k) of the Factories Act pertains to activities such as making, altering, or treating articles, rather than simple storage.
The court further distinguished between cold storage and regular refrigeration, noting that the appellant's use of a domestic refrigerator did not meet the conditions for a manufacturing process. Cold storage, as defined under the Act, refers to large, insulated, and mechanically cooled facilities, unlike the appellant's 365-liter refrigerator.
The decision also underscored the primary versus incidental nature of activities, emphasizing that since the core business of the appellant was trading, with refrigeration being merely incidental, it does not qualify under the ambit of the ESI Act's manufacturing process clause.
This ruling is expected to have significant implications for traders and businesses involved in similar storage activities, relieving them from certain regulatory burdens under the ESI Act. However, the court stayed the operation of its order for eight weeks, allowing the respondents time to consider further legal steps.
Bottom Line:
Mere storing of medicines by a trader in a refrigerator does not fall under the definition of "manufacturing process" as per Section 2(k) of the Factories Act, 1948, and thus, cannot be governed by the provisions of the Employees' State Insurance Act, 1948.
Statutory provision(s): Employees State Insurance Act, 1948 Section 2A, Section 2(12), Section 2(14-AA); Factories Act, 1948 Section 2(k).
Madhu Malti EnterPrises v. Employees State Insurance, (Bombay) : Law Finder Doc id # 2848889
