Dry Cleaning is a Manufacturing Process Under Factories Act: Supreme Court Reinstates Criminal Proceedings Against Laundry Business

Washing and Cleaning, Even Without Producing a New Commodity, Constitutes a Manufacturing Process Under Law – In a landmark judgment Supreme Court overturned the Bombay High Court’s order and reinstated criminal proceedings against a Goa-based laundry service accused of operating without a factory license. The Court ruled that "washing and cleaning, even if it does not create a new marketable commodity, constitutes a manufacturing process under Section 2(k) of the Factories Act, 1948."

The case, State of Goa & Anr. v. Namita Tripathi, arose from a complaint by the Inspector of Factories alleging that White Cloud Laundry had been operating without statutory approvals and failed to obtain a factory license despite employing over ten workers. The Judicial Magistrate First Class (JMFC), Panaji, had taken cognizance and issued summons. However, the Bombay High Court at Goa quashed the proceedings, ruling that dry cleaning does not amount to manufacturing.

Reversing the High Court’s ruling, the Supreme Court emphasized that "when the law explicitly includes washing and cleaning within the definition of a manufacturing process, judicial interpretation cannot read down the provision by importing an artificial requirement of 'transformation into a new commodity.'"

"High Court Ignored Clear Legislative Intent – Factories Act Includes Washing and Cleaning Within Its Scope"

The dispute centered on whether the operation of a centralized laundry service, including dry cleaning, constituted a 'manufacturing process' under the Factories Act. The respondent contended that laundry services merely provide a convenience to customers and do not produce a new commercial product.

Rejecting this argument, the Supreme Court ruled that "the Factories Act does not require an article to be transformed into a commercially different product. The statute includes any process involving washing or cleaning an article with a view to its use, transport, delivery, or disposal."

The judgment made it clear that "the High Court erred in interpreting 'manufacturing process' through the lens of excise law, which defines manufacture differently for taxation purposes. The Factories Act is a welfare legislation intended to regulate working conditions, and its provisions must be interpreted in a manner that furthers its protective intent."

"A Business Employing Over 10 Workers and Using Power Falls Within the Definition of a Factory"

The inspection report revealed that White Cloud Laundry operated six collection centers and a centralized processing unit employing more than ten workers. It also confirmed the use of electrically powered industrial washing and drying machines.

The Supreme Court ruled that "once an establishment engages in a manufacturing process and employs ten or more workers with the aid of power, it falls squarely within the definition of a 'factory' under Section 2(m) of the Factories Act."

The Court noted that the respondent’s own records, including its registration under the Employees’ State Insurance Act (ESIC), confirmed that it met the statutory threshold for factory classification.

The High Court had relied on the Punjab and Haryana High Court’s ruling in Employees' State Insurance Corporation v. Triplex Dry Cleaners (1982) to conclude that a manufacturing process requires the creation of a new marketable commodity. The Supreme Court rejected this approach, ruling that:

"The judgment in Triplex Dry Cleaners was decided under the ESIC Act before its definition was amended to align with the Factories Act. That case has no application here, where the statutory definition of manufacturing process explicitly includes washing and cleaning."

The Court also rejected reliance on excise law cases, ruling that "manufacturing in excise law pertains to taxable goods, whereas in labor law, the focus is on regulating working conditions and ensuring compliance with safety and welfare standards."

Final Judgment: Supreme Court Restores Criminal Case, Orders Proceedings to Continue

Allowing the appeal, the Supreme Court ruled: "The High Court’s order quashing the criminal proceedings is set aside. The complaint filed by the Inspector of Factories and the order issuing process by the JMFC, Panaji, are restored. The trial shall proceed in accordance with law."

The Supreme Court’s ruling has far-reaching implications for businesses engaged in service-oriented industries that involve mechanical processing. The judgment affirms that washing and cleaning, when done on an industrial scale with employees and powered machinery, constitute a manufacturing process under labor laws.

By reinstating the criminal proceedings against the laundry business, the Court has sent a strong message that statutory compliance with labor laws is mandatory and that businesses cannot evade liability by mischaracterizing their operations.

Date of decision: 03/03/2025