The Industries (Development and Regulation) Act, 1951

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 bring under

the control and regulation of Central Government; 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 in the first schedule attached to the Act, as the activities of such

industries will affect the country as a whole 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 the production and development of the industries specified in the schedule

attached to the Act. The Act also provides 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. Ancillary industrial undertaking [Sec. 3 (aa)]:

It means an industrial undertaking which in accordance with the proviso to sec. (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).

{The meaning of the word Ancillary is to provide necessary support to the main work or activities of

the principal organization. The Ancillary Undertaking means an undertaking the principal activity

of which consists of owing properties, managing data, health and care services or any other similar

activities which are similar to the principal industry.}

3. Current Assets and Current Liabilities:

Current Assets [Sec. 3(ab)]:

Current assets mean bank balance and cash. They include such other assets or reserves which 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.
4. Development Council [Sec. 3 (b)]:
It means a Development Council established under Sec. 6.

5. 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.

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

It means any premises, including the precincts thereof, in any part, of with a manufacturing process

is 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 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.

7. 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.

8. 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.

9. 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, 1999 or which is the subject

of a Patent. 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’.

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

It means an order notified in the official Gazette.

11. 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.

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

It means prescribed by rules made under this Act.

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

It means a schedule to this Act.

14. 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 manufacturing or production of any of the articles mentioned under each of

the headings or sub-heading given in the schedule.

15 Small-Scale industrial undertaking [Sec. 3 (j)]:
It means an industrial undertaking which, in accordance with the requirements specified under Sec.

1 of Sec. 11 B is entitled to be regarded as a small-scale industries undertaking for the purpose of this

Act.

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.

To grant exemptions, the Central Government will take into consideration 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.

Registration and Licensing of Industries

The Act has 31 sections and 3 Schedules. The Act provides for following important provisions

related to registration and licensing of the industries:-

(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. On registration, the owner shall be

issued a certificate of registration containing the production capacity of the industrial undertaking

and other particulars.

The owner of every industrial undertaking to whom a certificate of registration has been issued under

this section before the commencement of The Industries (Development and Regulation)

Amendment Act, 1973, shall produce the certificate of registration to the central government for
specifying the production capacity. 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 extent to which production during the said period was used for export; and

(iv) Such other factors as may be considered relevant, including the extent of underutilisation of

capacity, if any.
(ii) 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:

Sec. 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 under this Act is not made clear, however from the various notifications

issued by the Central Government from time to time, it has been made clear that the expansion up to

25 percent 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.

Revocation of Registration of Licence

Sec. 10A of the Act empowers the Central Government to revoke the registration when:

(a) Registration was obtained by misrepresentation of an essential fact; or

(b) Undertaking has ceased to be registrable by reason of any exemption granted under the Act, or

(c) Registration has become useless or ineffective.

Sec. 12 of the Act empowers the Central Government to revoke or amend any licence granted for

establishing a new undertaking, or license granted for manufacturing a new article, on finding that

the licence has, without reasonable cause failed to establish or to take effective steps to implement

the licence within the time allowed.

Constitution of Advisory Committee

Chapter II of the Act provides for the development of two councils for giving advisory services to
the Central Government on the matters concerning the regulation and development of the scheduled
industries under this Act. These councils are:-

(i) Central Advisory Council

(ii) Development Council

Central Advisory Council

Section 5 of the Act provides the establishment and functions of the Central Advisory Council. The

function of the Advisory Council is to advice the Central Government on matters concerning the

development and regulation of scheduled industries and to advice on any other matter connected with
the administration of this Act in respect of which the Central Government may consider it necessary

to obtain the advice of the Advisory Council.

The Central Advisory Council shall be composed of a chairman and such other members not

exceeding thirty in numbers all of whom may be appointed by the Central Government from among

the persons who are in the opinion of the Central Government capable of representing the interests

of-

(a) owners of industrial undertakings covered by scheduled industries;

(b) persons employed in industrial undertakings in scheduled industries;

(c) consumers of goods manufactured or produced by scheduled industries;

(d) such other class of persons including primary producers as in the opinion of the Central

Government ought to be represented on the Advisory Council.

It is made obligatory for the Central Government to consult the Central Advisory Council in regard

to the making of any rules other than the first rules to be made under sub-section (3) of sec. 5 by the

Central Government.

Development Councils

As per sec. 6 the Central Government may by a notified order establish in respect of any scheduled
industry or group of scheduled industries, a Development Council which shall consist of members
who in the opinion of the Central Government are-

(a) persons capable of representing the interest of the owners of industrial undertaking in the
scheduled industry or group of scheduled industries;

(b) person capable of representing the interest of persons employed in the industrial undertaking in
the scheduled industry or group of scheduled industries;

(c) person having special knowledge of matters relating to the technical or other aspects of the
scheduled industry or group of scheduled industries;

(d) persons not belonging to any of the aforesaid categories, who are capable of representing the
interest of consumers of goods manufactured or produced by the scheduled industry or group of
scheduled industries.
Functions of the Council:

The Development Council shall perform the following functions as laid down in the second schedule
of the Act:

1) Commanding targets of production, coordinating production programmes and reviewing

progress from time to time;

2) Promoting arrangements for better marketing and helping in the division of a system of
distribution and sale of the produce of the industry which would be satisfactory to the
consumers;

3) Promoting standardisation of products;

4) Suggesting norms of efficiency with a view to eliminating waste, obtaining maximum

production, improving quality and reducing costs;

5) Recommending measures of securing the full utilisation of the installed capacity and for
improving the working of the industry particularly of the less efficient units;

6) Assisting in the distribution of controlled materials promoting arrangement for obtaining

materials for industry;

7) Promoting the training of persons engaged or proposing engagement in the industry and their
education in technical or artistic subjects relevant thereto;

8) Promoting or undertaking inquiry as to materials and equipment and as to methods of

productions, management and labour utilisation, including the discovery and development in
new materials, equipment and methods of improvement in those already in use;

9) Promoting the retraining in alternative occupations of personnel engaged in or retrenched

from the industry;

10) Promoting or undertaking scientific and industrial research into matters affecting industrial
psychology and research into matter relating to production and consumption or use of goods
and service supplied by the industry;

11) Promoting or undertaking the collection and formulation of statistics;

12) Promoting improvements and standardization of accounting and costing methods and practice;
13) Investigation on possibilities of decentralising stages and processes of production with a view
to encouraging the growth of allied, small-scale and cottage industries;

14) Promoting the adoption of measures for increasing the productivity of labour including
measures of securing safer and better working conditions;

15) Advising on any matter relating to the industry (other than remuneration and conditions of
employment) as to which the Central Government may request the Development Council to
advise and undertaking inquiries for the purpose of enabling the Development Council so to
advice.