Business Law-munotes

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1 1
FORMATION OF PARTNERSHIP AND
TYPES OF PARTNERSHIP
Unit Structure
1.0 Objectives
1.1 Introduction
1.2 Meaning and Definition
1.3 Who May Be a Partner
1.4 Essential Elements of Partnership
1.5 Partnership Deed or Articles of Partnership
1.6 Test of Partnership
1.7 Types of Partners
1.8 Types of Partnership
1.9 Distinguish Between. Partnership Firm With Joint Family Business,
Company And Hindu Undivided Family Business
1.10 Summary
1.11 Questions
1.0 OBJECTIVES After studying the unit students wil l be able to:
 Understand the meaning of Partnership and Partnership deed.
 Explain the features of Partnership
 Distinguish between Partnership and co -partnership, HUF and
Company.
 Discuss about Dissolution of Partnership Firm
1.1 INTRODUCTION Partnership f orm of business organisation have come into existence due to
some of the limitations of sole trading concern such as limited capital,
managerial ability etc.
Formerly partnership business was regulated by Indian contract act 1872
but subsequently authoriti es found it necessary to have a separate law for
this purpose, as a result of which Indian partnership Act 1932 came into
effect. The act was established to define and modify as and when required.
Partnership derived from the word „part‟ and implies sharin g. Persons
come together to share profits and properties of the business. The
relationship of partnership arises from contract and not status. munotes.in

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2 1.2 MEANING AND DEFINITION Definition:
Section 4 of the Act defines Partnership as “the relation between the
persons who have agreed to share the profits of business carried on by all
or any of them acting for all”. Person who has entered into partnership
with one another are called individually partners and collectively a firm.
The name under which their business i s carried on is called firm name.
1.3 WHO MAY BE A PARTNER 1. INDIVIDUAL : An individual who satisfies all conditions required
for a valid contract can become a partner.
2. MINOR : A minor cannot become a partner. He may be entered into
partnership business with consent of all other partners.
3. LUNATIC : A person of unsound mind is not competent to contract
and therefore cannot become a partner.
4. CORPERATE BODY : A corporate body being an artificial person
can become a partner and can enter into partnership agreement.
5. A FIRM : A firm cannot be a partner of another firm, though its
partner can be in their individual capacity.
Who Are Not Partners:
 The members of Hindu undivided family carrying in family business.
However partnership contract inter se betwee n members of family is
permissible.
 Lender of the money receiving a rate of interest from any person
engaged in business or about to engage in business.
 An agent engaged in business receiving commission from principal.
 Widow or a child of deceased partner receiving a portion of profit as
annuity.
 A previous owner or part owner of the business selling his business
along with the good will and receiving a portion of the profit in
consideration of sale.
 Joint or co -owners of property sharing profits arising fr om the
business.
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Formation of Partnership and Types of Partnership
3 1.4 ESSENTIAL ELEMENTS OF PARTNERSHIP Following are the elements of Partnership:
1. Two or More Persons:
Minimum two persons are required to form a partnership. In case of
banking business maximum number of partners allowed is ten, while in
any other business the numbers cannot exceed 20.
2. Competency:
All partners must have attained an age of majority and must be of sound
mind to enable him to enter into contracts.
3. Agreement:
There has got to be an agreement to form partnership. This agreement may
be expressed or implied. Express agreement arises out of words spoken or
written. Similarly implied agreement arises out of the conduct and custom
of business. Section 5 of the act states “The relation of the partnership
arises from contract and not from status.
4. Lawful business:
Term business refers any lawful activity, which if successful would result
in profits. It include every trade, occupation and profession. It is not
necessary that a business be permanent undertaking. A Partnership m ay
exist even for a single venture example: X and Y are partners for
producing a film.
5. Profit Sharing:
An agreement entered into by all the partners concerned must be for
sharing the profit of the business. Profit means net profit arrived at after
provi ding for all expenses. It must be remembered that profit sharing is
must irrespective of profit -sharing ratio. However, it must be noted that
near sharing of profits between persons would not necessarily determine
the existence of partnership.
For Exampl e: Joint owner of a shop who shared the rent of the shop will
not be called partners.
6. Mutual Agency between Partners:
Another important aspect of the definition of a partnership is that the
business must be carried on by all the partners or by any (on e or more)
acting on their behalf of them, i.e., joint agency
1.5 PARTNERSHIP DEED OR ARTICLES OF PARTNERSHIP Partnership may be expressed or implied. Express Partnership arises by
words spoken or written. Implied Partnership may arise from conduct of munotes.in

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4 the parties. Partnership agreement must satisfy all conditions of valid
contract such as offer, acceptance, competency, lawful business etc.
Sometimes minor may be admitted to the benefits of the partnership with
the consent of all the partners. As relationshi p of partners to one another is
that of agency, no consideration is required to create partnership. The
documents which contain the terms of partnership as agreed among the
partner is called partnership deal.
Following are the contents or provisions of the deed:
a) Name of the firm
b) Name and address of all partners
c) Nature and place of business
d) Duration of the partnership.
e) Amount of capital of each partner with profit sharing ratio.
f) Interest on drawings and Interest on capital.
g) Interest on l oan advanced by partner.
h) Salary or commission payable t any partner.
i) Method of valuation of goodwill in case of admission, retirement or
death of a partner.
j) Settlement of account in case of retirement or death of a partner or
dissolution of a firm .
1.6 TEST OF PARTNERSHIP The true test of a partnership is the existence of a Mutual Agency. There
are other circumstances where the sharing of profit exists but there is no
partnership. But if an agency exists between the parties who run a business
toget her and share profits it will be deemed that a partnership exists.
Following three tests must be undertaken to determine whether or not a
group of persons doing lawful activity constitute partnership or not.
1. Agreement to share profits:
Sharing of profit is prima facie evidence of existence of partnership. The
term profits mean net profit i.e surplus left after deducting all expenses
paid or payable. In what ratio profit is to be shared is immaterial.
2. Mutual agency:
U/S 18 of the Indian partnership act a partner is both agent and principal.
It means each partner is both agent and a principal. A partner is an agent
of the other partner in the sense that by his act he can bind other partners. munotes.in

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Formation of Partnership and Types of Partnership
5 He is principal in the sense that he can be held liable for the acts of the
other partners.
3. Intention of parties:
The intention of the partners may be gathered from their conduct, course
of dealings, circumstances of their entering into business.
1.7 TYPES OF PARTNERS A partnership is when two or more people join t ogether do engage in a
particular venture and share the profits carried on from such venture or
business. However, one must not always assume that all partners
participate in the work or profits or even liabilities of the firm equally. In
fact, there are v arious types of partners based on the degree of their
liability, or their involvement in the firm.
1. Active Partner:
An Ostensible Partner or an active partner first type of partner. As the
name suggests he takes an active part in the firm and carrying o f the
business activity. He performs on the daily business on behalf of all the
partners. This means he acts as an agent of all the other partners on a day -
to-day basis and with regards to all routine business of the firm.
2. Sleeping Partner:
This is a pa rtner that does not take actual part in the daily functioning, i.e.
he does not take an active part in the daily activities of the firm. He is
bound by the action of all the other partners.
He will continue to share the profits and losses of the firm and e ven bring
in his share of capital like any other partner. If such a dormant partner
retires, he need not give a public notice of the same.
3. Nominal Partner
This is a partner that does not have any significant interest in the
partnership. So, in essence, he is only lending his name to the partnership.
He will not make any capital contributions to the firm, and so he will not
have a share in the profits. But the nominal partner will be liable to
outsiders and third parties for acts done by any other partne rs in the
partnership.
4. Partner by Estoppel:
When a person holds out to another that he or she is a partner of the firm,
either by his words, actions or conduct then such a partner cannot deny
that he/she is not a partner. This actually means that thoug h such a person
is not a partner he/she has represented himself /herself as such, and so he
becomes partner by estoppel.
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6 5. Partner in Profits Only:
Such types of partners will only share the profits of the firm, he will not be
liable for any liabilities. Even when dealing with third parties he will be
liable for all acts of profit only, he will not share any of the liability of the
firm.
6. Minor Partner:
A minor cannot be a partner of a firm according to the Contract Act.
However, a partner can be admitt ed to the benefits of a partnership if all
partner gives their consent for the same. He will share profits of the firm
but his liability for the losses will be limited to his share in the firm.
Such a minor partner on attaining majority has six months to d ecide if he
wishes to become a partner of the firm. He must then declare his decision
by giving a public notice. He will have to give the public notice in the
circumstances whether he continues as a partner or decides to retire.
1.8 TYPES OF PARTNERSHIP 1. Partnership for a Fixed Term:
It is a partnership where at time period is fixed. Such a partnership gets
dissolved at the expiry of the time period. Before the fix period it may be
dissolved by mutual consent. However, if it continues after the fix pe riod
it becomes partnership at will
2. Particular Partnership (Section 8) :
Where two or more persons agree to do business in a particular adventure
or undertaking such partnership is called particular partnership.
E.g. X & Y enter into partnership for prod ucing advertising film.
3. Partnership at Will:
It is a partnership in which duration is not fixed and can be dissolved by
any partner by giving a notice. The firm may be dissolved by any partner
by giving 14 days advance notice in writing to all the other partners
indicating his intention to dissolve the firm.
1.9 DISTINGUISH BETWEEN PARTNERSHIP FIRM WITH JOINT FAMILY BUSINESS, COMPANY AND
HINDU UNDIVIDED FAMILY BUSINESS 1. Distinguish Between Partnership and Co -ownership : Partnership Co ownership 1 Business: To carry on business is an essential element of partnership. Co ownership may exist without carrying on any business. munotes.in

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Formation of Partnership and Types of Partnership
7 2. Mutual agency: There exist mutual agency among the partners of the firm. No mutual agency exists among co owners 3. Creation: Partnership is created by an agreement Co ownership is created by an agreement or by law or by virtue of status. 4. Profit: An agreement to share profit is essential element of partnership. Sharing 5. Lien: A partner has a lien on the property of the firm owned in common Co ownership has no lien on the property owned in common. 6. Partition of property: A partner cannot demand the partition of property of the firm. A co -owner is entitle to claim
partition of property.7 7. Agreement: Partnership Arises f rom an agreement 8. No of partners: Minimum 2, maximum 10 for banking, 20 for other business. There is no maximum limit of
co-owners.
2. Distinguish Between Partnership and Company : Partnership Company 1. Meaning: Partnership is the relationship between the persons who have agreed to share profits of the business carried on by all or any one of them acting for all. A company means a company formed and registered under company‟s act or an existing company. 2. Legal person: A firm is not a legal entity. A company is a legal person created in the eye of a law. 3. Liability: liability of a partner is unlimited. Even personal property of the partner is liable to settle claim of creditor. In case of company the liability of the member is limited to the extent of unpaid amount on calls. 4. Transfer of share: in a firm a partner cannot his share without the consent all the partners. In a company shareholder can transfer his shares subject to the provision of A.A. 5. Agency: every partner is an agent of other partner. Shareholder of the company is not an agent of the company. 6. Registration: registration of firm is not compulsory under partnership act 1932. Registration of company is compulsory under companies act 1956. munotes.in

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8 7. Management: Management vests in the hands of the partners except in the case of sleeping partner Management 8. Creditors: Creditors of the firm are also the creditor of the partners individually as well. Creditors are only the creditors of the company and not 9. Accounts: Accounts of the partnership need not be audited by the auditors Accounts 10. Ownership of property: The property of the Firm collectively belongs to the partner. The property of the company, belongs to the company, and not to the shareholders 11. Effect of death: In case of a death or insolvency of a partner firm gets dissolved, unless there is contract to the contrary. In case of company, death or insolvency of a member of the company does not results in to dissolution of the company. 12. Disposal of property: A partner can dispose the property of the firm A shareholder cannot dispose of the property of the company. 13. No of members: Minimum 2, maximum 10 in case of banking and 20 in case of general business. In case of private company maximum 50 members and public company can have any number of shareholder. 14. Existence: Partnership has no perpetual or continuous life. Company has long and stale life
3. Distinguish Between Partnership and HUF: Partnership Hindu undivided Family 1. Meaning: partnership is the relationship between the persons who have agreed to share profits of the business carried on by all or any of the acting for all. A joint Hindu family which carries on business handed down from its ancestors. 2. Agreement: It can arise only by an agreement of the partner It arises by the operation of the law. 3. Admission of new member: A new partner can be admitted in the partnership, only with the consent of all the partners. A person becomes member only by birth in the family. munotes.in

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Formation of Partnership and Types of Partnership
9 4. Numbers: maximum 5. Mutual agency: There exist mutual agency among the partners i.e. all is acting for one and one is acting for all. There is no such agency relationship between members of the family. The karta i.e. head or manager of the family is the only representative of the family. 6. Implied authority: Every partner has an implied authority to bind the firm by his acts done in the ordinary course of the business. Only karta has an implied authority to bind the family by his acts. 7. Liability: A partner is personally liable for the business obligation of the firm. The share of each partner in the property and profits along with his private property is liable for the discharge of the debts of the firm. A member is not personally
liable for the business
obligation of the f amily. Only
his share of profits and
property in the family is liable
for discharge the debts of the
family.
8. Dissolution / partition: A partner has right to demand for dissolution of firm. A partner has right to demand for dissolution of firm. 9. Death / insolvency: Firm gets dissolved on death or insolvency of any one partner. It is not dissolved on the death or insolvency of any of the members.
1.10 SUMMARY Partnership:
Section 4 of the Act defines Partnership as “the relation between the
persons who have agreed to share the profits of business carried on by all
or any of them acting for all. ”
Who can become a Partner:
Individual, Body Corporate.
Who can not become a Partner in Partnership:
The members of Hindu undivided family carrying in fami ly business.
Lender of the money receiving a rate of interest from any person engaged
in business or about to engage in business. An agent engaged in business
receiving commission from principal. etc munotes.in

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10 Essentials of Partnership:
Two Or More Persons: Compete ncy: Agreement: Profit Sharing: Mutual
Agency between Partners:
Partnership Deed or Articles of Partnership:
Partnership Deed: Meaning: Partnership Deed is nothing but an agreement
between the Partners in respect of the Partnership.
Contents:
a) Name of the firm, Name and address of all partners, Nature and place
of business, Duration of the partnership, Amount of capital of each
partner with profit sharing ratio. etc
 Types of Partnership: Agreement to share profits: Mutual agency:
Intention of parties:
 Types of Partners: Active Partner, Sleeping Partner, Nominal
Partner, Partner by Estoppel, Partner in Profits Only, Minor Partner
 Types of Partnership: Partnership for a Fixed Term: Particular
Partnership: Partnership at Will:
1.11 QUESTIONS 1. State and explain the concept of partnership and essential elements of
partnership
2. How the Partnership Firm can be formed? State types of Partnership?
3. What are types of partners?
4. “Mutual Agency‟ is an essence of the Partnership‟ Explain this
statement.
5. Distinguish between Partnership and Company
6. Distinguish between Partnership and Joint Hindu Family Business.
7. Write Short Note on
a. Distinguish Partnership and co -ownership
b. Public notice
c. Partnership Deed
d. Who can become a partner in par tnership?

*****
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11 2
REGISTRATION O F FIRMS AND
CONSEQUENCES OF NON -
REGISTRATION
RELATIONS AMONST THE PARTNERS
AND DISSOLUTION OF FIRM
Unit Structure
2.0 Objectives
2.1 Introduction
2.2 Consequences of Non - Registration of Partnership.
2.3 Rights, Duties and Liabilitie s and Authority of Partners
2.4 Rights of a Partner
2.5 Duties of Partners
2.6 Liabilities of Partners
2.7 Implied Authority of Partner
2.8 Mutual Relationship of Partners to Each Other
2.9 Relationship of Partners to Third Persons
2.10 Minor ’s Position in Partnership
2.11 Minor Become A Full -Fledged Partner.
2.12 Rights of the Minor If He Elects Not to Become A Partner
2.13 Effects or Consequenses of Dissolution
2.14 Public Notice
2.15 Summary
2.16 Questions
2.0 OBJECTIVES After studying the unit students will be able to:
 Understand importance of registration of Partnership.
 Understand the consequences of non -registration of firm
 Understand rights duties and mutual rights duties of partners
 Understand the Minors position in partnership
 Understand Liability of Partners to the firm and to a third parties.
 Understand the concept of Dissolution and Effects of Dissolution. munotes.in

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12 2.1 INTRODUCTION Registration of a partnership firm is not compulsory under law. The
provisions under Partnership Act, 1932 made specifically that if the
partners so wish to register, may register the firm with the Registrar of
Firms of the state in which the firm’s main office is situated. A partnership
firm may be registered at the time when it is formed or at any time
there after. Procedure for partnership Registration so that to get a
partnership firm registered, an application in a prescribed form must be
submitted with the Registrar of Firms. The application must include the
following information:
 The name of the firm
 The principal place of business of the firm
 Names of other places where the firm’s business is carried on.
 Names in full and permanent addresses of the partners.
 The date on which each partner joined the firm
 Duration of partnership, if specified
The filled and prescribed application should be signed and verified by
each partner, after that it is to be submitted to the Registrar of Firms of the
place in which the main office of the firm’s business is located or
proposed to be located. The registrati on fee is also deposited along with
the application. On submission of the application, the registrar will
scrutinize the application. If he is satisfied that everything that required to
fulfill has fulfilled and all the legal formalities have been taken ca re, he
will make an entry in the register of firms. He will also issue a certificate
of registration. Any change in the information submitted at the time of
registration should be communicated to the Registrar.
2.2 CONSEQUENCES OF NON -REGISTRATION OF PAR TNERSHIP The consequences of a partnership firm which is not registered are as
follows:
 It cannot enforce its claims against the third party in a court of law.
 It cannot file a legal suit against any of its partners
 Partners of an unregistered firm cann ot file any suit to enforce a right
against the firm.
 A partner of an unregistered firm cannot file suit against other
partners. It cannot claim adjustment for any sum exceeding Rs. One
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Registration of Firms and Consequences of Non-Registration Relations amonst the Partners and Dissolution of Firm
13 Example: Suppose an unregistered firm owes Rs. 2000 to Sah il and Sahil
owes Rs.1000 to the firm. The firm cannot enforce an adjustment of
Rs.1000 in a court of law.
Partnership Property (Section 14) :
Partnership Property is also known as property of a firm, partnership
assets, joint stock, common stock, or joint estate. A partnership property
includes all property and rights, and interest in property that the purchases
by partnership firm.
These properties are collectively owned by all the members of the in the
course of partnership business which includes Goodwil l.
Therefore, a partnership property includes of the following items if there is
no agreement between the partners showing any contrary intention. All
property and rights and interest in property that the partners purchase in
the common stock as their co ntribution to the common business purpose.
Goodwill of the business:
To arrive at the conclusion or to decide whether a particular property is
partnership property or not it depends on the fair and true objective or
agreement between the partners.
Therefor e, if a firm uses the property of a partner for its purposes, it does
not make it a partnership property unless that was the real intention. At
any time, the partners may agree to convert the property of a partner or
partners into partnership property.
2.3 RIGHTS, DUTIES AND LIABILITIES AND AUTHORITY OF PARTNERS The Partnership Deed includes the mutual rights, duties and obligations of
the partners, in certain cases, the Partnership Act also makes a compulsory
provision in respect of the rights and obligat ions of partners. When
Partnership Deed is silent.
2.4 RIGHTS OF A PARTNER The rights of a partner are as follows:
1. Right of the partner to take active part in the day -to-day affiars of the
firm.
2. Right to be consulted and heard when taking any decisi on regarding
the business.
3. Right as agent of the firm and implied authority to bind the firm for
any act done in carrying the business.
4. Right to share the profits equally or as agreed upon by the partners as
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14 5. Right to get interest on capital contributed by the partners to the firm.
6. Right of access to books of accounts and call for the copy of the same
for inspection.
7. Right to prevent admission of new partners/expulsion of existing
partners.
8. Right t o enjoy interest on advances paid by the partners for business
purpose.
9. Right to the use of partnership property exclusively for partnership
business only not for his personal use or benefit.
10. Right to retire with the consent of other partners and ac cording to the
terms -and conditions of deed.
2.5 DUTIES OF PARTNERS The duties of a partner are as under:
a. To carry on the business to the greatest common advantage:
Every partner is bound to carry on the business of the firm to the greatest
common adva ntage. In other words, the partner must use his knowledge
and skill in the conduct of business to provide maximum benefits for the
firm.
b. To be just and faithful to each other :
Every partner must be faithful to other partners of the firm. Every partner
must observe utmost good faith and fairness towards other partners in
partnership activity.
c. To render true accounts:
Every partner must render true and proper accounts to his co -partners, as
they are mutually related.
d. To provide full information :
Every partner must provide full information and details of activities
affecting the firm to the other co -partners. No information should be hide.
e. To attend diligently to his duties:
Every partner is bound to attend diligently and faithfully to duties in t he
conduct of the business of the firm.
f. To indemnify for loss caused by fraud or willful neglect:
It is the duty of the partners to indemnify the firm for loss If any caused to
the firm because of a partner’s willful neglect in the conduct of the
busine ss or fraud commit by him against a third party. munotes.in

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Registration of Firms and Consequences of Non-Registration Relations amonst the Partners and Dissolution of Firm
15 g. Should not hold and use partnership property exclusively for the
firm:
The partners must hold and use the partnership property exclusively for
the purpose of partnership activity of the firm not for thei r personal
advantage.
h. No Secret Profit and to account for personal profits :
If a partner secured any personal benefit or profit from partnership
transactions or from the use of the property of the firm or business
connection the firm or the firm’s name, he must account for such profit
and reimbursed it to the firm.
i. Not to carry on any competing business:
A partner must not engage in competing activities to that of the firm. If he
carries on and earns any profit then he must account for the profit mad e
and pay it to the firm.
j. To share losses:
When there is no agreement as to partnership, partners have to share the
losses of the firm equally as per profit sharing ratio
2.6 LIABILITIES OF PARTNERS a. Joint & Several : Every partner is liable jointly a nd severally for all
the acts of the firm done while he was a partner. The liability of a
partner is unlimited.
b. Liability for Secret Profits : A partner is liable to account for and pay
to the firm any personal profits earned from the business of the fir m
or property .
c. Liability for Profits from Business of a same nature : If a partner
carries on any business of the same nature and competing with that of
the firm, he would be liable to account for and pay to the firm all
profits made by him in that busi ness.
d. Liability to Render True Accounts : A partner is liable to render true
statements of accounts to other partners. He is liable to disclose all the
accounts which fall within the scope of business of the firm.
e. Liability for Losses of the firm: As a partner has a right to share the
profits of the firm likewise is he liable to share the losses equally
unless otherwise agreed upon.
2.7 IMPLIED AUTHORITY OF PARTNER The authority of a partner to bind the firm is called his “implied
authority”. Partne rs in the partnership firm are playing dual role that is as
an agent and at the same time Principle. An authority which is in the munotes.in

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16 form of express or by words spoken and the Indian Partnership Act is has
not specifically mentioned any authority by express ion. In the absence of
any usage or custom of trade to the contrary, the implied authority of a
partner does not confer any rights to him to -
a. Submit a dispute relating to the business of the firm to arbitration,
b. Open a banking account on behalf of th e firm in his own name,
c. Acquire immovable property on behalf of the firm,
d. Admit any liability in a suit or proceeding against the firm.
e. Suspend any claim or portion of a claim by the firm,
f. Depart a suit or proceeding filed on behalf of the firm ,
g. Transfer immovable property belonging to the firm enter into
partnership on behalf of the firm.
2.8 MUTUAL RELATIONSHIP OF PARTNERS TO EACH OTHER Each partner has a right to share in the profits of the partnership .
Unless the provisions made in the p artnership deed otherwise, partners
share profits equally. Moreover, partners must contribute equally to
partnership losses unless a provision made in the partnership deed for
another arrangement.
Each partner has a right to participate equally in the work ing of
management of the partnership . In many partnerships a majority vote
resolves disputes relating to management of the partnership. Except, some
decisions, like as admitting a new partner or expelling a partner, require
the consent from all the partne rs.
Each partner owes a Fiduciary duty to the partnership and to copartners.
This duty requires that a partner deal with copartners in Good Faith, and it
also requires a partner to account to copartners for any benefit that he or
she receives while engage d in partnership business. If a partner generates
profits for the partnership, for example, that partner must hold the profits
as a trustee for the partnership.
2.9 RELATIONSHIP OF PARTNERS TO THIRD PERSONS A partner is an agent of the partnership :
When a partner has the actual authority and acts on behalf of the firm, the
partner binds the partnership and every partner for the obligations.
Similarly, a partner’s admission concerning the partnership’s affairs is
considered an admission of the partner ship. A partner may only bind the
partnership, however, if the partner has the authority to do so and munotes.in

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Registration of Firms and Consequences of Non-Registration Relations amonst the Partners and Dissolution of Firm
17 undertakes transactions while conducting the usual partnership business. If
a third person, however, knows that the partner is not authorized to
act on be half of the partnership, the partnership is generally not liable
for the partner’s unauthorized acts. Moreover, a partnership is not
responsible for a partner’s wrongful acts or omissions committed after the
dissolution of the partnership or after the diss ociation of the partner. A
partner who is new to the partnership is not liable for the obligations of the
partnership that occurred prior to the partner’s admission.
2.10 MINOR’S POSITION IN PARTNERSHIP A person who has not attained the age of 18 years of his or her age is
known as minor as provided to Section 3 of the Indian Majority Act.
Section 4 of the Indian Partnership Act, 1932, defines partnership and
partner as follows:
“Partnership is the relation between persons who have agreed to
share the pro fits of a business carried on by all or any of them acting
for all”.
Persons who have entered into a partnership busin ess with one another are
called “partners” individually and collectively it is called as “firm”, and
the name by which their partners hip business is carried on is called the
“firm name”.
As per Indian Contract Act, 1872 , minors can neither take an active
party in any partnership business nor to enter into any agreement. An
agreement involving a minor is void -ab-initio. However, the I ndian
Partnership Act has its own sets of legal rules in respect of minors.
Minor admitted to benefits of partnership :
A partnership firm cannot be formed with a minor as the only other
member. The relation of partnership arises from a contract
“Section 30 of the Indian Partnership Act, provides that a minor cannot
become a partner, however with the consent of the adult partners, he may
be admitted to the benefits of partnership.
A minor can only be admitted to the benefits of a partnership, and that
partne rship has to exist independently. Also, there cannot be a contract
between two minors.
Rights of Minor :
A minor admitted to the benefits of a partnership in consultation and
unanimous consent of all the other major partners.
 Such minor is entitled to his agreed shares of the property and of the
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18  Such minor has the right to access and taking copies of the book of
accounts of the firm. But has no right of access to those other books
of the firm which do not contain matters of account.
 Such minor is not personally liable to the third parties for the debts of
the firm, but his liability is limited only up to his shares in the
partnership assets and profits.
 Such minor is not entitled to take part in the conducting of the actual
business ac tivities as he has no capacity to contract
2.11 MINO R BECOME A FULL -FLEDGED PARTNER On attaining the age of majority, the minor has his own choice whether to
continue with the same partnership or not and accordingly he should
specify his interest with in a time specified that is within six months on
attaining the majority. If he fails to do the same, he becomes personally
liable to the third parties for all the debts of the firm with retrospective
effect from the date of he gets admitted to the benefits of partnership.
2.12 RIGHTS OF THE MINOR IF HE ELECTS NOT TO BECOME A PARTNER  His rights and liabilities shall continue to be those of a minor up to the
date of giving public notice;
 His share shall not be liable for any acts of the firm done after the date
of the notice;
 He shall be entitled to sue the partners for his share of the property
and profits.
 If after attaining the age of majority but before choosing to become a
partner the minor represents and knowingly permits himself to be
represented as a part ner in the firm, he will be personally liable to
anyone who on the faith of such representation granted credit to the
firm on the ground of ‘holding out’.
From the above discussion, we can say that a partnership firm cannot be
formed with a minor as the on ly other member. The relation of partners in
partnership business come into in existence from a contract. Section 11 of
Indian Contract Act states that a minor is not competent to contract and
hence not entitled to have the contractual relations amongst th e other
partners as he is not able to form the sensible judgment and such contracts
are void ab initio as mentioned in the landmark judgement in the case of
Mohoribibi V/s Dharmodash Ghosh.

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Registration of Firms and Consequences of Non-Registration Relations amonst the Partners and Dissolution of Firm
19 Dissolution of Firm:
Meaning of Dissolution:
Partnership, as we a re aware is a result of an agreement. All agreements
can be discharged or terminated. This termination of the contractual
relationship in case of partnership is called as dissolution. Dissolution
under the partnership law can be mean “Dissolution of the fi rm” as well as
“Dissolution of partnership”. Commonly both are taken to mean the same
and are used interchangeably. However, legally there is a difference in the
two. Dissolution of the firm means complete breakdown of the relations
among all partners. Whe reas dissolution of the partnership means, the
relationship between same partners came to be an end while the firm
continues. It would be right for us to say dissolution of the firm
necessarily implies dissolution of partnership whereas dissolution of
partnership does not necessarily involve dissolution of firm.
Example:
1. A, B,C, D. are partners in a firm. A, dies B, C, D decides to close
down the firm. This amount to dissolution of the firm.
2. A, B, C, D, and E are partners in a firm. There is an agreem ent that
the firm shall not be dissolved on the death, retirement or expulsion of
any partner. C dies, this amounts to dissolution of partnership as the
firm continues. Only relationship with C. comes to an end.
Modes of Dissolution:
There are modes of dis solution of a firm
1) Voluntary dissolution.
2) Dissolution by operation of law.
3) Dissolution by intervention of court.
1. Voluntary dissolution :
It includes dissolution by any of the following manner.
a) By consent: All partners may consent for the diss olution of the firm.
This can happen whether the firm is for a fixed duration or not.
b) By agreement: A firm may be dissolved in accordance with a
contract. For example partnership formed for a specific period or for a
particular venture.
c) By Notice: Whenever a partnership is at will any partner can give 14
days’ clear notice in advance indicating his intention to disassociate
from the firm.
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20 a) Compulsory dissolut ion: In this case firm is compulsorily dissolved
due to insolvency or some new law makes the business of the firm
unlawful
b) Some event making the business unlawful, if carried on in
partnership, due to change in its number, example a firm carrying in
banking business by more than 10 person
c) On happening of certain contingencies such as expiry of fixed period
or particular venture for which it was formed, on death of a partner
and on insolvency of a partner.
3. Dissolution by intervention of court :
It arises on the following ground:
a) Insanity of a partner :
When a partner becomes of unsound mind. The other partner can institute
case against such partner to dissolve the firm.
b) Permanent incapacity:
In case a partner becomes permanently incapable in disc harging his duties,
the court may order dissolution of the firm.
c) Misconduct of a partner:
When a partner is guilty of misconduct which adversely affects the
business of the firm then court may order dissolution of the firm provided
other partner take le gal action.
d) Willful or persistent breaches of agreement:
Sometimes, a partner willfully or persistently commits a breach of
agreement relating to the management of the affairs of the firm or
conducts the business in such a way that the other partners fi nd it difficult
to carry on business with him. In such a cases any partner other than the
guilty partner may approach the court for dissolution.
e) Transfer of interest:
Sometimes a partner may transfer the whole of his interest or share to a
third party o r the share may be charged or the share has been sold for the
recovery of arrears of land revenue in which cases the other partner or
partners may seek for dissolution of the firm
f) Losses in Business:
Where the business of the firm cannot be carried on e xcept at a loss the
court can order for dissolution.
g) Any other just an equitable ground:
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Registration of Firms and Consequences of Non-Registration Relations amonst the Partners and Dissolution of Firm
21 2.13 EFFECTS OR CONSEQUENSES OF DISSOLUTION Dissolution of firms :
Section 39 of the Indian Partnership Act, 1932 defines the dissolution of
partnership firms. “The dissolution of the firm means to stop all the
business activities with the firm” There is a difference between the
dissolution of the firm and the dissolution of the partnershi p.
When all the activities in respect of partnership business comes to an end
and all the profit and loss is settled among the partners is called
dissolution of the firm and when the partner retires or dies even though
the firm continues to perform its p artnership business with existing
partners is called dissolution of a partnership.
Rights of A Partner on Dissolution of A Firm:
1. Rights to have the business wound up.
2. Right to repayment of premium on premature dissolution.
3. Where the firm was diss olved on account of fraud or
misrepresentation by a partner, the innocent partner can rescind the
contract and also have right to retain surplus if any for the capital and
sum paid to be indemnified for all debts paid with regard to the firm.
4. Right to r estrain partners from the use of the firm name or firm
property.
Liabilities of Partners on dissolution :
Liabilities for an act of the partners on dissolution specified under Section
45 of the Indian Partnership Act, 1932
1. According to this section, the partners of the firm are liable to the
third party for any act done by any of them unless they give public
notice of the dissolution of the firm.
2. It also states that the partner who dies, retries, becomes insolvent or
that of a person who the third par ty is not aware of being the partner
of the firm, is not liable under this section.
Return of premium after dissolution
Section 51 of the Indian Partnership Act specifically tells about the return
of premium after dissolution. At the time of entering into a partnership
firm, the partner has to pay an amount as premium. However, when the
firm gets dissolves before the maturity due to any reason, then such
partners are entitled to the repayment of premium at the time of
admission.
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22 2.14 PUBLIC NOTICE Secti on 72 of Indian Partnership Act describes the manner and the in
which the public notice of certain matters relating to partnership firm is to
be given. According to this section, public notice must be given in the
following circumstances:
a) On retirement or expulsion of a partner from a registered firm.
b) On the dissolution of a registered firm.
c) On the election of a minor to become or not to become a partner on
attaining majority.
Following are the modes by whic h the public notice pertaining to the
above matter is to be given are as under:
a) By notice to the Registrar of firm under Section 63.
b) By, publication in the Official Gazette.
c) By publication in at least one vernacular newspaper circulating in the
district where the firm to which it relat es has its place or principal
place of business.
Following are the repercussions or Consequences when public notice
is not given:
 When a minor admitted to benefits of partnership fails to give public
notice within six months of his attaining majority, he b ecomes a
partner in the firm on the expiry of the said period and would be liable
as a partner.
 If a partner does not give a public notice of the retirement, he and the
other partners shall continue to be liable as partners to third parties for
any act don e by any of them which would have been an act of the firm
if done before retirement.
 If in case of expulsion of a partner, a public notice is not given, the
expelled partner and other partners shall continue to be liable to third
parties dealing with the f irm as in the case of a retired partner.
 If on dissolution of a registered firm a public notice is not given, the
partners shall continue to be liable to third persons for any act done by
any of them which would have been an act of the firm done before
dissolution.
2.15 SUMMARY Registration of Partnership :
Registration of a partnership firm is not compulsory under law
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Registration of Firms and Consequences of Non-Registration Relations amonst the Partners and Dissolution of Firm
23 Consequences of Non - Registration of Partnership:
It cannot enforce its claims against the third party in a court of law. It
cannot file a legal suit against any of its partners, Partners of an
unregistered firm cannot file any suit to enforce a right against the firm.
Rights of a Partner:
Right of the partner to take active part in the day -to-day affairs of the firm.
Right to be consult ed and heard when taking any decision regarding the
business.
Duties of Partners:
 To carry on the business to the greatest common advantage: To be just
and faithful to each other: To render true accounts:
 To provide full information : To attend diligently to his duties: No
Secret Profit and to account for personal profits: Not to carry on any
competing business:
Liabilities of Partners :
Joint & Several: Liability for Secret Profits : Liability for Profits from
Business of a same nature : Liability for Losse s of the firm:
Implied authority of Partner:
Submit a dispute relating to the business of the firm to arbitration, open a
banking account on behalf of the firm in his own name, acquire
immovable property on behalf of the firm,
Mutual Relationship of Part ners to Each Other: Each partner has a right to
share in the profits of the partnership . Each Partner has right to participate
equally in the working of management of the partnership . Fiduciary Duty.
Relationship of Partners to Third Persons:
A partner is an agent of the partnership. If a third person, however, knows
that the partner is not authorized to act on behalf of the partnership, the
partnership is generally not liable for the partner’s unauthorized acts.
Minor’s Position in Partnership:
Minor admitted to benefits of partnership, Rights of Minor, Minor become
a full -fledged Partner.
Dissolution of Firm: MODES OF DISSOLUTION :
Voluntary dissolution. Dissolution by operation of law. Dissolution by
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24 Rights of A Partner on Dissolution of A Firm:
Rights to have the business wound up. Right to repayment of premium on
premature dissolution. Where the firm was dissolved on account of fraud
or misrepresentation by a partner, the innocent partner can rescind the
contract and Volunta ry dissolution: Dissolution by operation of law;
Dissolution by operation of law.
2.16 QUESTIONS 1. Define partnership. Explain its features
2. What are the effects of non -registration of Partnership Firm?
3. Explain Test of partnership
4. What do you mea n by the property of the firm ?
5. Explain kinds of partnership
6. What do you mean by dissolution of the partnership firms? How
dissolution takes place by operation of law?
7. Explain dissolution by intervention of court.
8. What are the modes of dissolut ion of Partnership?
9. Distinguish between partnership & co -ownership
10. Distinguish between partnership & company
11. Distinguish between partnership & Hindu undivided family.
12. Write a Short Note:
a. Partnership
b. Partnership Deed
c. Particular Part nership
d. Dissolution of Partnership


*****

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25 3
LIMITED LIABILITY PARTNERSHIP
ACT, 2008
Unit Structure
3.0 Objectives
3.1 Introduction
3.2 Nature and Features o f LLP
3.3 Advantages of Limited Liability Partnership
3.4 Disadvantages of Limited Liability Partner ship
3.5 Procedure for Incorporation of LLP
3.6 Extent and Limitation of Liability of the LLP
3.7 Conversion into Limited Liability Partnership ( Section 55)
3.8 Dissolution of LLP
3.9 Distinguish Between Limited Liability Partnership and Partnership
3.10 Questi ons
3.0 OBJECTIVES After studying this chapter, you will be able to understand:
 The meaning of the term Limited Liability Partnership and i ts features
 The advantages and disadvantages of Limited Liability Partnership
 The procedure for incorporation of the Limited Liability Partnership
 The procedure for winding – up of an Limited Liability Partnership
3.1 INTRODUCTION The concept of limited li ability partnership has originated from France as
early as beginning of the nineteenth century and it has become popular
throughout the world in India we have sole proprietorship concern,
partnership, The Hindu undivided family and the company.
The partner ship lost its popularity because of two major reasons unlimited
liability and the presence of concept of mutual agency.
To solve the problem of partnership mentioned above, Naresh Chandra
committee recommended the formation of limited liability partnership so
that the organisation can exist at an international level. The
recommendations of J. J. Irani Committee also played a very important
role for introduction of the concept of limited liability partnership. The
limited liability Partnership Act 2008 was a pproved by the president of
India on 27th of January 2009 and the act came into force on 31st of
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26 3.2 NATURE AND FEATURES OF LLP 1. An LLP is a body corporate separate from its partners.
2. The liability of the LLP is unlimited where as the liability of the
partners Sha ll by Limited. Partner shall not be liable for the act of
other partners but the lmp will continue to remain liable for any act
done by other partners.
3. The rights and duties of every partner is decided by agreement
between the LLP and th e partners full stop because LLP is having
separate legal status comma it can enter into partnership agreement on
its own.
4. NLP must have at least two partners and two more persons as
designated partners comma out of which at least one partner must be
resid ent in India.
5. AN LLP is required to carry out audit every year and submit the
statement of solvency to the registrar every year. However the central
government has the power to exempt certain LLP from this formality.
6. In case of any problem the central gove rnment will have power to
investigate the affairs of the LLP.
7. Any private company coma unlisted public company, any firm can be
converted into an LLP.
8. The winding up of the LLP can be carried out either by the High
Court or by the Tribunal.
9. The limited lia bility partnership act is applicable limited liability
partnership and therefore the Indian Partnership Act 1932 does not
become applicable to any limited liability partnerships.
Advantages and Disadvantages of LLP
3.3 ADVANTAGES OF LIMITED LIABILITY PARTN ERSHIP 1. An LLP has a separate legal status
2. An LLP is easy to form
3. An LLP enjoys long and continuous life i.e. perpetual succession
4. An LP has Global recognition
5. There is no limit on maximum number of partners of LLP
6. Action by 1 partner does not make all the other partners under the
concept of LLP. in other words concept of mutual agency is not
present in LLP
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27 3.4 DISADVANTAGES OF LIMITED LIABILITY PARTNERSHIP 1. LLP cannot raise capital from general public.
2. Partners may not be liable for act of any other partners however the
LLP continues to remain liable for the act of any of its partners.
3. There is no separation of ownership and Management in case of LLP.
3.5 PROCEDURE FOR INCORPORATION OF LLP 1. The incorporation of LLP is done under the jurisdiction of the
Registrar of Companies where the Principal Place of Business of LLP
is situated. Under the LLP Act, 2008, the entire procedure
incorporation of the LLP has to be carried out in virtual mode i.e.
online mode.
The procedur e for incorporation is as follows:
a. Requirement before Incorporation :
Every designated partner is required to obtained digital signature
certificate into bracket DSE. This is mandatory is required to be obtained
as it is needed to be affixed on all docum ents submitted for incorporation.
The LLP has to obtain and directors identification number i n for every
disease LLB the d i n is one time unique number and is mandatory to be
obtained for every designated partner of the LLP.
1. Approval of name: the name of the LLP must be approved from the
registrar of the companies as no two LLP can be incorporated with
same or similar names. the approval for name can be obtained by
filing LLP form number 1. the name once approved is valid only for a
period of 60 days it will be presumed that the name is withdrawn, if
incorporation proceedings are not completed within that period
2. Application for certificate of Incorporation: the second step after
obtaining all of the name is to get the of Incorporation. For certificate
of Incorporation by filing LLP form number 2 and submitting it with
the required documents.
3. If the registrar that all the documents and application is we will issue
certificate of Incorporation seal and signature the conclusive evidence
of incorporation of t he LLP after receiving the certificate of
Incorporation the LLP has to apply for LLP identification number.
after receiving the LP identification number should apply for
permanent account number (PAN) within a period of 30 days.
4. LLP agreement: partners and LLP are required to execute LLP
agreement and register the same after payment of the stamp duty and
registration charges. The LLP agreement contains all the rights and
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28 Registrar within 30 days from the Incorporation in the form of LLP
Form Number 3. The formality of LLP agreement must be completed
within a period of 30 days from receiving the certificate of
Incorporation.
3.6 EXTENT AND LIMITATION OF LIABILITY OF THE LLP Section 26 - partne rs as agent of LLP: every partner is considered as an
agent of LLP but not the agent of every other partner. Therefore top
mutual agency present in LLP.
Section 27 limitation of liability: the liability of LLP can be Limited in
case does something outside his authority. But the LLP will be liable if a
partner does any wrongful act during the course of business.
Section 30 - in case of fraud the liability will be unlimited for LLP for the
partner who commits the fraud.
Section 31 - whistle - blowing
a. the co urt or Tribunal can wave off any kind of penalty which is
charged on a particular partner on the basis of information received
under whistle - blowing from that particular partner only, if it leads to
obtaining any material information helpful for investig ating the
wrongful activities of the LLP or which can lead to conviction of any
of the partner of LLP.
b. no LLP or its partners can suspend, remove, demote, restrict any
partner who has been involved in the act of whistle -blowing because
of which there i s any kind of enquiry or complaint on that particular
LLP.
3.7 CONVERSION INTO LIMITED LIABILITY PARTNERSHIP ( SECTION 55) 1. any particular form can be converted into LLP as per the provision of
IInd schedule of the LLP act.
2. a private company can be converte d into an LLP as per the provision
of IIIrd schedule of the LLP act.
3. an unlisted public company can also be converted into an LLP under
the provision of IVth schedule of the LLP act.
4. the conversion of different organizations into an LLP is under Section
55 of the LLP act of 2008.
5. any organization wanting to convert into an LLP must make an
application to the registrar with necessary documents required for
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29 6. the registrar after verification, if he is satisfied, he will issue
certificate of incor poration under his seal and signature.
7. If the certificate of incorporation is issued all the Assets and liabilities
will be transferred to the LLP.
8. it is mandatory to execute an LLP agreement and register it as per the
provisions of LLP Act 2008.
3.8 DISS OLUTION OF LLP An organisation created by law can only and by the provision of law the
central government has formed limited liability partnership (dissolution
and winding up) Rules 2010 effect from 30th of March 2010 for the
purpose of winding up of LLP.
There are two types of winding up :
1. voluntary winding up
2. winding up by Tribunal or Court
Voluntary Winding up :
it can happen under the following situations
i. when term specified in LLP agreement comes to an end
ii. where the L LP passes special r esolution for winding up of its
business
iii. any other situation where LLP agreement requires its winding up
The Procedure for winding up is as follows:
Step 1 - Passing of Resolution :
The LLP has to pass special resolution requiring to two - third or 75 %
majority. this resolution must be submitted to the registrar within a period
of thirty days in the manner of form number 1 declaration of solvency -
the LLP and its designated partners to declare solvency as per the format
provided in form number to give n under the LLP act. The liabilities must
be paid off within a period of one year from the date of dissolution and the
resolution for the same in prescribed from form number 2 must be
submitted within a period of 15 days from the date of passing of the
resolution.
Along with this LLP should submit form number 3 statement of assets and
liabilities it should also submit a copy of valuation report for such assets
or liabilities.
Step 2 - Declaration of Solvency :
It is the duty of majority of designated partner s to make declaration as per
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30 stating that the LLP has no debt or if it has so, it will pay the entire debt
within a period not exceeding one year from the date when the winding of
has co mmenced. It is necessary to submit this declaration to the Registrar
in the format provided in Form Number 3 within the 15 days ok passing
resolution for voluntary winding up. This must be accompanied with the
following :
Statement of Assets and Liabilities : this must be provided in the format
of Form Number 4 containing statement of all the assets and liabilities,
prepared on the date immediately before making of the declaration. The
same should be duly attested at least 2 designated partners.
Valuation Rep ort: providing the valuation of Assets of the LLP. This is
to determine that the LLP has provided true and fair value of the acids
without any undue inflation to misrepresent any value of the assets.
Step 3 - To obtain consent of creditors for winding up :
In case there is existence of any creditors whether secured or unsecured,
the approval of the creditors is necessary for the winding up. The copy of
declaration, stating the amount due to every creditor along with the offer
for accepting the mentioned cl aim is required to be sent to the creditors by
registered or speed post or any other type of communication as per Rule
Number 15 of the 2009 LLP Partnership Rules. It is necessary that the
creditors must record their opinion within 30 days from the date of
receiving the declaration. At least two third creditors are required to give
their consent for voluntary winding up. If the case arises that the amount
due to the creditors would not be payable from the amount received by
realizing the Assets of the LLP, consent by the creditors is voluntary.
Where LLP is unable to pay the amount proposed and the LLP is to be
wound - up by the Tribunal, the LLP is required to file an application
within 14 days. Thereafter, notice of any decision of the creditors is
require d to be given by the LLP to the registrar in the Format of Form
Number -5 within a period of 15 days from receiving consent of the
creditors.
Step 4 - Publication of Resolution :
Within 14 days of the receipt of the creditors consent LLP is required to
give the notice of resolution by the way of advertisement in the newspaper
circulating in the district where the registered office or the principal office
of the LLP is situated.
Step 5 - Appointment of Liquidator :
Within 30 days from the date of passing reso lution, where there is no
existence of creditors or in case of creditors, where they have intimated
decision to the registrar, the liquidator of the LLP is required to be
appointed with the consent of the partners.
Step 6 - Audit of LLP liquidator’s Accoun t:
As per the procedure laid down in rule 56, it is necessary to audit the
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31 Step 7 - Liquidators Report :
After winding of the LLP, the LLP liquidator is required to prepare a
report in the format given in Form Number 9, stat ing the manner in which
the winding up has been carried out, property has been disposed of, how
the loans have been paid. The said report should have approval of the
partners. It is mandatory that at least two third of the total partners consent
on the app roval of the report indicating that they are satisfied by the steps
of the liquidator. Resolution for such approval shall be passed within 30
days from the date of the report of the winding up and the audit of
accounts and the explanation for the dissoluti on of the LLP.
Step 8 - Dissolution of LLP :
After the LLP’s winding up is carried out, the LLP liquidator is required to
prepare report as specified in Form Number 9 explaining how the winding
up process has been conducted and how the property has been di sposed of.
The report must also state how the of the LLP’s debts has been discharged.
Within 15 days from the date of passing of the resolution, it is necessary
for the LLP liquidator to file with the Registrar a copy of final winding up
action of accounts and report in Form Number 10 and application filed
with the Tribunal, requesting to pass the order of the Dissolution. The
Tribunal on the satisfaction about the following of the process, order for
dissolution of LLP, within a period of 60 days from the d ate of receiving
the application. The LLP is required to file order of dissolution of the
LLP with the Registrar within 30 days in the form given in the format
form number 11.
Section 64 : Circumstances where LLP can be wound up by the
Tribunal :
An LLP can be wound up by the Tribunal under any of the following
circumstances:
i. if the limited liability partnership decide that the winding up to be by
the Tribunal.
ii. if for a period of more than 6 months comma partner of the LLP is
reduced below 2
iii. if the LLP is unable to pay its dues
iv. if the LLP has acted against the interest of the show Sovereignty and
integrity comma the security of the state or public order
v. if the LLP has made default in filing with the registrar account
insolvency for any five consecutive financial years
vi. if the Tribunal is of the opinion that it is just and equitable that the
LLP should be wound up
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32 Procedure For Winding - Up Through Tribunal :
An application for winding up shall be made in a manner by LLP or
creditors the contributory or contributories all or some of the above
mentioned parties or by the Registrar of Companies or by the Central
Government. After receiving the Petition, the Tribunal shall enquire into
the merits and accordingly pass order whether LLP is required to be
wound up or not. If the Tribunal is of the opinion that LLP should be
wound -up, the Petitioner shall within a period of 30 days from the date of
passing of the order, submit the copy of the order to the Registrar of the
Companies, otherwise there is a penalty of 100 Rupees for each and every
day of default.
In case where the LLP is to be wound off by the Tribunal, the partners are
required to appoint qualified person act as a provisional liquidator for the
purpose of winding up. It is howeve r to be noted that the liquidator shall
always be subject to the provisions of the Central Government as well as
the Tribunal, to ensure that the LLP is round up as per the rules and
regulations given in.
The appointed Liquidator shall have all the powers so that there is timely
completion of the process of winding up. In the process of winding up, the
liquidator shall take over the control of the business of the LLP and
accordingly dispose off the assets and pay off all the statutory dues and
after setting off all the liabilities, the excess, if applicable, will be
distributed between the partners in the manner that is agreed by them as
per the provisions of LLP Agreement.
A report of liquidation must be submitted to the Registrar, who then issue
the final winding -up order in the name of the LLP, after removing the
name from the Register mentioned by him.
3.9 DISTINGUISH BETWEEN LIMITED LIABILITY PARTNERSHIP AND PARTNERSHIP Limited Liability Partnership Partnership The Limited Liability Partnership is governed by the provisions of the Limited Liability Partnership Act, 2008 The Partnership is governed by the provisions of the Indian Partnership Act, 1932 Limited Liability Partnership requires minimum two partners and there is no limit specified on the maximum number of partners Partnership required minimum two partners and maximum of ten for the Banking Business and twenty for the non-banking business. Incorporation of an Limited Liability Partnership is mandatory under the provisions of the Limited Liability Partnership Act, 2008 Except for the State of Maharashtra, Registration of Partnership is voluntary. munotes.in

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33 An Limited Liability Partnership enjoys a perpetual succession Partnership does not enjoy perpetual succession A Partner is a agent of an Limited Liability Partnership, but not of other partners A Partner is a principal as well as an agent of all other partners. Limited Liability Partnership can sue and be sued in its own name Partnership cannot sue or be sued in its own name. Act of a Partner binds the Limited Liability Partnership, but not every other partner Act of Partner binds all other partners as well. Transfer of Interest in an Limited Liability Partnership is governed by the LLP Agreement Transfer of Interest of a Partner
in Partnership is n ot possible,
unless, there is consent by all
other partners.
Difference between Limited Liability Partnership and Company : Limited Liability Partnership Company Limited Liability Partnership is governed by the provisions of the Limited Liability Partnership Act, 2008 Company is governed by the
provisions of Companies Act,
2013 Limited Liability Partnership is managed through Designated Partners Company is managed through Board of Directors Limited Liability Partnership cannot collect capital from outsiders A Public Company can collect capital from outsiders, by way of an public issue. Meetings are not mandatory for Limited Liability Partnership A Company is required to hold Annual General Meeting every year. An Limited Liability Partnership does not require to pass resolutions to record the decisions taken by them. A Company requires decision to be recorded in the form of Resolution. The Limited Liability Partnership Agreement is the most important document for an Limited Liability Partnership Memorandum of Association and Articles of Association are the most important documents for the Company.
Exercise:
1. The liability of a Partner of the LLP is ________.
(unlimited, unknown, limited, variable)
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34 2. An LLP shall be a _____________.
(body co rporate, non-existent corporate, unrecognized organization,
no separate existence)
3. Every LLP must have at least ____ partners.
(4, 3, 2, 1)
4. An LLP is an ______ form of business
(unknown , outdated , monotype , renowned )
5. An LLP is _______ t o form .
(easy, difficult , complicated , time consuming)
6. An incorpo rated LLP has ____________.
(no life , perpetual succession , short life , no existence )
7. In LLP there is f reedom to ________________.
(deliver , manage , plan, discuss )
8. Indian Partnership Act is ___________ to an LLP .
(not applicable , applicable , superior , guiding force )
9. One of the Designated Partner must be a __________ in India.
(business man , non – resident , resident , government employee )
10. An Application for Re gistration of an LLP must be filed with
_______________ .
(Registrar of Firms, Registrar of co -operative society , Registrar of
HUF, registrar of Companies)
11. A person who makes false statement at the time of application for
incorpation of LLP shall be l iable to pay a fine of Rs. ____________ .
(1 lakh , 3 lakhs , 5 lakhs , 10 lakhs )
12. The Registtrar shall grant certificate of incorporation within _____
day of submission of the form .
(14, 28, 30, 7)
13. In case of Fraud, the li ablity shall be ____________ _.
(limited , unlimited , no liability , shared by creditors )
14. The liability in case of fraud under the LLP Act, 2008 is laid down
u/s. ______ -
(30(a) , 30(b) , 30 (d) , 30) munotes.in

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35 15. Section 31 of LLP Act, 2008 talks about the term __________.
(whistle -blowing , role of designated partners , dissolution of LLP ,
Registration of LLP )
16. ________ i s not compulsory for an LLP.
(business , registration , capital , partners )
17. When LLP is wound up after duration is completed is an example of
______________ winding up
(compulsory , court order , registrar order , voluntary )
18. For winding up, consent must be obtained from atleast _____
crediters .
(one-third , two-third , one – tenth , half)
19. __________ must be appointed within 30 days of passing the
resolution .
(Liquida tor, Receiver , Debtor , partners )
20. Resolution must be published within _____ days of receipt of
creditors consent.
(30, 28, 21, 14)
21. The liquidator is required to file a copy of order of dissolution within
______ days .
(60, 45, 30, 15 €)
22. Audit of _________ Account is required during winding up .
(LLP, Liquidator , Designated Partner , partners )
23. In winding up be the tribunal, the tribunal should appoint __________
to act as provisional liquidator .
(advocate , CA, CS, qualifie d professional )
24. In winding up through Tribunal, after order of winding up is obtained,
it should be filed with the ___________.
(ROC , Central Government , High Court , Supreme Court )
25. In LLP, a partner _________ personally liable.
(is, can be, shoul d be, is not )
26. Individual Partner of an L LP should not be a ___________.
(adult , minor , woman , person above 50 years of age )
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36 27. An LLP __________ into contract in its own name.
(cannot enter , should not , can enter , may not )
28. S. _____ of LLP Ac t 2008 d efines the term Body Corporate .
(2(a), 2(b), 2c, 2(d))
29. A ________ can be allow ed to be converted into an LLP.
(Private Company , Government Company , listed Public Company,
Dead Individual)
30. _______ has power to enqu ire into the affairs of an LLP.
(Registrar of Company , Registrar of co -operative society , Central
Government , Registrar of Firms )
31. Audit of LLP is mandatory if a nnual turnover exceeds Rs _____.
(20 Lakhs , 40 Lakhs , 60 Lakhs , 80 Lakhs )
32. Audit of LLP is mandatory i f contrib ution exceeds Rs _____.
(50 Lakhs , 52 Lakhs , 10 Lakhs , 5 Lakhs )
33. An LLP _________ rai se money from public.
(may, can, could , cannot )
34. Names of 2 incorporated LLP ___________.
(cannot be similar , can be similar , can be same to same , should be
same to same )
35. Section _____ of LLP Act 2008 defines the term Partners.
(2, 3, 4, 5)
36. An LLP is managed through.
(Designated Partners , Partners , Creditors , Court )
37. The profits are determined by _______________ .
(LLP Registration , LLP Agreement , LLP winding up order , decission
of the court )
38. An LLP can appoint a Designated partner who is a resident o utside
India. This statement is
(True , False , partly true , somewhat true )
39. If any designated partner becomes a whistle blower, the court can
________ penalty on him .
(charge , order , waive off, compensate ) munotes.in

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37 40. A person who is involved in whistle blowing ______ be removed
from the LLP .
(cannot , can, should , must )
41. An LLP _______ allowed to issue shares to general public .
(can be , must be , should be , cannot be )
42. A __________ company c annot be converted into an LLP .
(Private Company , partnership , one person , public )
43. An LLP d oes not exist outside Ind ia .
(True , False , partly true , absolutely true )
44. _______ consent is required at the time of winding up of the LLP .
(Debtors , Bank , Creditors , Auditors )
45. A _____ can also file a petition for winding up of LLP .
(Private Company , Public Company , Central Government , State
Government )
46. LLP Act is a _________ act .
(Local , State , Central , Universal )
47. The conc ept of LLP originated from .
(Germany , US, Australia , France )
Ans:
1. c
2. a
3. c
4. d
5. a
6. b
7. b
8. a
9. c
10. d
11. c munotes.in

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38 12. a
13. b
14. d
15. a
16. c
17. d
18. b
19. a
20. d
21. c
22. b
23. d
24. a
25. d
26. b
27. c
28. d
29. a
30. c
31. b
32. b
33. d
34. a
35. d
36. a
37. b
38. b
39. c
40. a munotes.in

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Limited Liability Partnership Act, 2008
39 41. d
42. d
43. b
44. c
45. c
46. c
47. d
3.10 QUESTIONS 1. What do you mean by Limited Liability Partnership? Explain its
features.
2. Explain the advantages and d isadvantages of a Limited Liability
Partnership.
3. State the difference between Limited Liability Partnership and
Partnership Firm.
4. State the difference between Limited Liability Partnership and
Company.
5. Explain the procedure for incorporation of Limited Li ability
Partnership.
6. Explain the Procedure for Dissolution and Winding up of the
Company.
7. Write Short Notes:
a. Whistle Blowing
b. Extent of Limited Liability Partnership
c. Conversion into Limited Liability Partnership
d. Winding – up of Limited Liability Partnership

*****
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40 4
THE FACTORIES ACT, 1948
Unit Structure
4.0 Objectives
4.1 Introduction
4.2 Definitions
4.3 Approval, Licensing and Registration of Factories
4.4 Chapter III
4.5 Chapter IV
4.6 Chapter V
4.7 Chapter VI
4.8 Chapter VII
4.9 Chapter VIII
4.10 Questions
4.0 OBJECTIVES After studying this chapter, the Learners shall be able:
 To understand the definitions related to formation and registration of
the Factory.
 To analyze and adapt to the various Health, safety and Welfare
Provisions provided under the Factories Act, 1948
 To understand the provisions regarding overtime, holidays and breaks
in the factory.
 To study the provisions relating to employment of Women and Young
Children in the Factories.
4.1 INTRODUCTION Any organization always has two impor tant units i.e. Corporate Office and
the Factory. While the decisions are taken in the corporate office, the
factory is a place where the implementation of all the decisions take place.
The wo rkers in the factory play a ver y important role there. Hence, it is
important to take care of them and protect their interest from time to time.
The most important objectives of the Factories Act is to make necessary
provisions for the health of the workers, take care of the provisions
relating to the safety of the wo rkers and make necessary arrangements or
provisions to ensure the welfare of the workers. All the three elements are
equally important as they play a very crucial role for the organization to
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41 The mos t important judgment regarding the provisions for Health, Safety
and Welfare, was given by the Court in the case of M/s. Bhikusa Yamasa
Kshatriya (P) Ltd. V Union of India (1963 AIR 1591), wherein, it was
held that the the primary goal of the law's passage was to safeguard
factory workers from both personal and occupational hazards. For that
reason, it aims to impose certain obligations on the owner or occupier,
including the protection of the workers and the provision of employment
for them in settings tha t are favorable to their health and safety.
Therefore we can see that the Factories Act is a social legislation, the
object of which is to protect from any kind of exploitation against the
conditions of work in the factory premises act applies to all facto ries
including factories belonging to the central or the state government unless
they are specifically excluded there in.
4.2 DEFINITIONS (a) “adult” means a person who has completed his eighteenth year of age;
(b) “adolescent” means a person who has com pleted his fifteenth year of
age but has not completed his eighteenth year;
[(bb) “calendar year” means the period of twelve months beginning
with the first day of January in any year;]
(c) “child” means a person who has not completed his fifteenth yea r of
age;
[(ca) “competent person”, in relation to any provision of this Act,
means a person or an institution recognised as such by the Chief
Inspector for the purposes of carrying out tests, examinations and
inspections required to be done in a factor y under the provisions of
this Act having regard to —
(i) the qualifications and experience of the person and facilities
available at his disposal; or
(ii) the qualifications and experience of the persons employed in such
institution an d facilities availa ble therein, with regard to the
conduct of such tests, examinations and inspections, and more
than one person or institution can be recognised as a competent
person in relation to a factory;
(cb) “hazardous process” means any process or activity in relati on to
an industry specified in the First Schedule where, unless special care
is taken, raw materials used therein or the intermediate or finished
products, bye -products, wastes or effluents thereof would —
(i) cause material impairment to the health of the persons engaged in
or connected therewith, or
(ii) result in the pollution or the general environment: munotes.in

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42 Provided that the State Government may, by notification in the
Official Gazette, amend the First
Schedule by way of addition, omission or variat ion of any industry
specified in the said Schedule;]
(d) “young person” means a person who is either a child or an adolescent;
(f) “day” means a period of twenty -four hours beginning at midnight;
(g) “week” means a period of seven days beginning at midn ight on
Saturday night or such other night as may be approved in writing for a
particular area by the Chief Inspector of Factories;
(h) “power” means electrical energy, or any other form of energy which
is mechanically transmitted and is not generated by human or animal
agency;
(i) “prime mover” means any engine, motor or other appliance which
generates or otherwise provides power;
(j) “transmission machinery” means any shaft, wheel, drum, pulley,
system of pulleys, coupling, clutch, driving belt or othe r appliance or
device by which the motion of a prime mover is transmitted to or
received by any machinery or appliance;
(k) “machinery” includes prime movers, transmission machinery and all
other appliances whereby power is generated, transformed,
transmi tted or applied;
(l) “manufacturing process” means any process for —
(i) 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; or
[(ii) pumping oil, water, sewage or any other substance; or]
(iii) generating, transforming or transmitting power; or
[(iv) composing types for printing, printing by letter press,
lithography, p hotogravure or other similar process or book
binding; [or]]
(v) constructing, reconstructing, repairing, refitting, finishing or
breaking up ships or vessels; [or]
[(vi) preserving or storing any article in cold storage;]
(m) “worker” means a person [employed, directly or by or through any
agency (including a contractor) with or without the knowledge of the
principal employer, whether for remuneration or not], in any
manufacturing process, or in cleaning any part of the machinery or munotes.in

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43 premises used for a manufacturing process, or in any other kind of
work incidental to, or connected with, the manufacturing process, or
the subject of the manufacturing process [but does not include any
member of the armed forces of the Union];
(n) “factory” means any prem ises including the precincts thereof —
(i) whereon ten or more workers are working, or were working on
any day of the preceding twelve months, and in any part of which
a manufacturing process is being carried on with the aid of
power, or is ordinarily so c arried on, or
(ii) whereon twenty or more workers are working, or were working
on any day of the preceding twelve months, and in any part of
which a manufacturing process is being carried on without the aid
of power, or is ordinarily so carried on, — but d oes not include a
mine subject to the operation of [the Mines Act, 1952 (35 of
1952)], or [a mobile mobile unit belonging to the armed forces of
the Union, railway running shed or a hotel, restaurant or eating
place].
[Explanation [I]: For computing t he number of workers for the
purposes of this clause all the workers in [different groups and
relays] in a day shall be taken into account;]
[Explanation II: For the purposes of this clause, the mere fact
that an Electronic Data Processing Unit or a Com puter Unit is
installed in any premises or part thereof, shall not be construed to
make it a factory if no manufacturing process is being carried on
in such premises or part thereof;]
(o) “occupier” of a factory means the person who has ultimate control
over the affairs of the factory
[Provided that —
(i) in the case of a firm or other association of individuals, any one
of the individual partners or members thereof shall be deemed to
be the occupier;
(ii) in the case of a company, any one of the directo rs shall be
deemed to be the occupier;
(iii) in the case of a factory owned or controlled by the Central
Government or any State Government, or any local authority, the
person or persons appointed to manage the affairs of the factory
by the Central Govern ment, the Stale Government or the local
authority, as the case may be, shall be deemed to be the
occupier:]
[Provided further that] in the case of a ship which is being repaired, or on
which maintenance work is being carried out, in a dry dock which is
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44 (1) the owner of the dock shall be deemed to be the occupier for the
purposes of any matter provided for by or under —
(a) section 6, section 7, [section 7A, section 7B,] section 11 or
section 12;
(b) section 17, in so far as it relat es to the providing and maintenance
of sufficient and suitable lighting in or around the dock;
(c) section 18, section 19, section 42, section 46, section 47 or
section 49, in relation to the workers employed on such repair or
maintenance;
(2) the owner of the ship or his agent or master or other officer -in-charge
of the ship or any person who contracts with such owner, agent or
master or other officer -in-charge to carry out the repair or
maintenance work shall be deemed to be the occupier for the purpos es
of any matter provided for by or under section 13, section 14, section
16 or section 17 (save as otherwise provided in this proviso) or
Chapter IV (except section 27) or section 43, section 44 or section 45,
Chapter VI,
Chapter VII, Chapter VIII or Cha pter IX or section 108, section 109 or
section 110, in relation to —
(a) the workers employed directly by him, or by or through any
agency; and
(b) the machinery, plant or premises in use for the purpose of
carrying out such repair or maintenance work by such owner,
agent, master or other officer -in-charge or person;
(p) “prescribed” means prescribed by rules made by the State
Government under this Act;
(r) where work of the same kind is carried out by two or more sets of
workers working during differe nt periods of the day, each of such sets
is called a [“group” or “relay”] and each of such periods is called a
“shift”.
4.3 APPROVAL, LICENSING AND REGISTRATION OF FACTORIES (1) The State Government may make rules:
[(a) requiring, for the purposes of th is Act, the submission of plans of
any class or description of factories to the Chief Inspector or the
State Government;]
[(aa)] requiring, the previous permission in writing of the State
Government or the Chief Inspector to be obtained for the site on
which the factory is to be situated and for the construction or
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The Factories Act, 1948
45 (b) requiring for the purpose of considering applications for such
permission the submission of plans and specifications;
(c) prescribing the nature of such plans and specifications and by whom
they shall be certified;
(d) requiring the registration and licensing of factories or any class or
description of factories, and prescribing the fees payable for such
registration and licens ing and for the renewal of licences;
(e) requiring that no licence shall be granted or renewed unless the
notice specified in section 7 has been given.
(2) If on an application for permission referred to in [clause (aa)] of sub -
section (1) accompanied b y the plans and specifications required by
the rules made under clause (b) of that sub -section, sent to the State
Government or Chief Inspector by registered post, no order is
communicated to the applicant within three months from the date on
which it is s o sent, the permission applied for in the said application
shall be deemed to have been granted.
(3) Where a State Government or a Chief Inspector refuses to grant
permission to the site, construction or extension of a factory or to the
registration and l icensing of a factory, the applicant may within thirty
days of the date of such refusal appeal to the Central Government if
the decision appealed from was of the State Government and to the
State Government in any other case.
Explanation:
A factory shall not be deemed to be extended within the meaning of this
section by reason only of the replacement of any plant or machinery, or
within such limits as may be prescribed, of the addition of any plant or
machinery [if such replacement or addition does not r educe the minimum
clear space required for safe working around the plant or machinery or
adversely affect the environmental conditions from the evolution or
emission of steam, heat or dust or fumes injurious to health].
7. Notice by occupier:
(1) The oc cupier shall, at least fifteen days before he begins to occupy
or use any premises as a factory, send to the Chief Inspector a
written notice containing :
(a) the name and situation of the factory;
(b) the name and address of the occupier;
[(bb) the name and address of the owner of the premises or building
(including the precincts thereof) referred to in section 93;]
(c) the address to which communications relating to the factory may be
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Business Law - II
46 (d) the nature of the manufacturing process —
(i) carried on in the factory during the last twelve months in the
case of factories in existence on the date of the commencement
of this Act; and
(ii) to be carried on in the factory during the next twelve months in
the case of all factories;
[(e) the total rated ho rse power installed or to be installed in the factory,
which shall not include the rated horse power of any separate stand -
by plant;]
(f) the name of the manager of the factory for the purposes of this Act;
(g) the number of workers likely to be employed in the factory;
(h) the average number of workers per day employed during the last
twelve months in the case of a factory in existence on the date of the
commencement of this Act; (i) such other particulars as may be
prescribed.
(2) In respect of all es tablishments which come within the scope of the
Act for the first time, the occupier shall send a written notice to the
Chief Inspector containing the particulars specified in sub-section
(1) within thirty days from the date of the commencement of this
Act.
7A. General duties of the occupier:
(1) Every occupier shall ensure, so far as is reasonably practicable, the
health, safety and welfare of all workers while they are at work in
the factory.
(2) Without prejudice to the generality of the provisions of sub-section
(1), the matters to which such duty extends, shall include —
(a) the provision and maintenance of plant and systems of work in the
factory that are safe and without risks to health;
(b) the arrangements in the factory for ensuring safety and absence of
risks to health in connection with the use, handling, storage and
transport of articles and substances;
(c) the provisions of such information, instruction, training and
supervision as are necessary to ensure the health and safety of all
worker s at work;
(d) the maintenance of all places of work in the factory in a condition
that is safe and without risks to health and the provision and
maintenance of such means of access to, and egress from, such
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The Factories Act, 1948
47 (e) the provision, maintenance or monitoring of such working
environment in the factory for the workers that is safe, without risks
to health and adequate as regards facilities and arrangements for
their welfare at work.
(3) Except in such cases as may be pr escribed, every occupier shall
prepare, and, as often as may be appropriate, revise, a written
statement of his general policy with respect to the health and safety
of the workers at work and the organisation and arrangements for the
time being in force fo r carrying out that policy, and to bring the
statement and any revision thereof to the notice of all the workers in
such manner as may be prescribed.
8. Inspectors:
(1) The State Government may, by notification in the Official Gazette,
appoint such person s as possess the prescribed qualification to be
Inspectors for the purposes of this Act and may assign to them such
local limits as it may think fit.
(2) The State Government may, by notification in the Official Gazette,
appoint any person to be a Chief Inspector who shall, in addition to
the powers conferred on a Chief Inspector under this Act, exercise
the powers of an Inspector throughout the State.
[(2A) The State Government may, by notification in the Official Gazette,
appoint as many Additional Ch ief Inspectors, Joint Chief
Inspectors and Deputy Chief Inspectors and as many other officers
as it thinks fit to assist the Chief Inspector and to exercise such of
the powers of the Chief Inspector as may be specified in such
notification.
(2B) Every Add itional Chief Inspector, Joint Chief Inspector, Deputy
Chief Inspector and every other officer appointed under sub -section
(2A) shall, in addition to the powers of a Chief Inspector specified in
the notification by which he is appointed, exercise the power of an
Inspector throughout the State.]
(3) No person shall be appointed under sub -section (1), sub -section (2)
1[, sub -section (2A)] or sub-section (5) or, having been so
appointed, shall continue to hold office, who is or becomes directly
or indirectly interested in a factory or in any process or business
carried on therein or in any patent or machinery connected
therewith.
(4) Every District Magistrate shall be an Inspector for his district.
(5) The State Government may also, by notification as afores aid,
appoint such public officers as it thinks fit to be additional
Inspectors for all or any of the purposes of this Act, within such
local limits as it may assign to them respectively. munotes.in

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Business Law - II
48 (6) In any area where there are more Inspectors than one the State
Government may, by notification as aforesaid, declare the powers,
which such Inspectors shall respectively exercise and the Inspector
to whom the prescribed notices are to be sent.
(7) [Every Chief Inspector, Additional Chief Inspector, Joint Chief
Inspec tor, Deputy Chief Inspector, Inspector and every other officer
appointed under this section] shall be deemed to be a public servant
within the meaning of the Indian Penal Code (45 of 1860), and shall
be officially subordinate to such authority as the State Government
may specify in this behalf.
9. Powers of Inspectors:
Subject to any rules made in this behalf, an Inspector may, within the local
limits for which he is appointed, —
(a) enter, with such assistants, being persons in the service of the
Governme nt, or any local or other public authority, [or with an
expert] as he thinks fit, any place which is used, or which he has
reason to believe is used, as a factory;
[(b) make examination of the premises, plant, machinery, article or
substance;
(c) inquir e into any accident or dangerous occurrence, whether resulting
in bodily injury, disability or not, and take on the spot or otherwise
statements of any person which he may consider necessary for such
inquiry;
(d) require the production of any prescribed r egister or any other
document relating to the factory;
(e) seize, or take copies of, any register, record or other document or
any portion thereof, as he may consider necessary in respect of any
offence under this Act, which he has reason to believe, has been
committed;
(f) direct the occupier that any premises or any part thereof, or anything
lying therein, shall be left undisturbed (whether generally or in
particular respects) for so long as is necessary for the purpose of any
examination under clause ( b);
(g) take measurements and photographs and make such recordings as he
considers necessary for the purpose of any examination under clause
(b), taking with him any necessary instrument or equipment;
(h) in case of any article or substance found in any premises, being an
article or substance which appears to him as having caused or is
likely to cause danger to the health or safety of the workers, direct it
to be dismantled or subject it to any process or test (but not so as to munotes.in

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The Factories Act, 1948
49 damage or destroy it unless the same is, in the circumstances
necessary, for carrying out the purposes of this Act), and take
possession of any such article or substance or a part thereof, and
detain it for so long as is necessary for such examination;
(i) exercise such other power s as may be prescribed.]
4.4 CHAPTER III Health:
11. Cleanliness:
(1) Every factory shall be kept clean and free from effluvia arising from
any drain, privy or other nuisance, and in particular —
(a) accumulation of dirt and refuse shall be removed dail y by sweeping
or by any other effective method from the floors and benches of
workrooms and from staircases and passages, and disposed of in a
suitable manner;
(b) the floor of every workroom shall be cleaned at least once in every
week by washing, using disinfectant, where necessary, or by some
other effective method;
(c) where a floor is liable to become wet in the course of any
manufacturing process to such extent as is capable of being drained,
effective means of drainage shall be provided and maintai ned;
(d) all inside walls and partitions, all ceilings or tops of rooms and all
walls, sides and tops of passages and staircases shall —
(i) where they are [painted otherwise than with washable water -
paint] or varnished, be repainted or rev arnished at
least once in every period of five years;
[(ia) where they are painted with washable water -paint, be
repainted with at least one coat of such paint at least once in
every period of three years and washed at least once in every
period of six m onths;]
(ii) where they are painted or varnished or where they have
smooth impervious surfaces, be cleaned at least once in every
period of fourteen months by such method as may be
prescribed;
(iii) in any other case, be kept whitewashed, or colourwashed , and
the whitewashing or colourwashing shall be carried out at least
once in every period of fourteen months;
3[(dd) all doors and window frames and other wooden or metallic
framework and shutters shall be kept painted or varnished and the
painting or va rnishing shall be carried out at least once in every
period of five years;] munotes.in

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Business Law - II
50 (e) the dates on which the processes required by clause (d) are carried
out shall be entered in the prescribed register.
(2) If, in view of the nature of the operations carried on [in a factory or
class or description of factories or any part of a factory or class or
description of factories], it is not possible for the occupier to comply
with all or any of the provisions of subsection (1), the State
Government may by order exem pt such factory or class or
description of factories [or part] from any of the provisions of that
sub-section and specify alternative methods for keeping the factory
in a clean stale.
12. Disposal of wastes and effluents:
[(1) Effective arrangements sh all be made in every factory for the
treatment of wastes and effluents due to the manufacturing process
carried on therein, so as to render them innocuous, and for their
disposal.]
(2) The State Government may make rules prescribing the arrangements
to be made under sub -section (1) or requiring that the arrangements
made in accordance with sub -section (1) shall be approved by such
authority as may be prescribed.
13. Ventilation and temperature :
(1) Effective and suitable provision shall be made in ever factory for
securing and maintaining in every workroom —
(a) adequate ventilation by the circulation of fresh air, and
(b) such a temperature as will secure to workers therein reasonable
conditions of comfort and prevent injury to health; and in
particula r,—
(i) walls and roofs shall be of such material and so designed that
such temperature shall not be exceeded bill kept as tow as
practicable;
(ii) where the nature of the work carried on in the factory involves, or
is likely to involve the production of excessively high
temperatures, such adequate measures as are practicable shall be
taken to protect the workers therefrom, by separating the process
which produces such temperatures from the workroom, by
insulating the hot parts or by other effective means .
(2) The State Government may prescribe a standard of adequate
ventilation and reasonable temperature for any factory or class or
description of factories or parts thereof and direct that [proper
measuring instruments, at such places and in su ch position as may
be specified, shall be provided and such records, as may be
prescribed, shall be maintained.] munotes.in

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51 [(3) If it appears to the Chief Inspector that excessively high
temperatures in any factory can be reduced by the adoption of
suitable measur es, he may, without pre judice to the rules made
under sub-section (2), serve on the occupier, an order in writing
specifying the measures which, in his opinion, should be adopted,
and requiring them to be carried out before a specified date.]
14. Dust and fume :
(1) In every factory in which, by reason of the manufacturing process
carried on, there is given off any dust or fume or other impurity of
such a nature and to such an extent as is likely to be injurious or
offensive to the workers employed therein , or any dust in substantial
quantities, effective measures shall be taken to prevent its inhalation
and accumulation in any workroom, and if any exhaust appliance is
necessary for this purpose, it shall be applied as near as possible to
the point of origi n of the dust, fume or other impurity, and such
point shall be enclosed so far as possible.
(2) In any factory no stationary internal combustion engine shall be
operated unless the exhaust is conducted into the open air, and no
other internal combustion engine shall be operated in any room
unless effective measures have been taken to prevent such
accumulation of fumes therefrom as are likely to be injurious to
workers employed in the room.
15. Artificial humidification :
(1) In respect of all factories i n which the humidity of the air is
artificially increased, the State Government may make rules, —
(a) prescribing standards of humidification;
(b) regulating the methods used for artificially increasing the humidity
of the air;
(c) directing prescribed t ests for determining the humidity of the air to
be correctly carried out and recorded;
(d) prescribing methods to be adopted for securing adequate ventilation
and cooling of the air in the workrooms.
(2) In any factory in which the humidity of the air is artificially
increased, the water used for the purpose shall be taken from a
public supply, or other source of drinking water, or shall be
effectively purified before it is so used.
(3) If it appears to an Inspector that the water used in a factory for
increasing humidity which is required to be effectively purified
under sub -section (2) is not effectively purified he may serve on the
manager of the factory an order in writing, specifying the measures
which in his opinion should be adopted, and requiring them to be
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52 16. Overcrowding :
(1) No room in any factory shall be overcrowded to an extent injurious
to the health of the workers employed therein.
(2) Without prejudice to the generality of sub -section (1) there shall be
in every workroom of a factory in existence on the date of the
commencement of this Act at least [9.9 cubic metres] and of a
factory built after the commencement of this Act at least [14.2 cubic
metres] of space for every worker employed therein, and f or the
purposes of this sub -section no account shall be taken of any space
which is more than [4.2 metres] above the level of the floor of the
room.
(3) If the Chief Inspector by order in writing so requires, there shall be
posted in each workroom of a fa ctory a notice specifying the
maximum number of workers who may, in compliance with the
provisions of this section, be employed in the room.
(4) The Chief Inspector may by order in writing exempt, subject to such
conditions, if any, as he may think fit to impose, any workroom from
the provisions of this section, if he is satisfied that compliance
therewith in respect of the room is unnecessary in the interest of the
health of the workers employed therein.
17. Lighting :
(1) In every part of a factory wher e workers are working of passing
there shall be provided and maintained sufficient and suitable
lighting, natural or artificial, or both.
(2) In every factory all glazed windows and skylights used for the
lighting of the workrooms shall be kept clean on b oth the inner and
outer surfaces and, so far as compliance with the provisions of any
rules made under sub -section (3) of section 13 will allow, free from
obstruction.
(3) In every factory effective provision shall, so far as is practicable, be
made for t he prevention of —
(a) glare, either directly from a source of light or by reflection from a
smooth or polished surface:
(b) the formation of shadows to such an extent as to cause eye -strain or
the risk of accident to any worker.
(4) The State Governme nt may prescribe standards of sufficient and
suitable lighting for factories or for any class or description of
factories or for any manufacturing process.
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53 18. Drinking water :
(1) In every factory effective arrangements shall be made to provide and
main tain at suitable points conveniently situated for all workers
employed therein a sufficient supply of wholesome drinking water.
(2) All such points shall be legibly marked “drinking water” in a
language understood by a majority of the workers employed in the
factory, and no such point shall be situated within [six metres of any
washing place, urinal, latrine, spittoon, open drain carrying sullage
or effluent or any other source of contamination] unless a shorter
distance is approved in writing by the Chie f Inspector.
(3) In every factory wherein more than two hundred and fifty workers
are ordinarily employed, provision shall be made for cool drinking
water during hot weather by effective means and for distribution
thereof.
(4) In respect of all factories or any class or description of factories the
State Government may make rules for securing compliance with the
provisions of sub -sections (1), (2) and (3) and for the examination
by prescribed authorities of the supply and distribution of drinking
water in factories.
19. Latrines and urinals :
(1) In every factory —
(a) sufficient latrine and urinal accommodation of prescribed types shall
be provided conveniently situated and accessible to workers at all
times while they are at factory;
(b) separate enclo sed accommodation shall be provided for male and
female workers;
(c) such accommodation shall be adequately lighted and ventilated, and
no latrine or urinal shall, unless specially exempted in writing by the
Chief Inspector, communicate with any work room except through
an intervening ope n space or ventilated passage;
(d) all such accommodation shall be maintained in a clean and sanitary
condition at all times;
(e) sweepers shall be employed whose primary duty it would be to keep
clean latrines, urinals and washing places.
(2) In every factory wherein more than two hundred and fifty workers
are ordinarily employed —
(a) all latrine and urinal accommodation shall be of prescribed sanitary
types;
(b) the floors and internal walls, up to a height of [ninet y centimetres],
of the latrines and urinals and the sanitary blocks shall be laid in munotes.in

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54 glazed tiles or otherwise finished to provide a smooth polished
impervious surface;
(c) without prejudice to the provisions of clauses (d) and (e) of sub -
section (1), the floors, portions of the walls and blocks so laid or
finished and the sanitary pans of latrines and urinals shall be
thoroughly washed and cleaned at least once in every seven days
with suitable detergents or disinfectants or with both.
(3) The State Gove rnment may prescribe the number of latrines and
urinals to be provided in any factory in proportion to the numbers of
male and female workers ordinarily employed therein, and provide
for such further mailers in respect of sanitation in factories,
including the obligation of workers in this regard, as it considers
necessary in the interest of the health of the workers employed
therein.
20. Spittoons :
(1) In every factory there shall be provided a sufficient number of
spittoons in convenient places and they shall be maintained in a
clean and hygienic condition.
(2) The State Government may make rules prescribing the type and the
number of spittoons to be provided and their location in any factory
and provide for such further matters relating to their mainte nance in
a clean and hygienic condition.
(3) No person shall spit within the premises of a factory except in the
spittoons provided for the purpose and a notice containing this
provision and the penalty for its violation shall be prominently
displayed at suitable places in the premises.
(4) Whoever spits in contravention of sub -section (3) shall be
punishable with fine not exceeding five rupees.
4.5 CHAPTER IV Safety:
21. Fencing of machinery :
(1) In every factory the following, namely: —
(i) every mov ing part of a prime mover and every flywheel connected
to a prime mover, whether the prime mover or flywheel is in the
engine house or not;
(ii) the headrace and tailrace of every water -wheel and water turbine:
(iii) any part of a stock -bar which project s beyond the head stock of a
lathe; and
(iv) unless they are in such position or of such construction as to be safe
to every person employed in the factory as they would be if they
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55 (a) every part of an electr ic generator, a motor or rotary converter;
(b) every part of transmission machinery; and
(c) every dangero us part of any other machinery; shall be securely
fenced by safeguards of substantial construction which [shall be
constantly maintained and kept in position] while the parts of
machinery the y are fencing are in motion or in use:
(2) The State Government may by rules prescribe such further
precautions as it may consider necessary in respect of any particular
machinery or part thereof, or exempt, subject to such condition as
may be prescribed, for securing the safety of the workers, any
particular machinery or part thereof from the provisions of this
section.
22. Work on or near machinery in motion :
(1) [Where in any factory it becomes necessar y to examine any part of
machinery referred to in section 21, while the machinery is in
motion, or, as a result of such examination, to carry out —
(a) in a case referred to in clause (i) of the proviso to sub -section (1) of
section 21, lubrication or othe r adjusting operation; or
(b) in a case referred to in clause (ii) of the proviso aforesaid, any
mounting or shipping of belts or lubrication or other adjusting
operation,
while the machinery is in motion, such examination or operation shall be
made or c arried out only by a specially trained adult male worker wearing
tight fitting clothing (which shall be supplied by the occupier) whose
name has been recorded in the register prescribed in this behalf and who
has been furnished with a certificate of this a ppointment, and while he is
so engaged, — (a) such worker shall not handle a belt at a moving pulley
unless —
(i) the belt is not more than fifteen centimetres in width;
(ii) the pulley is normally for the purpose of drive and not merely a fly -
wheel or bal ance wheel (in which case a belt is not permissible);
(iii) the belt joint is either laced or flush with the belt;
(iv) the belt, including the joint and the pulley rim, are in good repair;
(v) there is reasonable clearance between the pulley and any fi xed plant
or structure;
(vi) secure foothold and, where necessary, secure handhold, are provided
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56 (vii) any ladder in use for carrying out any examination or operation
aforesaid is securely fixed or lashed or is firmly held by a seco nd
person;]
[(2) No woman or young person shall be allowed to clean, lubricate or
adjust any part of a prime mover or of any transmission machinery
while the prime mover or transmission machinery is in motion, or to
clean, lubricate or adjust any part o f any machine if the cleaning,
lubrication or adjustment thereof would expose the woman or young
person to risk of injury from any moving part either of that machine
or of any adjacent machinery.]
(3) The State Government may, by notification in the Offi cial Gazette,
prohibit, in any specified factory or class or description of factories,
the cleaning, lubricating or adjusting by any person of specified
parts of machinery when those parts are in motion.
23. Employment of young persons on dangerous machin es:
(1) No young person [shall be required or allowed to work] at any
machine to which this section applies, unless he has been fully
instructed as to the dangers arising in connection with the machine
and the precautions to be observed and —
(a) has rece ived sufficient training in work at the machine, or
(b) is under adequate supervision by a person who has a thorough
knowledge and experience of the machine.
(2) Sub-section (1) shall apply to such machines as may be prescribed
by the State Government, being machines which in its opinion are of
such a dangerous character that young persons ought not to work at
them unless the foregoing requirements are complied with.
24. Striking gear and devices for cutting off power :
(1) In every factory —
(a) suitab le striking gear or other efficient mechanical appliance shall be
provided and maintained and used to move driving belts to and from
fast and loose pulleys which form part of the transmission
machinery, and such gear or appliances shall be so constructed,
placed and maintained as to prevent the belt from creeping back on
the fast pulley;
(b) driving belts when not in use shall not be allowed to rest or ride
upon shafting in motion.
(2) In every factory suitable devices for cutting off power in
emergencie s from running machinery shall be provided and
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57 Provided that in respect of factories in operation before the
commencement of this Act, the provisions of this sub -section shall
apply only to workrooms in which electricity is u sed as power.
[(3) When a device, which can inadvertently shift from “off” to “on”
position, is provided in a factory to cut off power, arrangements
shall be provided for locking the device in safe position to prevent
accidental starting of the transmiss ion machinery or other machines
to which the device is fitted].
25. Self-acting machines :
No traversing part of a self -acting machine in any factory and no material
carried thereon shall, if the space over which it runs is a space over which
any person is liable to pass, whether in the course of his employment or
otherwise, be allowed to run on its outward or inward traverse within a
distance of [forty -five centimetres] from any fixed structure which is not
part of the machine:
Provided that the Chief In spector may permit the continued use of a
machine installed before the commencement of this Act which does not
comply with the requirements of this section on such conditions for
ensuring safety as he may think fit to impose.
26. Casing of new machinery :
(1) In all machinery driven by power and installed in any factory after
the commencement of this Act, —
(a) every set screw, bolt or key on any revolving shaft, spindle, wheel or
pinion shall be so sunk, encased or otherwise effectively guarded as
to prev ent danger;
(b) all spur, worm and other toothed or friction gearing which does not
require frequent adjustment while in motion shall be completely
encased, unless it is so situated as to be as safe as it would be if it
were completely encased.
(2) Whoe ver sells or lets on hire or, as agent of a seller or hirer, causes
or procures to be sold or let on hire, for use in a factory any
machinery driven by power which does not comply with the
provisions of [sub -section (1) or any rules made under sub -section
(3)], shall be punishable with imprisonment for a term which may
extend to three months or with fine which may extend to five
hundred rupees or with both.
[(3) The State Government may make rules specifying further safeguards
to be provided in respect o f any other dangerous part of any
particular machine or class or description of machines.]
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58 27. Prohibition of employment of women and children near cotton -
openers :
No woman or child shall be employed in any part of a factory for pressing
cotton in which a cotton opener is at work:
Provided that if the feed -end of a cotton -opener is in a room separated
from the delivery end by a partition extending to the roof or to such height
as the Inspector may in any particular case specify in writing, women and
children may be employed on the side of the partition where the feed -end
is situated.
28. Hoists and lifts :
(1) In every factory —
(a) every hoist and lift shall be —
(i) of good mechanical construction, sound material and adequate
strength;
(ii) properly maintained, and shall be thoroughly examined by a
competent person at least once in every period of six months,
and a register shall be kept containing the prescribed particulars
of very such examination;
(b) every hoist way and lift way shall be sufficie ntly protected by an
enclosure fitted with gates, and the hoist or lift and every such
enclosure shall be so constructed as to prevent any person or thing
from being trapped between any part of the hoist or lift and any
fixed structure or moving part;
(c) the maximum safe working load shall be plainly marked on every
hoist or lift, and no load greater than such load shall be carried
thereon;
(d) the cage of every hoist or lift used for carrying persons shall be fitted
with a gate on each side from which a ccess is afforded to a landing;
(e) every gate referred to in clause (b) or clause (d) shall be fitted with
interlocking or other efficient device to secure that the gate cannot
be opened except when the cage is at the landing and that the cage
cannot be moved unless the gate is closed.
(2) The following additional requirement shall apply to hoists and lifts
used for carrying persons and installed or reconstructed in a factory
after the commencement of this Act, namely: —
(a) where the cage is supported b y rope or chain, there shall be at least
two ropes of chains separately connected with the cage and balance
weight, and each rope or chain with its attachments shall be capable
of carrying the whole weight of the cage together with its maximum
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59 (b) efficient devices shall be provided and maintained capable of
supporting the cage together with its maximum load in the event of
breakage of the ropes, chains or attachments;
(c) an efficient automatic device shall be provided and maintained to
prevent the cage from over -running.
(3) The Chief Inspector may permit the continued, use of a hoist of lift
installed in a factory before the commencement of this Act which
does not fully comply with the provisions of sub -section (1) upon
such conditions for en suring safely as he may think fit to impose.
(4) The State Government may, if in respect of any class or description
of hoist or lift, it is of opinion that it would be unreasonable to
enforce any requirement of sub -sections (1) and (2), by order direct
that such requirement shall not apply to such class or description of
hoist or lift.
29. Lifting machines, chains, ropes and lifting tackles :
(1) In any factory the following provisions shall be complied with in
respect of every lifting machine (other tha n a hoist and lift) and
every chain, rope and lifting tackle for the purpose of raising or
lowering persons, goods or materials: —
(a) all parts, including the working gear, whether fixed or movable, of
every lifting machine and every chain, rope or liftin g tackle shall
be—
(i) of good construction, sound material and adequate strength and
free from defects;
(ii) properly maintained; and
(iii) thoroughly examined by a competent person at least once in
every period of twelve months, or at such intervals a s the Chief
Inspector may specify in writing; and a register shall be kept
containing the prescribed particulars of every such examination;
(b) no lifting machine and no chain, rope or lifting tackle shall, except
for the purpose of test be loaded beyond the safe working load
which shall be plainly marked thereon together with an identification
mark and duly entered in the prescribed register; and where this is
not practicable, a table showing the safe working loads of every kind
and size of lifting machin e or chain, rope or lifting tackle in use shall
be displayed in prominent positions on the premises;
(c) while any person is employed or working on or near the wheel track
of a travelling crane in any place where he would be liable to be
struck by the cra ne, effective measures shall be taken to ensure that
the crane does not approach within [six metres] of that place.
(2) The State Government may make rules in respect of any lifting
machine or any chain, rope or lifting tackle used in factories — munotes.in

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60 (a) prescribing further requirements to be complied with in addition to
those set out in this section;
(b) providing for exemption from compliance with all or any of the
requirements of this section, where in its opinion, such compliance
is unnecessary or impract icable.
(3) For the purposes of this section a lifting machine or a chain, rope or
lifting tackle shall be deemed to have been thoroughly examined if a
visual examination supplemented, if necessary, by other means and
by the dismantling of parts of the ge ar, has been carried out as
carefully as the conditions permit in order to arrive at a reliable
conclusion as to the safely of the parts examined. Explanation. —In
this section. —
(a) “lifting machine” means a crane, crab, winch, teagle, pulley block,
gin w heel, transporter or runway;
[(b) “lifting tackle” means any chain sling, rope sling, hook, shackle,
swivel, coupling, socket, clamp, tray or similar appliance, whether
fixed or movable, used in connection with the raising or lowering of
persons, or load s by use of lifting machines.]
30. Revolving machinery :
(1) [In every factory] in which the process of grinding is carried on
there shall be permanently affixed to or placed near each machine in
use a notice indicating the maximum safe working periphera l speed
of every grindstone or abrasive wheel, the speed of the shaft or
spindle upon which the wheel is mounted, and the diameter of the
pulley upon such shaft or spindle necessary to secure such safe
working peripheral speed.
(2) The speeds indicated in notices under sub -section (1) shall not be
exceeded.
(3) Effective measures shall be taken in every factory to ensure that the
safe working peripheral speed of every revolving vessel, cage,
basket, fly -wheel, pulley, disc or similar appliance driven by p ower
is not exceeded.
31. Pressure plant :
[(1) If in any factory, any plant or machinery or any part thereof is
operated at a pressure above atmospheric pressure, effective
measures shall be taken to ensure that the safe working pressure of
such plant o r machinery or part is not exceeded.]
(2) The State Government may make rules providing for the
examination and testing of any plant or machinery such as is referred
to in sub -section (1) and prescribing such other safety measures in
relation thereto as may in its opinion be necessary in any factory or
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61 [(3) The State Government may, by rules, exempt, subject to such
conditions as may be specified therein, any part of any plant or
machinery referred to in sub -section ( 1) from the provisions of this
section.]
32. Floors, stairs and means of access:
In every factory —
(a) all floors, steps, stairs, passages and gangways shall be of sound
construction and properly maintained [and shall be kept free from
obstructions and substances likely to cause persons to slip], and
where it is necessary to ensure safety, steps, stairs, passages and
gangways shall be provided with substantial handrails;
(b) there shall, so far as is reasonably practicable, be provided and
maintained sa fe means of access to every place at which any person
is at any time required to work.
[(c) when any person has to work at a height from where he is likely to
fall, provision shall be made, so far as is reasonably practicable, by
fencing or otherwise, to ensure the safety of the person so working.]
33. Pits, sumps openings in floors, etc. :
(1) In every factory every fixed vessel, sump, tank, pit or opening in the
ground or in a floor which, by reason of its depth, situation,
construction or contents, is or may be a source of danger, shall be
either securely covered or securely fenced.
(2) The State Government may, by order in writing, exempt, subject to
such conditions as may be prescribed, any factory or class or
description of factories in respect of any vessel, sump, tank, pit or
opening from compliance with the provisions of this section.
34. Excessive weights :
(1) No person shall be employed in any factory to lift, carry or move
any load so heavy as to be likely to cause him injury.
(2) The Sta te Government may make rules prescribing the maximum
weights which may be lifted, carried or moved by adult men, adult
women, adolescents and children employed in factories or in any
class or description of factories or in carrying or any specified
process .
35. Protection of eyes :
In respect of any such manufacturing process carried on in any factory as
may be prescribed, being a process which involves —
(a) risk of injury to the eyes from particles or fragments thrown off in
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62 (b) risk to the eyes by reason of exposure to excessive light, the State
Government may by rules require that effective screens or suitable
goggles shall be provided for the protection of persons employed on,
or in the immed iate vicinity of, the proces s.
[36. Precautions against dangerous fumes, gases, etc. :
(1) No person shall be required or allowed to enter any chamber, tank,
vat, pit, pipe, flue or other confined space in any factory in which
any gas, fume vapour or dust is likely to be present to such an extent
as to involve risk to persons being overcome thereby, unless it is
provided with a manhole of adequate size or other effective means
of egress.
(2) No person shall be required or allowed to enter any confined space
as is referred to in sub-section (1), until all practicable measures
have been taken to remove any gas, fume, vapour or dust, which
may be present so as to bring its level within the permissible limits
and to prevent any ingress of such gas, fume, vapour or dust and
unless —
(a) a certificate in writing has been given by a competent person, based
on a test carried out by himself that the space is reasonably free from
dangerous gas, fume, vapour or dust; or
(b) such person is wearing suitable breathing apparatus and a belt
secure ly attached to a rope the free end of which is held by a person
outside the confined space.]
[36A. Precautions regarding the use of portable electric light :
In any factory —
(a) no portable electric light or any other electric appliance of voltage
exceedi ng twenty -four volts shall be permitted for use inside any
chamber, tank, vat, pit, pip e, flue or other confined space [unless
adequate safety devices are provided]; and
(b) if any inflammable gas, fume or dust is likely to be present in such
chamber, tan k, vat, pit, pipe, flue or other confined space, no lamp
or light other than that flame -proof construction shall be permitted to
be used therein.]
37. Explosive or inflammable dust, gas, etc. :
(1) Where in any factory any manufacturing process produces d ust, gas,
fume or vapour of such character and to such extent as to be likely to
explode on ignition, all practicable measure shall be taken to prevent
any such explosion by —
(a) effective enclosure of the plant or machinery used in the process; munotes.in

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63 (b) remo val or prevention of the accumulation of such dust, gas, fume or
vapour; (c) exclusion or effective enclosure of all possible sources of
ignition.
The State Government may by rules exempt, subject to such conditions as
may be prescribed, any factory or cl ass or description of factories from
compliance with all or any of the provisions of this section.
38. Precautions in case of fire :
(1) In every factory, all practicable measures shall he taken to prevent
outbreak of fire and its spread, both internally and externally, and to
provide and maintain — (a) safe means of escape for all persons in
the event of a fire, and (b) the necessary equipment and facilities for
extinguishing fire.
(2) Effective measures shall be taken to ensure that in every factory all
the workers are familiar with the means of escape in case of fire and
have been adequately trained in the routine to be followed in such
cases.
(3) The State Government may make rules, in respect of any factory or
class or description of factories, requi ring the measures to be
adopted to give effect to the provisions of sub -sections (1) and
(2).
39. Power to require specifications of defective parts or tests of
stability :
If it appears to the Inspector that any building or part of a building or any
part of the ways, machinery or plant in a factory is in such a condition that
it may be dangerous to human life or safety, he may serve on [the
occupier or manger or both] of the factory an order in writing requiring
him before a specified date —
(a) to furnish such drawings, specifications and other particulars as may
be necessary to determine whether such building, ways, machinery
or plant can be used with safety, or
(b) to carry out such tests in such manner as may be specified in the
order, and to inform the Inspector of the results thereof.
40. Safety of buildings and machinery :
(1) If it appears to the Inspector that any building or part of a building or
any part of the ways, machinery or plant in a factory is in such a
condition that it is dan gerous to human life or safety, he may serve
on 1[the occupier or manager or both] of the factory an order in
writing specifying the measures which in his opinion should be
adopted, and requiring them to be carried out before a specified date. munotes.in

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64 (2) If it appears to the Inspector that the use of any building or part of a
building or any part of the ways, machinery or plant in a factory
involves imminent danger to human life or safety, he may serve on
1[the occupier or manager or both] of the factory an orde r in writing
prohibiting its use until it has been properly repaired or altered.
[40A. Maintenance of buildings :
If it appears to the Inspector that any building or part of a building in a
factory is in such a state of disrepair as is likely to lead to co nditions
detrimental to the health and welfare of the workers, he may serve on the
occupier or manager or both of the factory an order in writing specifying
the measures which in his opinion should be taken and requiring the same
to be carried out before s uch date as is specified in t he order.] 40B. Safety
Officers:
(1) In every factory —
(i) wherein one thousand or more workers are ordinarily employed, or
(ii) wherein, in the opinion of the State Government, any manufacturing
process or operation is carr ied on, which process or operation
involves any risk of bodily injury, poisoning or disease, or any other
hazard to health, to the persons employed in the factory, the
occupier shall, if so, required by the State Government by
notification in the Official Gazette, employ such number of Safety
Officers as may be specified in that notification.
(2) The duties, qualifications and conditions of service of Safety
Officers shall be such as may be prescribed by the State
Government.]
41. Power to make rules to supplement this Chapter :
The State Government may make rules requiring the provision in any
factory or in any class or description of factories of such further [devices
and measures] for securing the safety of persons employed therein as it
may deem neces sary.
41B. Compulsory disclosure of information by the occupier :
(1) The occupier of every factory involving a hazardous process shall
disclose in the manner prescribed all information regarding dangers,
including health hazards and the measures to overc ome such hazards
arising from the exposure to or handling of the materials or
substances in the manufactures, transportation, storage and other
processes, to the workers employed in the factory, the Chief
Inspector, the local authority within whose jurisdi ction the factory is
situate and the general public in the vicinity.
(2) The occupier shall, at the time of registering the factory involving a
hazardous process, lay down a detailed policy with respect to the
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65 policy to the Chief Inspector and the local authority and, thereafter,
at such intervals as may be prescribed, inform the Chief Inspector
and the local authority of any change made in the said policy.
(3) The information furnished u nder sub -section (1) shall include
accurate information as to the quantity, specification and other
characteristics of wastes and the manner of their disposal.
(4) Every occupier shall, with the approval of the Chief Inspector, draw
up an on -site emergenc y plan and detailed disaster control measures
for his factory and make known to the workers employed therein and
to the general public living in the vicinity of the factory the safety
measures required to be taken in the event of an accident taking
place.
41C. Specific responsibility of the occupier in relation to hazardous
processes :
Every occupier of a factory involving any hazardous process shall —
(a) maintain accurate and up -to-date health records or, as the case may
be, medical records, of the worker s in the factory who are exposed
to any chemical, toxic or any other harmful substances which are
manufactured, stored, handled or transported and such records shall
be accessible to the workers subject to such conditions as may be
prescribed;
(b) appoint persons who possess qualifications and experience in
handling hazardous substances and are competent to supervise such
handling within the factory and to provide at the working place all
the necessary facilities for protecting the workers in the manner
prescribed:
Provided that where any question arises as to the qualifications and
experience of a person so appointed, the decision of the Chief Inspector
shall be final;
(c) provide for medical examination of every worker —
(a) before such worker is assig ned to a job involving the handling
of, or working with, a hazardous substance, and
(b) while continuing in such job, and after he has ceased to work in
such job, at intervals not exceeding twelve months, in such
manner as may be prescribed.
4.6 CHAPTER V Welfare:
42. Washing facilities :
(1) In every factory — munotes.in

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66 (a) adequate and suitable facilities for washing shall be provided and
maintained for the use of the workers therein;
(b) separate and adequately screened facilities shall be provided for the
use of male and female workers;
(c) such facilities shall be conveniently accessible and shall be kept
clean.
(2) The State Government may, in respect of any factory or class or
description of factories or of any manufacturing process, prescribe
standards of adequate and suitable facilities for washing.
43. Facilities for storing and drying clothing :
The State Government may, in respect of any factory or class or
description of factories, make rules requiring the provision therein of
suitable places for k eeping clothing not worn daring working hours and
for the drying of wet clothing.
44. Facilities for sitting :
(1) In every factory suitable arrangements for sitting shall be provided
and maintained for all workers obliged to work in a standing
position, in order that they may take advantage of any opportunities
for rest which may occur in the course of their work.
(2) If, in the opinion of the Chief Inspector, the workers in any factory
engaged in a particular manufacturing process or working in a
partic ular room are able to do their work efficiently in a sitting
position, he may, by order in writing, require the occupier of the
factory to provide before a specified date such seating arrangements
as may be practicable for all workers so engaged or working .
(3) The State Government may, by notification in the Official Gazette,
declare that the provisions of sub -section (1) shall not apply to any
specified factory or class or description of factories or to any
specified manufacturing process.
45. First -aid appliances :
(1) There shall in every factory be provided and maintained so as to be
readily accessible during all working hours first -aid boxes or
cupboards equipped with the prescribed contents, and the number of
such boxes or cupboards to be provided a nd maintained shall not be
less than one for every one hundred and fifty workers ordinarily
employed [at any one time] in the factory.
[(2) Nothing except the prescribed contents shall be kept in a first -aid
box or cupboard.
(3) Each first -aid box or cupboard shall be kept in the charge of a
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67 treatment recognised by the State Government] and who shall
always be readily available during the working hours of the factory.]
[(4)] In every f actory wherein more than five hundred workers are
[ordinarily employed] there shall be provided and maintained an
ambulance room of the prescribed size, containing the prescribed
equipment and in the charge of such medical and nursing staff as
may be pres cribed [and those facilities shall always be made readily
available during the working hours of the factory].
46. Canteens :
(1) The State Government may make rules requiring that in any
specified factory wherein more than two hundred and fifty workers
are ordinarily employed, a canteen or canteens shall be provided and
maintained by the occupier for the use of the workers.]
(2) Without prejudice to the generality of the foregoing power, such
rules may provide for —
(a) the date by which such canteen s hall be provided;
(b) the standards in respect of construction, accommodation, furniture
and other equipment of the canteen;
(c) the foodstuffs to be served therein and the charges which may be
made therefor;
(d) the constitution of a managing committee for the canteen and
representation of the workers in the management of the canteen;
[(dd) the items of expenditure in the running of the canteen which are not
to be taken into account in fixing the cost of foodstuffs and which
shall be borne by the emplo yer;]
(e) the delegation to the Chief Inspector, subject to such conditions as
may be prescribed, of the power to make rules under clause (c).
47. Shelters, rest rooms and lunch rooms :
(1) In every factory wherein more than one hundred and fifty workers
are ordinarily employed, adequate and suitable shelters or rest rooms
and a suitable lunch room, with provision for drinking water, where
workers can eat meals brought by them, shall be provided and
maintained for the use of the workers:
Provided that an y canteen maintained in accordance with the provisions of
section 46 shall be regarded as part of the requirements of this sub -section:
Provided further that where a lunch room exists no worker shall eat any
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68 (2) The shelters or res t rooms or lunch rooms to be provided under sub -
section (1) shall be sufficiently lighted aid ventilated and shall be
maintained in a cool and clean condition.
(3) The State Government may —
(a) prescribe the standards in respect of construction, accommod ation,
furniture and other equipment of shelters, rest rooms and lunch
rooms to be provided under this section;
(b) by notification in the Official Gazette, exempt any factory or class or
description of factories from the requirements of this section.
48. Creches :
(1) In every factory wherein more than [thirty women workers] are
ordinarily employed there shall be provided and maintained a
suitable room or rooms for the use of children under the age of six
years of such women.
(2) Such rooms shall provi de adequate accommodation, shall be
adequately lighted and ventilated, shall be maintained in a clean and
sanitary condition and shall be under the charge of women trained in
the care of children and infants.
(3) The State Government may make rules —
(a) prescribing the location and the standards in respect of construction,
accommodation, furniture and other equipment of rooms to be
provided under this section;
(b) requiring the provision in factories to which this section applies of
additional facilities for the care of children belonging to women
workers, including suitable provision of facilities for washing and
changing their clothing;
(c) requiring the provision in any factory of free milk or refreshment or
both for such children;
(d) requiring that facilities shall be given in any factory for the mothers
of such children to feed them at the necessary intervals.
49. Welfare officers :
(1) In every factory wherein five hundred or more workers are
ordinarily employed the occupier shall employ in the f actory such
number of welfare officers as may be prescribed.
(2) The State Government may prescribe the duties, qualifications and
conditions of service of officers employed under sub -section (1).
50. Power to make rules to supplement this Chapter :
The State Government may make rules —
(a) exempting, subject to compliance with such alternative
arrangements for the welfare of workers as may be prescribed, any munotes.in

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69 factory or class or description of factories from compliance with any
of the provisions of this C hapter;
(b) requiring in any factory or class or description of factories that
representatives of the workers employed in the factory shall be
associated with the management of the welfare arrangements of the
workers.
4.7 CHAPTER VI Working Hours of Adu lts:
51. Weekly hours :
No adult worker shall be required or allowed to work in a factory for more
than forty -eight hours in any week.
52. Weekly holidays :
(1) No adult worker shall be required or allowed to work in a factory on
the first day of the week (hereinafter referred to as the said day),
unless —
(a) he has or will have a holiday for a whole day on one of the three
days immediately before or after the said day, and
(b) the manager of the factory has, before the said day or the substituted
day un der clause (a), whichever is earlier, —
(i) delivered a notice at the office of the Inspector of his intention
to require the worker to work on the said day and of the day
which is to be substituted, and
(ii) displayed a notice to that effect in the fac tory:
Provided that no substitution shall be made which will result in any
worker working for more than ten days consecutively without a holiday
for a whole day.
(2) Notices given under sub -section (1) may be cancelled by a notice
delivered at the office of the Inspector and a notice displayed in the
factory not later than the day before the said day or the holiday to be
cancelled, whichever is earlier.
(3) Where, in accordance with the provisions of sub -section (1), any
worker works on the said day and has had a holiday on one of the
three days immediately before it, that said day shall, for the purpose
of calculating his weekly hours of work, be included in the
preceding week.
53. Compensatory holidays :
(1) Where, as a result of the passing of an orde r or the making of a rule
under the provisions of this Act exempting a factory or the workers munotes.in

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70 therein from the provisions of section 52, a worker is deprived of
any of the weekly holidays for which provision is made in sub -
section (1) of that section, he s hall be allowed, within the month in
which the holidays were due to him or within the two months
immediately following that month, compensatory holidays of equal
number to the holidays so lost.
(2) The State Government may prescribe the manner in which t he
holidays for which provision is made in sub -section (1) shall be
allowed.
54. Daily hours :
Subject to the provisions of section 51, not adult worker shall be required
or allowed to work in a factory for more than nine hours in any day:
[Provided that , subject to the previous approval of the Chief Inspector, the
daily maximum specified in this section may be exceeded in order to
facilitate the change of shifts.]
55. Intervals for rest :
[(1)] The periods of work] of adult workers in a factory each da y shall be
so fixed that no period shall exceed five hours and that no worker
shall work for more than five hours before he has had an interval for
rest of at least half an hour.
55. Prohibition of overlapping shifts :
(1) Work shall not be carried on in any factory by means of system of
shifts so arranged that more than one relay of workers is engaged in
work of the same kind at the same time.
56. Extra wages for overtime :
(1) Where a worker works in a factory for more than nine hours in any
day or for more than forty -eight hours in any week, he shall, in
respect of overtime work, be entitled to wages at the rate of twice his
ordinary rate of wages.
60. Restriction on double employment :
Except under certain circumstances that may be stipulated, no adul t
worker must be forced or permitted to work in any factory on any day on
which he has already worked in any other factory.
62. Register of adult workers :
(1) The manager of every factory shall maintain a register of adult
workers, to be available to the Inspector at all times during working
hours, or when any work is being carried on in the factory,
showing —
(a) the name of each adult worker in the factory; munotes.in

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71 (b) the nature of his work;
(c) the group, if any, in which he is included;
(d) where his group works on shifts, the relay to which he is allotted; (e)
such other particulars as may be prescribed:
Provided that, if the Inspector is of opinion that any muster roll or register
maintained as part of the routine of a factory gives in respect of any or all
the workers in the factory the particulars required under this section, he
may, by order in writing, direct that such muster roll or register shall to the
corresponding extent be maintained in place of, and be treated as the
register of adult workers i n that factory.
[(1A) No adult worker shall be required or allowed to work in any
factory unless his name and other particulars have been entered in
the register of adult workers.]
66. Further restrictions on employment of women :
(1) The provisions of this Chapter shall, in their application to women in
factories, be supplemented by the following further restrictions,
namely: —
(a) no exemption from the provisions of section 54 may be granted in
respect of any woman;
(b) no woman shall be [required o r allowed to work in any factory]
except between the hours of 6 A.M. and 7 P.M.:
Provided that the State Government may, by notification in the Official
Gazette, in respect of [any factory or group or class or description of
factories,] very the limits la id down in clause (b), but so that no such
variation shall authorise the employment of any woman between the hours
of 10 P.M. and 5 A.M.:
[(c) there shall be no change of shifts except after a weekly holiday or
any other holiday.]
(2) The State Governme nt may make rules providing for the exemption
from the restrictions set out in sub -section (1), to such extent and
subject to such conditions as it may prescribe, of women working in
fish-curing or fish -canning factories, where the employment of
women beyo nd the hours specified in the said restrictions is
necessary to prevent damage to, or deterioration in, any raw
material.
(3) The rules made under sub -section (2) shall remain in force for not
more than three years at a time.
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72 4.8 CHAPTER VII Employment of Young Persons:
67. Prohibition of employment of young children :
No child who has not completed his fourteenth year shall be required or
allowed to work in any factory.
68. Non-adult workers to carry tokens:
A child who has completed his fourteenth ye ar or an adolescent shall not
be required or allowed to work in any factory unless —
(a) a certificate of fitness granted with reference to him under section 69
is in the custody of the manager of the factory, and
(b) such child or adolescent carries whil e he is at work a token giving a
reference to such certificate.
69. Certificates of fitness :
(1) A certifying surgeon shall, on the application of any young person or
his parent or guardian accompanied by a document signed by the
manager of a factory tha t such person will be employed therein if
certified to be fit for work in a factory, or on the application of the
manager of the factory in which any young person wishes to work,
examine such person and ascertain his fitness for work in a factory.
(2) The certifying surgeon, after examination, may grant to such young
person, in the prescribed form, or may renew —
(a) a certificate of fitness to work in a factory as a child, if he is satisfied
that the young person has completed his fourteenth year, that he has
attained the prescribed physical standards and that he is fit for such
work;
(b) a certificate of fitness to work in a factory as an adult, if he is
satisfied that the young person has completed his fifteenth year, and
is fit for a full day's work in a factory:
Provided that unless the certifying surgeon has personal knowledge of the
place where the young person proposes to work and of the manufacturing
process in which he will be employed, he shall not grant or renew a
certificate under this sub -section until he has examined such place.
(3) A certificate of fitness granted or renewed under sub -section (2) —
(a) shall be valid only for a period of twelve months from the date
thereof:
(b) may be made subject to conditions in regard to the nature of the
work in which the young person may be employed, or requiring re -munotes.in

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73 examination of the young person before the expiry of the period of
twelve months.
(4) A certifying surgeon shall revoke any certificate granted or renewed
under sub -section (2) if in his opinion the holder of it is no longer fit
to work in the capacity stated therein in a factory.
(5) Where a certifying surgeon refuses to grant or renew a certificate or
a certificate of the kind requested or revokes a certificate, he shall, if
so requeste d by any person who could have applied for the
certificate or the renewal thereof, state his reasons in writing for so
doing.
(6) Where a certificate under this section with reference to any young
person is granted or renewed subject to such conditions as are
referred to in clause (b) of sub -section (3), the young person shall
not be required or allowed to work in any factory except in
accordance with those conditions.
(7) Any fee payable for a certificate under this section shall be paid by
the occupier and shall not be recoverable from the young person, his
parents or guardian.
10. Certifying surgeons :
(1) The State Government may appoint qualified medical practitioners
to be certifying surgeons for the purposes of this Act within such
local limits or for such factory or class or description of factories as
it may assign to them respectively.
(2) A certifying surgeon may, with the approval of the State
Government, authorise any qualified medical practitioner to exercise
any of his powers under this Act for such period as the certifying
surgeon may specify and subject to such conditions as the State
Government may think fit to impose, and references in this Act to a
certifying surgeon shall be deemed to include references to any
qualified medical practit ioner when so authorised.
(3) No person shall be appointed to be, or authorised to exercise the
powers of, a certifying surgeon, or having been so appointed or
authorised, continue to exercise such powers, who is or becomes the
occupier of a factory or is or becomes directly or indirectly
interested therein or in any process or business carried on therein on
in any patent or machinery connected therewith or is otherwise in
the employ of the factory:
[Provided that the State Government may, by order in wri ting and subject
to such conditions as may be specified in the order, exempt any person or
class of persons from the provisions of this sub -section in respect of any
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74 (4) The certifying surgeon shall carry out such duties as may be
prescribed in connection with — (a) the examination and
certification of young persons under this Act;
(b) the examination of persons engaged in factories in such dangerous
occupations or processes as may be prescribed;
(c) the exer cising of such medical supervision as may be prescribed for
any factory or class or description of factories where —
(i) cases of illness have occurred which it is reasonable to believe
are due to the nature of the manufacturing process carried on, or
other conditions of work prevailing, therein;
(ii) by reason of any change in the manufacturing process carried on
or in the substances used therein or by reason of the adoption of
any new manufacturing process or of any new substance for use
in a manufacturi ng process, there is a likelihood of injury to the
health of workers employed in that manufacturing process;
(iii) young persons are, or are about to be, employed in any work
which is likely to cause injury to their health.
Explanation :
In this section “ qualified medical practitioner” means a person holding a
qualification granted by an authority specified in the Schedule to the
Indian Medical Degrees Act, 1916 (7 of 1916), or in the Schedules to the
Indian Medical Council Act, 1933 (27 of 1933) .
71. Wo rking hours for children :
(1) No child shall be employed or permitted to work, in any factory —
(a) for more than four and a half hours in any day;
[(b) during the night.
Explanation :
For the purpose of this sub -section “night” shall mean a period of at least
twelve consecutive hours which shall include the interval between 10 P.M.
and 6 A.M.]
(2) The period of work of all children employed in a factory shall be
limited to two shifts which shall not overlap or spread over more
than five hours each; an d each child shall be employed in only one
of the relays which shall not, except with the previous permission in
writing of the Chief Inspector, be changed more frequently than
once in a period of thirty days.
(3) The provisions of section 52 shall apply also to child workers and no
exemption from the provisions of that section may be granted in
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75 (4) No child shall be required or allowed to work in any factory on any
day on which he has already been working in another factory.
[(5) No female child shall be required or allowed to work in any factory
except between 8 A.M. and 7 P.M.]
72. Notice of periods of work for children :
(1) There shall be displayed and correctly maintained in every factory in
which children are employed, in ac cordance with the provisions of
sub-section (2) of section 108 a notice of periods of work for
children, showing clearly for every day the periods during which
children may be required or allowed to work.
(2) The periods shown in the notice required by su b-section (1) shall be
fixed beforehand in accordance with the method laid down for adult
workers in section 61, and shall be such that children working for
those periods would not be working in contravention of any of the
provisions of section 71.
(3) The provisions of sub -sections (8), (9) and (10) of section 61 shall
apply also to the notice required by sub -section (1) of this section.
73. Register of child workers :
(1) The manager of every factory in which children are employed shall
maintain a regis ter of child workers, to be available to the Inspector
at all times during working hours or when any work is being carried
on in a factory, showing —
(a) the name of each child worker in the factory,
(b) the nature of his work,
(c) the group, if any, in which he is included,
(d) where his group works on shifts, the relay to which he is allotted,
and (e) the number of his certificate of fitness granted under section
69.
[(1A) No child worker shall be required or allowed to work in any
factory unless hi s name and other particulars have been entered in
the register of child workers.]
(2) The State Government may prescribe the form of the register of
child workers, the manner in which it shall be maintained and the
period for which it shall be preserved.
74. Power to require medical examination :
Where an Inspector is of opinion —
(a) that any person working in a factory without a certificate of fitness is
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76 (b) that a young person working in a factory with a certificate of fitness
is no longer fit to work in the capacity stated therein,
he may serve on the manager of the factory a notice requiring that such
person or young person, as the case may be, shall be examined by a
certifying surgeon, and such person or young person shall not, i f the
Inspector so directs, be employed, or permitted to work, in any factory
until he has been so examined and has been granted a certificate of fitness
or a fresh certificate of fitness, as the case may be, under section 69, or has
been certified by the certifying surgeon examining him not to be a young
person.
75. Power to make rules :
The State Government may make rules —
(a) prescribing the forms of certificates of fitness to be granted under
section 69, providing for the grant of duplicates in the eve nt of loss
of the original certificates, and fixing the fees which may be charged
for such certificates and renewals thereof and such duplicates;
(b) prescribing the physical standards to be attained by children and
adolescents working in factories;
(c) regulating the procedure of certifying surgeons under this Chapter;
(d) specifying other duties which certifying surgeons may be required to
perform in connection with the employment of young persons in
factories, and fixing the fees which may be charged for such duties
and the persons by whom they shall be payable.
76. Certain other provisions of law not barred :
The provisions of this Chapter shall be in addition to, and not in
derogation of, the provisions of the Employment of Children Act, 1938
(26 of 1938).
4.9 CHAPTER VIII Annual L eave with Wages:
77. Application of Chapter :
(1) The provisions of this Chapter shall not operate to the prejudice of
any right to which a worker may be entitled under any other law or
under the terms of any award, [agre ement (including settlement)] or
contract of service:
[Provided that if such award, agreement (including settlement) or contract
of service provides for a longer annual leave with wages than provided in
this Chapter, the quantum of leave, which the worker shall be entitled to,
shall be in accordance with such award, agreement or contract of service,
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77 contract of service or matters which are provided for less favourably
therein, the prov isions of sections 79 to 82, so far as may be, shall apply.]
(2) The provisions of this Chapter shall not apply to workers [in any
factory] of any railway administered by the Government, who are
governed by leave rules approved by the Central Government .
79. Annual leave with wages :
(1) Every worker who has worked for a period of 240 days or more in a
factory during a calendar year shall be allowed during the
subsequent calendar year, leave with wages for a number of days
calculated at the rate of —
(i) if an adult, one day for every twenty days of work performed by him
during the previous calendar year;
(ii) if a child, one day for every fifteen days of work performed by him
during the previous calendar year.
Explanation 1 :
For the purpose of this su b-section —
(a) any days of lay off, by agreement or contract or as permissible under
the standing orders;
(b) in the case of a female worker, maternity leave for any number of
days not exceeding twelve weeks; and
(c) the leave earned in the year prior t o that in which the leave is
enjoyed, shall be deemed to be days on which the worker has
worked in a factory for the purpose of computation of the period of
240 days or more, but he shall not earn leave for these days.
Explanation 2 :
The leave admissible under this sub -section shall be exclusive of all
holidays whether occurring during or at either end of the period of leave.
(2) A worker whose service commences otherwise than on the first day
of January shall be entitled to leave with wages at the rate laid down
in clause (i) or, as the case may be, clause (ii) of sub -section (1) if he
has worked for two -thirds of the total number of days in the
remainder of the calendar year.
80. Wages during leave period :
(1) For the leave allowed to him under [secti on 78 or section 79, as the
case may be,] a worker [shall be entitled to wages] at a rate equal to
the daily average of his total full time earnings for the days on which
[he actually worked] during the month immediately preceding his
leave, exclusive of any overtime and bonus but inclusive of dearness
allowance and the cash equivalent of the advantage accruing through
the concessional sale to the worker of food grains and other articles: munotes.in

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78 [Provided that in the case of a worker who has not worked on any da y
during the calendar month immediately preceding his leave, he shall be
paid at a rate equal to the daily average of his total full time earnings for
the days on which he actually worked during the last calendar month
preceding his leave, in which he actu ally worked, exclusive of any
overtime and bonus but inclusive of dearness allowance and the cash
equivalent of the advantage accruing through the concessional sale to the
workers of food grains and other articles.]
(2) The cash equivalent of the advantag e accruing through the
concessional sale to the worker of food grains and other articles shall
be computed as often as may be prescribed, on the basis of the
maximum quantity of food grains and other articles admissible to a
standard family.
Explanation 1 :
“Standard family” means a family consisting of a worker, his or her
spouse and two children below the age of fourteen years requiring in all
three adult consumption units.
Explanation 2 :
“Adult consumption unit” means the consumption unit of a male abov e the
age of fourteen years; and the consumption unit of a female above the age
of fourteen years and that of a child below the age of fourteen years shall
be calculated at the rates of 8 and 6 respectively of one adult consumption
unit.
(3) The State Gov ernment may make rules prescribing —
(a) the manner in which the cash equivalent of the advantage accruing
through the concessional sale to a worker of food grains and other
articles shall be computed; and
(b) the registers that shall be maintained in a f actory for the purpose of
securing compliance with the provisions of this section.
4.10 QUESTIONS 1. One of the Objective of the Factories Act is to _________ regulate
working condition in the factory
a. formulate , b. calculate , c. regulate , d. delegat e
(Answer: c)
2. The Factories Act 1948 envisages to regulate the __________ for the
workers.
a. travelling modes , b. travelling time , c. gossip time , d. working
hours
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79 3. The Factories Act 1948 is applicable to the establishment where
_______ or more workers are employed on any single day of the
preceding month and manufacturing process is carried out with the aid
of power
a. 40 , b. 30 , c. 10 , d. 5
(Answer: c)
4. The Factories Act 1948 is applicable to the establishment where
____ ___ or more workers are employed on any single day of the
preceding month and manufacturing process is carried out without the
aid of power
a. 30 , b. 20 , c. 10 , d. 5
(Answer: b)
5. The _________ government has power to make rules under the
Factories Act, 1948
a. State , b. Central , c. Municipal Corporations , d. Panchayat
(Answer: a)
6. The term Factory is defined u/s. _____ of Factories Act, 1948.
a. 2(b) , b. 2(m) , c. 2(x), d. 2(d)
(Answer: b)
7. The approval for factory is deemed to be granted if no order is
communicated within _____ months from the date of application
a. 6, b. 5, c. 4, d. 3
(Answer: d)
8. The Occupier is required to give Notice of Occupation to the Chief
Inspector of the Factory at least ____ days before he begins to occup y
the factory.
a. 15 , b. 30 , c. 45 , d. 60
(Answer: a)
9. The Health Provisions are laid down in Chapter ____ of the Factories
Act 1948.
a. II, b. III , c. IV , d. V
(Answer: b)
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Business Law - II
80 10. The Safety Provisions are laid down in Chapter ____ of the Fac tories
Act 1948
a. II, b. III , c. IV , d. V
(Answer: c)
11. ____________ is a Welfare Provision required to be provided
especially for women workers in the factory Premises
a. first – aid, b. facility for sitting , c. Canteen , d. Creches
(Answer: d)
12. Creches facility must be provided if the number of female workers in
the factory are ___ or more
a. 30 , b. 20 , c. 10 , d. 5
(Answer: a)
13. Any child under the age of ___ __ years can be kept in creches
a. 9, b. 8, c. 7, d. 6
(Answer: d)
14. Canteen Facility is required where the number of workers are ____ or
more
a. 500 , b. 350 , c. 250 , d. 150
(Answer: c)
15. There should be one first - aid box for atleast every ______ workers
a. 150 , b. 250 , c. 100 , d. 75
(Answer: a)
16. Any worker who vio lates the rules regarding spitting can be punished
with fine not exceeding Rs. _______
a. 5, b. 10 , c. 15 , d. 20
(Answer: a)
17. The floors of the factory must be cleaned by washing with
disinfectant at least once every _________.
a. forth night , b. week, c. month , d. quarter
(Answer: b)
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81 18. The provision for fencing of machinery is laid down under section
____ of the Factories Act, 1948
a. 18 , b. 20 , c. 21 , d. 22
(Answer: c)
19. A worker ____ work in two factories on any day
a. may , b. should , c. can , d. cannot
(Answer: d)
20. An _______is a person who has completed his eighteenth year of age
or more
a. child , b. adolescent, c. adult , d. minor
(Answer: c)
21. An adolscent is a person is above ___ years but has not completed his
eighteent h year
a. 15 , b. 14 , c. 13 , d. 12
(Answer: b)
22. A worker cannot work continuously for a period of more than ___
days
a. 10 , b. 14 , c. 7, d. 30
(Answer: a)
23. Provisions regarding Latrines and Urinals are provided under section
_____ of the Ac t
a. 17 , b. 18 , c. 19 , d. 20
(Answer: c)
24. Provisions regarding disposal of wastes and effluents are provided
under section _____ of the Act.
a. 11, b. 12, c. 13, d. 14
(Answer: b)
25. Facility for _____ is laid down under section 44 of the act.

a. standing , b. sleeping , c. jumping , d. sitting
(Answer: d)
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82 26. Ambulance Room is required for factories having _____ or more
workers
a. 500 , b. 250 , c. 150 , d. 100
(Answer: a)
27. Artificial Humidification is provided u/s. ____ of the Factories Act.
a. 12 , b. 13 , c. 14 , d. 15
(Answer: d)
28. Section 42 of the Factories Act lays down provisions regarding
________ facilities
a. drying , b. storing , c. washing , d. stitching
(Answer: c)
29. The ______ of the Factory is required to have custody o f the
certificate of fitness
a. owner , b. manager , c. watchman , d. housekeeper
(Answer: b)
30. Which of the following is a safet y provision under Factories Act.
a. Painting of Walls , b. Creches , c. Fencing of Machine , d. canteen
(Answer: c)
31. There s hould be a distance of at least ______ cms from fixed structure
in case of automatic machines
a. 45 , b. 35 , c. 25 , d. 15
(Answer: a)
32. Women and Young person are not allowed to work near ______.
a. Machines , b. Factory Building , c. Cotton Openers , d. au tomatic
machine
(Answer: c)
33. The fine for not using spittons is Rs. ____.
a. 10 , b. 15 , c. 25 , d. 5
(Answer: d)

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83 34. Certificate of Fitness is v alid for a period of ________ .
a. 1 year , b. 2 years , c. 3 years d, 4 years
(Answer: a)
35. The certif icate of fitness is valid for a per iod of _______ years.
a. 4, b. 3, c. 2, d. 1
(Answer: d)
Answer The Following :
1. Explain the provisions regarding Registration of the Factory.
2. State in detail the Health Provisions under the Factories Act, 1948.
3. State in detail the Safety Provisions under the Factories Act, 1948.
4. State in detail the Welfare Provisions under the Factories Act, 1948.
5. Explain the provisions regarding Employment of Young Children in
the Factory Premises.
Write Short Notes :
1. Objectives of the Factories Act. 1948
2. Annual Leaves with Wages
3. Employment of Young Children
4. Powers of Inspectors under the Factories Act, 1948


*****
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