Registration and Cancellation of an Establishment

Section 3(3). The manner of applying for cancellation, the conditions subject to which registration is to be cancelled, the procedure of cancellation and other related matters, are to be prescribed by the Central Government.

Broken down

Read as a test, the section has four elements and one exception.

1. Who must register. Only an establishment "to which this Code applies". That is not every establishment in India. It is decided by section 1(4) read with the First Schedule, and Chapter by Chapter. So the first question in any problem is never "must this employer register?" but "does any Chapter of the Code reach this establishment?" If the answer is no, section 3 never arises.

2. In what form. "Electronically or otherwise." The Code prefers an electronic filing and permits another mode. It does not make electronic registration compulsory on the face of the section.

3. By when, and how. Both are left to rules made by the Central Government. Note that it is the Central Government here and not the appropriate Government, so the timing and manner of registration are uniform across India even for establishments whose appropriate Government is a State.

4. The single exception. An establishment already registered under any other Central labour law is not required to register again, and its existing registration is deemed to be registration under this Code. Two consequences follow from the word "deemed". The employer need do nothing at all, because the deeming happens by force of the proviso rather than on application. And the existing registration is good for every purpose of this Code, not merely as evidence of good standing.

Cancellation is narrower than registration. Registration under section 3(1) is owed by every covered establishment. Cancellation under section 3(2) is available only to an establishment to which Chapter III or Chapter IV applies, that is provident fund or employees' state insurance, and only where its business activities are in the process of closure. An establishment covered only by Chapter V or VI has no cancellation route stated in the section.

Note also what section 3(2) does not say. It gives a right to apply, not a right to have the registration cancelled. Whether it is cancelled depends on conditions to be prescribed under section 3(3).

A worked example

Farida owns a bakery in Kurla with twelve employees, all of whom use powered mixers and ovens.

Step 1. Does the Code apply to her at all? Her premises are a factory under section 2(32)(a), because ten or more employees work there and a manufacturing process is carried on with the aid of power. The First Schedule brings her within Chapter IV, ten or more persons, and within Chapters V and VI, which cover a factory outright. She is not within Chapter III, which needs twenty.

Step 2. Must she register under section 3(1)? Yes. The Code applies to her establishment, so the obligation attaches. The time and manner are those prescribed by the Central Government.

Step 3. She has already registered under the Occupational Safety, Health and Working Conditions Code 2020. Must she register again? No. The proviso to section 3(1) exempts her, and that existing registration is deemed to be registration for the purposes of this Code. This is the practical value of the proviso and it is the answer examiners are looking for.

Step 4. Two years later she is winding the bakery up. Can she apply to cancel? Chapter IV applies to her and her business activities are in the process of closure, so section 3(2) is available and she may apply. Had she been covered only by Chapters V and VI, section 3(2) would not have reached her on its own terms.

Step 5. Does applying end her liability? No. Section 3(2) gives a right to apply and section 3(3) leaves the conditions and procedure to rules. Liabilities already incurred are unaffected, and recovery under Chapter XI is a separate matter altogether.

What this does NOT mean

Registration is not the same as coverage. An establishment is covered because section 1(4) and the First Schedule reach it, not because it registered. An employer who never registers is still liable; he has simply added an offence to his liability. Nor does registering an establishment the Code does not reach make the Code apply to it.

Registration of an establishment is not registration of a worker. Section 3 registers the workplace. Sections 106, 111, 112 and 113 register people, and they are separate provisions with separate purposes.

Cancellation is not closure. The two are different events. The Code lets an employer apply once closure is in process; it does not treat cancellation as proof that the business has closed, and it does not make cancellation automatic on closure.

Limits and criticism

Almost everything is left to rules. The section fixes no period, no form, no fee and no consequence. Until rules are notified under section 3(1) and section 3(3), the obligation exists but its content does not, and section 164(2)(a) keeps the old registrations alive in the meantime.

The cancellation right is oddly narrow. There is no obvious reason why an establishment covered only by Chapter V or Chapter VI should have no route to cancellation while one covered by Chapter III or IV does.

"In the process of closure" is undefined. The Code does not say who decides that the process has begun, or on what evidence.

Quick revision

• Section 3(1): every establishment to which the Code applies must be registered, electronically or otherwise, in the time and manner prescribed by the Central Government.
• Proviso: an establishment already registered under any other Central labour law need not register again, and that registration is deemed to be registration under this Code.
• Section 3(2): an establishment to which Chapter III or Chapter IV applies, whose business activities are in the process of closure, may apply for cancellation.
• Section 3(3): manner, conditions and procedure of cancellation are prescribed by the Central Government.
• Coverage comes from section 1(4) and the First Schedule, not from registration.

Test yourself

1. State the obligation in section 3(1) in one sentence. Every establishment to which the Code applies must be registered, electronically or otherwise, within the time and in the manner prescribed by the Central Government.

2. An employer registered under the Code on Wages 2019 is told to register afresh under this Code. Is that right? No. The proviso to section 3(1) exempts an establishment already registered under any other Central labour law, and deems that registration to be registration for the purposes of this Code.

3. Which establishments may apply for cancellation, and in what circumstance? Only those to which Chapter III or Chapter IV applies, and only where their business activities are in the process of closure: section 3(2).

4. An establishment covered by the Code never registers. Is it outside the Code? No. Coverage flows from section 1(4) and the First Schedule. Failure to register is a breach of section 3, not an escape from the Code.

5. Who prescribes the manner of registration, and why is that worth noticing? The Central Government. It is worth noticing because much of the Code speaks of the "appropriate Government", which may be a State; here the power is central, so the manner of registration is uniform throughout India.