The Industries (Development and Regulation) Act

The Industries (Development and Regulation) Act, (IDRA), came into force from 8th May 1952 under a notification of the Central Government published in the Gazette of India.

The Act extends to whole of India including the state of Jammu & Kashmir with a view to being under Central and regulation of a number of important industries, the activities of which affect the country as a whole and the development of which must be governed by economic factors of all India importance.

Objectives of the Act:

The Important objectives are,

(i) To Implement the Industrial Policy:

The Act provides the necessary means to the Central Government in order to implement its industrial policy.

(ii) Regulation and Development of Important Industries:

The Act brings under the control of the Central Government the development and regulation of a number of important industries listed m the first schedule attached to the Act as the activities of such industries will affect the country as a w о e and, therefore, the development of such important industries must be governed by the economic factors of all India importance.

(iii) Planning and Future Development of New Undertakings:

A system of licensing is introduced under the Act to regulate planning and future development of new undertaking on sound and balance lines and may be deemed expedient in the opinion of the Central Government.

The Act confers on the Central Government power to make rules for the registration of existing undertakings for regulating he production and development of the industries specified in the schedule attached to the Act The Ac a so provided for the constitution of the Central Advisory Council and Development Council.

Definitions:

Some of important definitions given in section 3 of the Act are as under:

1. Advisory Council [Sec. 3 (a)]:

It means the Central Advisory Council established under Sec. 5 of the Act.

2. Current assets and current liabilities:

Current Assets [Sec. 3(ab)]:

Current assets mean bank balance and cash. They include such other assets or reserves are expected to be realised in cash or sold or consumed within a period of not more than 12 months in the ordinary course of business such as stock-in-trade, amounts due from sundry debtor for sale of goods and for services rendered, advance tax payments and bills receivable.

They however do not include sums credited to a provident fund, and a pension fund, a gratuity fund or any other fund for the welfare of the employees, maintained by a company owning an industrial undertaking.

Current Liabilities [Sec. 3(ac)]:

Current liabilities mean liabilities which must be met on demand or within a period of 12 months from the date they are incurred. They include any current liability which is suspended under Sec. 18-FB.

3. Development Council [Sec. 3 (b)]:

It means a Development Council established under Sec. 6.

4. Factory [Sec. 3 (c)]:

It means any premises, including the percents thereof, in any part, of with a manufacturing process in being carried on or is ordinarily so carried on:

(i) With the aid of power if 50 or more workers are working thereon on any day of the preceding 12 months; or

(ii) Without the aid of power if 100 or more workers are were working thereon on any day of the preceding 12 months. Further in no part of such premises any manufacturing process should be carried on with the aid of power.

5. High Court [Sec. 3 (cc)]:

‘High Court’ means the High Court having jurisdiction in relation to the place at which registered office of a company is situated.

6. Industrial Undertaking [Sec. 3 (d)]:

It means an industrial undertaking pertaining to a scheduled industry carried on in one or more factories by any person or authority including the Government.

(1) Ancillary industrial undertaking [Sec. 3 (aa)]:

It means an industrial undertaking which in accordance with the proviso to sec. 11-B(1) and the requirement specified under sec. 11-B(1)] is entitled to be regarded as an ancillary industrial undertaking for the purposes of this Act (inserted by the Amendment Act, 1984).

(2) Small-Scale industrial undertaking [Sec. 3 (i)]:

It means an industrial undertaking which, in accordance with the requirements specified under Sec. 11 B (1) is entitled to be regarded as a small-sele industries undertaking for the purpose of this Act (inserted by the Amendment Act 1984).

(3) Existing Industrial Undertaking [Sec. 3(bb)]:

It means: (a) Industrial undertaking pertaining to any of the industries specified in the first schedule as originally enacted. An industrial undertaking which was in existence on the commencement of the industries (Development and Regulation) Act 1951, i.e. 8th May, 1952 or for the establishment of which effective steps had been taken before such commencement, and

(b) In the case for an industrial undertaking pertaining to any of the industries added to the first schedule by any amendment thereof, an industrial undertaking which is in existence on the coming into force of such amendment or for the establishment of which effective steps had been taken before the coming into force of such amendment.

7. New article [Sec. 3(dd)]:

In relation to an industrial undertaking which is registered or in respect of which a licence or permission has been issued under this Act, ‘New article’ means—

(a) Any article which falls under an item in the first schedule other than the item under which articles ordinarily manufactured or produced in the industrial undertaking at the date of registration or issue of the licence or permission, as the case may be, fall;

(b) Any articles which bears a mark as define in the Trade Mark Act, 1940 or which is the subject of a portent. If at the date of registration or issue of the licence or permission, as the case may be, the industrial undertaking was manufacturing or producing such article bearing that mark or which is the subject of that patent, the article not fall in the category of ‘New article’.

8. Notified Order [Sec. 3 (e)]:

It means an order notified in the official Gazette.

9. Owner [Sec. 3 (f)]:

In relation to an industrial undertaking, ‘owner’ means the person, who, or the authority which has the ultimate control over the affairs of the undertaking, where the said affair are entrusted to a manager or managing director, such manager or managing director shall be deemed to be the owner of the undertaking.

10. Prescribed [Sec. 3 (g)]:

It means prescribed by rules made under this Act.

11. Schedule [Sec. 3 (h)]:

It means a schedule to this Act.

12. Scheduled Industry [Sec. 3 (i)]:

It means any of the industries specified in the first schedule. The first schedule to the Act includes 38 industries engaged in the manufacture or production of any of the articles mentioned under each of the headings or sub-heading given in the schedule.

Scope of the Act:

This Act applies to the whole of India including the State of Jammu & Kashmir, The provision of the Act apply to industrial undertaking, manufacturing any of the articles mentioned in the first schedule. An industrial undertaking (also called a factory) for the purpose of the Act is the one where manufacturing process is being carried on:

(a) With the aid of power provided that fifty or more workers are working or were working on any day of the preceding twelve months; or

(b) Without the aid of power provided that one hundred or more workers are working or were working on any day of the preceding twelve months.

(c) The Act applies only on industrial undertakings. Trading houses and financial institutions are outside the purview of the Act.

Exemption from the Act:

The Act empowers the Central Government to grant exemption from this Act in certain cases section 29B of the Act provides that if the Central Government is of opinion that it would not be in public interest to apply all or any provision of this Act to any industrial undertaking, then the Central Government, by notification in the Official Gazette, may exempt any industrial undertaking or class of industrial undertakings from the operation of all or any of the provision of this Act.

For grant exemptions, the Central Government will take into consideration the small of the number of workers employed or the amount invested in any industrial undertaking or to the desirability of encouraging small undertakings generally or to the stage of development of any scheduled industry.

This section further provides that any notification as aforesaid can be cancelled by the Central Government and on such cancellation, no industrial undertaking, which was earlier exempted, shall carry on the business of the undertaking, after the expiry of such period as may be specified in the notification cancelling the exemption by the Central Government. Under the provisions of Sec. 29B, the Central Government has been issuing notifications from time to time granting exemptions.

Following are the notifications;

(a) Notification issued in 1973 granting exemption from the operation of section 10, 11, HA and 13 to small-scale units, ancillaries and other undertaking, with an investment of Rs. 3 crores (Now raised to Rs. 5 crores) each.

(b) Delicensing of certain industries (notification dated 1st November, 1975).

(c) Excess capacity over licensed capacity allowed, in certain industries (notification dated 1st November, 1975).

(d) Exemption of industrial undertakings pertaining to the manufacture of an article on the basis of technology developed by CSIR (Notification dated March 25, 1980)

(e) List of industries in which automatic expansion to the extent of 5 percent per annum of 25 percent in the five-year plan period over and above the licensed capacity permitted (Notification dated 14th August, 1980).

(f) List of industries where full utilisation of installed capacity without limit is permitted (notification dated 4th Sep. 1980).

(g) Exemption granted on exports (notification dated 17th March, 1981).

(h) Exemption to industrial undertaking from the operation of sections 10, 11, 11A and 13 of the Act subject to fulfillment of certain conditions (video notification no. 477 (E) dated July 25, 1991)

Provisions of the Act:

The Act has 31 sections. All of them can be classified into three broad categories depending upon the purposes they seek to serve:

1. Preventive Provisions:

Preventive provision provide for:

(i) Registration and Licensing;

(ii) Investigation; and

(iii) Revocation of Licence.

(i) Registration of an existing undertaking:

Sec. 10 provides that the owner of every industrial undertaking other than the Central Government shall get his undertaking registered within a specified period. The industrial undertaking of which the Central Government is the owner. On registration, the owner shall be issued a certificate of registration containing the production capacity of the industrial undertaking and other particulars.

In specifying the production capacity in the certificate of registration the Central Government takes into consideration the following factors:

(i) The productive or installed capacity as specified in the application.

(ii) The level of production immediately before the date on which the application for registration was made;

(iii) The level of the biggest annual production during the three years immediately preceding the introduction of an Amendment Bill to this Act in 1973;

(iv) The extent to which production during the said period was used for export; and

(v) Such other factors as may be considered relevant, including the extent of underutilisation of capacity, if any.

Registration Abolished:

As a consequence to the new industrial policy, existing schemes of registration have been abolished.

Licensing of Undertakings:

Licence is required for establishing a new undertaking, for manufacturing a new article by an existing undertaking, for effecting substantial expansion by an existing unit, for changing location of an existing undertaking and for carrying on issues by an existing undertaking.

(a) Licensing of New Undertaking:

Sec. 11 of the Act provides that no person or authority, other than the Central Government, shall establish, after the commencement of this Act, a new undertaking without a licence issued by Central government. A State Government also needs a license to set-up a new unit.

(b) Production of New Article:

See. 11A provides that no owner of an industrial undertaking other than the Central Government, which is registered under sec. 10 of this Act or licensed or permitted under Sec. 11. of the Act, shall produce or manufacture a new article without obtaining a licence to do so.

(c) Licence of effecting Substantial Expansion:

Sec. 13 lays down that no owner of an industrial undertaking other than Central Government, shall effect a substantial expansion of an undertaking which has been registered or licensed, without a licence issued to that effect by the Central Government. What is substantial expansion in not made clear in this Act.

However from the various notifications issued by the Central Government from time to time, it has been made clear the expansion up to percent will be regularised. In other words, expansion upto 25 per cent will not be considered as substantial.

(d) Licence for Shifting Location:

Sec. 13 lays down that without obtaining licence to the effect, no owner can change the location of the whole or any part of industrial undertaking which has been registered.

(е) Licence to carry on Business:

Licence is also necessary to carryon business (COB) by an existing undertaking to which licensing provision of the Act did not originally apply on account of exemption order issued by the government and subsequently became applicable as a result of cancellation of the exemption order under certain other circumstance as provided in the Act.