Exemptions and the Power to Amend the Schedules

The argument for it is that a State competing for investment needs something to offer, and that a factory which never opens employs nobody. The argument against it is that safety, hours, welfare and the machinery of inspection are not incentives to be traded, and that the workers of a new factory are the least organised and least able to insist on anything. An examination answer should give both and then take a position.

Some words this chapter uses

Public emergency, by the Explanation to section 128, means a grave emergency whereby the security of India or any part of the territory thereof is threatened, whether by war or external aggression or internal disturbance.

New factory or class or description of new factories, by the Explanation to section 127(2), means such factories which are established and whose commercial production starts within such period as may be specified in the notification.

Public institution in section 129 is one maintained for education, training, research or information.

Section 176 of the Indian Penal Code punishes omission to give notice or information to a public servant by a person legally bound to give it.

Removal of difficulties is the standard power to make transitional provisions when a new Act begins to operate.

Section 127: exemption of establishments, and of new factories

Section 127(1), the general power. The appropriate Government may, by notification and subject to such conditions and restrictions, if any, and for such period or periods as may be specified in the notification, direct that all or any of the provisions of this Code or the rules or the regulations made under it shall not apply to or in relation to any establishment or class of establishments.

Section 127(2), new factories. Without prejudice to the generality of sub-section (1), where the State Government is satisfied in the public interest that it is necessary to create more economic activities and employment opportunities, it may, by notification, exempt, subject to such conditions as it may think fit, any new factory or class or description of new factories from all or any of the provisions of this Code, for such period from the date on which such commercial production starts as may be specified in the notification.

The proviso. Any notification issued by a State Government under the Factories Act 1948 before the commencement of this Code to achieve the same purpose shall remain in force after such commencement for its remaining period, as if the provisions of this Code, to the extent they defeat any purpose to be achieved by such notification, were not in force.

The Explanation. New factory or class or description of new factories means such factories which are established and whose commercial production starts within such period as may be specified in the notification.

Five points, and they should all appear in an answer on this section.

Sub-section (1) is unlimited in subject. All or any of the provisions of the Code, rules or regulations, for any establishment or class of establishments. Its only discipline is that conditions, restrictions and the period must be specified in the notification.

Sub-section (2) is exercisable only by a State Government, and only for new factories, whose novelty is defined by the notification itself.

Its ground is economic, not safety: the creation of more economic activities and employment opportunities, in the public interest.

The exemption runs from the start of commercial production, so the period is measured from the moment the workers are actually at work.

The proviso preserves old State notifications made under the Factories Act 1948 for the same purpose, and does so in a striking way: the provisions of this Code are treated as if not in force to the extent that they would defeat the purpose of the earlier notification.

Compare section 58. That section, in the contract labour Part, allows the appropriate Government in an emergency to disapply all or any provisions of the Code to an establishment, class of establishments or class of contractors. Section 127 needs no emergency at all.

Section 128: public emergency, disaster or pandemic

In case of a public emergency or disaster or pandemic in the whole of India or any part of it, the appropriate Government may, by notification, exempt any workplace or work activity or class thereof from all or any of the provisions of this Code, for such period and subject to such conditions as it may think fit.

Proviso. No such notification shall be made for a period exceeding one year at a time.

Explanation. Public emergency means a grave emergency whereby the security of India or any part of the territory thereof is threatened, whether by war or external aggression or internal disturbance.

Three points.

Three triggers, one defined and two not. Public emergency is defined by the Explanation in the language of article 352 of the Constitution. Disaster and pandemic are not defined in this section.

The unit is the workplace or work activity, not the establishment, so the exemption may be aimed at a particular kind of work.

The proviso is the safeguard, and it should be stated precisely: not exceeding one year at a time. It caps each notification, not the total, so successive notifications are possible.

The word pandemic in a statute passed in 2020 tells its own history, and it should be noticed: it was written into the Code because the Code was finalised in the year the schedules of every workplace in India were rewritten.

Section 129: workshops of public institutions

The appropriate Government may exempt, subject to such conditions as it may consider necessary, any workshop or workplace where a manufacturing process is carried on and which is attached to a public institution maintained for the purposes of education, training, research or information, from all or any of the provisions of this Code.

The proviso, and it is the reason this section is the best drafted of the four exemption powers. No such exemption shall be granted from the provisions relating to hours of work and holidays unless the persons having the control of the institution submit, for the approval of the appropriate Government, a scheme of the regulation of the hours of employment, intervals for meals, and holidays of the persons employed in or attending the institution, or who are inmates of the institution, and the appropriate Government is satisfied that the provisions of the scheme are not less favourable than the corresponding provisions of this Code.

Four points.

The subject is narrow: a workshop or workplace where a manufacturing process is carried on, attached to a public institution maintained for education, training, research or information. A technical school's foundry, a university engineering workshop, a research institute's pilot plant.

Hours and holidays are protected differently from everything else. For them, exemption is conditional on a scheme.

The scheme must be submitted by those in control of the institution and approved, and the Government must be satisfied that its provisions are not less favourable than the corresponding provisions of this Code. That is a standard, which is exactly what sections 127 and 128 lack.

And the scheme covers people the Code otherwise does not reach: persons employed in or attending the institution, or who are inmates of it. A student in a workshop is not an employee, and the proviso brings him inside the protection.

Sections 130 to 132: notices, Schedules, difficulties

Section 130, notices and information. Every person required to give any notice or to furnish any information to any authority in relation to the provisions of this Code shall be legally bound to do so within the meaning of section 176 of the Indian Penal Code 1860.

The section does not itself punish; it supplies the missing element of a different offence. Section 176 of the Penal Code punishes the omission to give notice or information to a public servant by a person legally bound to give it, and section 130 makes every person required to give notice or information under this Code such a person.

Section 131, amendment of Schedules. The Central Government may, by notification, amend any Schedule by way of addition, alteration or omission, and on any such notification being issued the Schedule shall be deemed to be amended accordingly.

This is a considerable power and its importance comes from what the Schedules do. The First Schedule lists the industries by reference to which hazardous process is defined in section 2(1)(za), so adding an industry to it brings a whole regime of site appraisal, disclosure, medical examination and heavier punishment to bear on it, and omitting one takes that regime away. The Third Schedule lists the notifiable diseases under section 12, so amending it changes what a doctor must report. All of it may be done by notification, without an amendment of the Code.

Section 132, removal of difficulties. If any difficulty arises in giving effect to the provisions of the Code, the Central Government may, by order published in the Official Gazette, make such provisions, not inconsistent with the provisions of this Code, as appear to it necessary or expedient for removing the difficulty.

Proviso. No such order shall be made after the expiry of two years from the date on which this Code comes into force.

Sub-section (2). Every such order shall, as soon as may be after it is made, be laid before each House of Parliament.

The section carries the two limits such powers always carry, and both should be named: the order must be not inconsistent with the Code, and the power expires after two years from commencement. Since the Code came into force on 21 November 2025, the power under section 132 is available until 21 November 2027.

A worked example

A State Government wishes to attract a large electronics plant. The company asks to be relieved of parts of the Code for its first five years.

Can that be done? Under section 127(2), where the State Government is satisfied in the public interest that it is necessary to create more economic activities and employment opportunities, it may by notification exempt any new factory or class or description of new factories from all or any of the provisions of this Code, subject to such conditions as it thinks fit, for such period from the date on which commercial production starts as the notification specifies.

Is the plant a "new factory"? By the Explanation, that means a factory established and whose commercial production starts within such period as may be specified in the notification.

Is there any ceiling on the exemption? Not on the face of sub-section (2). It states no maximum period and no provisions that may not be exempted, and requires no consultation.

The State already had a notification to the same effect under the Factories Act 1948. By the proviso, it remains in force for its remaining period after the commencement of this Code, and the Code's provisions are treated as not in force to the extent they defeat any purpose to be achieved by that notification.

A cyclone closes a port district for six weeks. Under section 128 the appropriate Government may, in the case of a disaster, by notification exempt any workplace or work activity or class thereof from all or any provisions of this Code, for such period and on such conditions as it thinks fit, but no such notification may be made for a period exceeding one year at a time.

A polytechnic runs a foundry in which students cast metal. Under section 129 the appropriate Government may exempt a workshop or workplace where a manufacturing process is carried on and which is attached to a public institution maintained for education, training, research or information, from all or any provisions of the Code.

May it be exempted from the hours provisions? Only if those in control of the institution submit for approval a scheme regulating the hours of employment, intervals for meals and holidays of persons employed in or attending the institution or who are inmates of it, and the appropriate Government is satisfied that the scheme's provisions are not less favourable than the corresponding provisions of this Code.

A contractor does not send a notice the Code requires. Section 130 makes him legally bound to give it within the meaning of section 176 of the Indian Penal Code 1860, which supplies the element that offence requires.

A new chemical process turns out to be dangerous but is not in the First Schedule. The Central Government may, by notification, amend any Schedule by way of addition, alteration or omission, and on the notification being issued the Schedule shall be deemed to be amended accordingly: section 131. Adding the industry brings sections 82 to 88 and the definition in section 2(1)(za) to bear on it.

A transitional problem arises in 2026 that the Code did not foresee. The Central Government may, by order published in the Official Gazette, make provisions not inconsistent with the Code for removing the difficulty: section 132(1). The power is available only until two years from the date the Code came into force, that is until 21 November 2027, and every such order must be laid before each House of Parliament.

What this does NOT mean

Section 127(1) is not confined to an emergency. Compare section 58, which requires one.

Section 127(2) is not exercisable by the Central Government. It is a power of the State Government.

Its ground is not safety. It is the creation of more economic activities and employment opportunities in the public interest.

Section 128's cap is not a total limit. No notification may be for a period exceeding one year at a time.

Public emergency in section 128 is not any serious problem. It is defined as a grave emergency whereby the security of India or any part of the territory is threatened, by war, external aggression or internal disturbance; disaster and pandemic are separate triggers.

Section 129 does not permit a free exemption from hours and holidays. A scheme not less favourable than the Code must be approved.

Section 130 does not create an offence. It makes the person legally bound, which is the element section 176 of the Indian Penal Code requires.

Section 131 does not need an amending Act. A notification amends the Schedule.

Section 132 is not permanent. No order may be made after two years from the commencement of the Code, and every order must be laid before each House of Parliament.

Limits and criticism

Section 127(2) is the provision on which the Code is most often attacked, and the criticism is not merely political. It permits a State to disapply all or any of a health and safety statute to a new factory, for a period the notification chooses, on an economic ground, with no floor of provisions that must survive, no consultation with any Board, and no maximum duration. Every other exemption power in the Code has at least one discipline: section 128 has a one year cap, section 129 has the scheme, and even section 58 requires an emergency.

The two exemption powers in Chapter XI and Chapter XIV overlap without a rule. Section 58 and section 127(1) both allow the appropriate Government to disapply provisions of the Code to an establishment or class of establishments, and nothing says which is to be used.

Section 128 does not define disaster or pandemic, and the two words carry the greater practical weight of the three triggers.

Section 131 allows the definition of a hazardous process to be changed by notification. Since section 2(1)(za) works through the First Schedule, the Central Government can move an industry out of the hazardous process regime without Parliament, and the Code requires no consultation with the National Board before doing so.

Section 132's orders are laid before Parliament, but no procedure follows. Section 132(2) requires them to be laid; the section does not say what Parliament may then do about them.

And nothing in these sections gives workers a voice. No exemption under sections 127, 128 or 129 requires the workers of the establishment, or any trade union, to be heard before their statutory protections are lifted.

Quick revision

• Section 127(1): the appropriate Government may by notification, on specified conditions, restrictions and period, direct that all or any provisions of the Code, rules or regulations shall not apply to any establishment or class of establishments.
• Section 127(2): a State Government satisfied in the public interest that it is necessary to create more economic activities and employment opportunities may by notification exempt any new factory or class of new factories from all or any provisions, on such conditions as it thinks fit, for a period from the start of commercial production. Proviso: an earlier Factories Act 1948 notification for the same purpose survives for its remaining period, the Code being treated as not in force so far as it would defeat that notification's purpose. Explanation: new factories are those established and starting commercial production within the period specified.
• Section 128: on a public emergency, disaster or pandemic, the appropriate Government may by notification exempt any workplace or work activity or class thereof from all or any provisions; no notification for a period exceeding one year at a time. Public emergency means a grave emergency threatening the security of India or a part of its territory by war, external aggression or internal disturbance.
• Section 129: exemption of a workshop or workplace carrying on a manufacturing process attached to a public institution for education, training, research or information; but no exemption from hours of work and holidays unless those in control submit a scheme of hours, meal intervals and holidays for persons employed in or attending the institution or its inmates, approved by the appropriate Government as not less favourable than the Code.
• Section 130: a person required to give notice or information under the Code is legally bound to do so within the meaning of section 176 of the Indian Penal Code 1860.
• Section 131: the Central Government may by notification amend any Schedule by addition, alteration or omission, and the Schedule is then deemed amended.
• Section 132: the Central Government may by Gazette order remove difficulties, by provisions not inconsistent with the Code, not after two years from commencement, that is not after 21 November 2027; every order is laid before each House of Parliament.

Test yourself

1. State the ground and the scope of the power in section 127(2). The ground is that the State Government is satisfied in the public interest that it is necessary to create more economic activities and employment opportunities. The scope is exemption by notification, subject to such conditions as it thinks fit, of any new factory or class or description of new factories from all or any of the provisions of this Code, for such period from the date on which commercial production starts as the notification specifies.

2. What is a "new factory" for that purpose? By the Explanation, such factory or class or description of factories as are established and whose commercial production starts within such period as may be specified in the notification.

3. What triggers the power in section 128, and what limit does the proviso set? A public emergency, disaster or pandemic in the whole of India or a part of it. The proviso provides that no such notification shall be made for a period exceeding one year at a time.

4. How is "public emergency" defined? As a grave emergency whereby the security of India or any part of the territory thereof is threatened, whether by war or external aggression or internal disturbance: the Explanation to section 128.

5. What condition attaches to exempting a public institution's workshop from hours and holidays? Those having control of the institution must submit for the approval of the appropriate Government a scheme regulating the hours of employment, intervals for meals and holidays of the persons employed in or attending the institution, or who are inmates of it, and the appropriate Government must be satisfied that the provisions of the scheme are not less favourable than the corresponding provisions of the Code.

6. What is the effect of section 130? It makes every person required to give any notice or furnish any information to an authority under the Code legally bound to do so within the meaning of section 176 of the Indian Penal Code 1860, thereby supplying the element that offence requires.

7. Why is the power in section 131 significant, and what are the limits on section 132? Because the Schedules do substantive work: the First Schedule defines which industries can carry a hazardous process under section 2(1)(za), and the Third Schedule lists the notifiable diseases under section 12. The Central Government may amend either by notification, without an amending Act. Section 132's power to remove difficulties is limited in two ways: the order must be not inconsistent with the provisions of the Code, and no order may be made after two years from the date the Code came into force; every order must also be laid before each House of Parliament.