Lanco Anpara Power Ltd. vs. State of Uttar Pradesh: Supreme Court Ruling on Applicability of BOCW Act and Welfare Cess Act

The case of Lanco Anpara Power Ltd. vs. State of Uttar Pradesh & Ors. is a landmark judgment concerning the applicability of the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 (BOCW Act) and the Building and Other Construction Workers Welfare Cess Act, 1996 (Welfare Cess Act). The Supreme Court had to determine whether a power project under construction was liable to pay cess under these Acts despite being registered under the Factories Act, 1948.

Background of the Case

The appellant, Lanco Anpara Power Ltd., was awarded a contract to develop a 2×600 MW coal-based thermal power plant in Uttar Pradesh. During the construction phase, the state government directed the company to register under the BOCW Act and pay a cess under the Welfare Cess Act.

Lanco Anpara argued that it had already registered under the Factories Act, 1948, which should exempt it from the provisions of the BOCW Act as per Section 2(1)(d). The authorities rejected this claim and issued notices demanding cess payment. Aggrieved by these notices, Lanco Anpara approached the High Court, which ruled against them. This led to an appeal before the Supreme Court.

Legal Issues Raised

• Whether registration under the Factories Act, 1948, exempts a power project from the provisions of the BOCW Act.
• Whether the definition of “building or other construction work” in Section 2(1)(d) of the BOCW Act excludes power plants under construction.
• Whether the demand for cess under the Welfare Cess Act was legally valid.

Arguments by the Appellants (Lanco Anpara)

Lanco Anpara Power Ltd. contended:

• Their project was registered under the Factories Act, 1948, which meant that the BOCW Act did not apply.
• Construction of a power plant does not fall within the definition of “building or other construction work” as per Section 2(1)(d) of the BOCW Act.
• Since no manufacturing process had started, applying the BOCW Act to an under-construction factory was incorrect.
• BOCW Act and Welfare Cess Act were enacted for the benefit of construction workers in unorganized sectors, not large industrial projects.
• Levies under the Welfare Cess Act should apply only to construction costs and not to the entire project cost.

Arguments by the Respondents (State of Uttar Pradesh)

The State of Uttar Pradesh and other respondents argued:

• The BOCW Act was intended to cover all construction workers, including those engaged in power projects.
• Mere registration under the Factories Act does not exclude an establishment from complying with the BOCW Act.
• Since no manufacturing process had commenced, the Factories Act protections had not yet come into effect.
• The construction workers engaged in building the power plant required protection under the BOCW Act.
• The cess demand was based on statutory provisions and was legally valid.

Supreme Court’s Judgment

The Supreme Court ruled in favor of the State of Uttar Pradesh, dismissing Lanco Anpara’s appeal. The key findings were:

1. Applicability of BOCW Act to Power Projects Under Construction

The Court held that the BOCW Act applies to all construction activities, including power plant construction. It stated:

“The provisions of the Factories Act apply only when the manufacturing process begins. Until then, the BOCW Act is applicable.”

2. Mere Registration Under Factories Act Does Not Grant Exemption

The Court ruled that obtaining a registration under the Factories Act before the factory becomes operational does not automatically exempt a company from the BOCW Act. The Court observed:

“Registration under the Factories Act does not override the social welfare protections provided by the BOCW Act to construction workers.”

3. Interpretation of Section 2(1)(d) of BOCW Act

The Court rejected the argument that power projects under construction should be excluded from the definition of “building or other construction work.” It stated:

“The exclusion clause in Section 2(1)(d) applies only when a factory is fully functional and engaged in manufacturing activity, not during its construction phase.”

4. Validity of Cess Demand

The Court upheld the imposition of cess under the Welfare Cess Act, ruling that:

“The cess is a valid levy aimed at ensuring welfare benefits for construction workers engaged in large-scale infrastructure projects.”

Key Takeaways

• BOCW Act applies to all construction activities: Industrial projects, including power plants under construction, are covered under the BOCW Act.
• Mere registration under Factories Act does not provide exemption: A company must start manufacturing operations before claiming exclusion from the BOCW Act.
• Construction workers in large projects are entitled to welfare benefits: The Court upheld the legislative intent behind the BOCW Act to protect construction laborers.
• Cess under the Welfare Cess Act is legally valid: Companies undertaking large-scale construction must contribute to the welfare of construction workers.

Conclusion

The Supreme Court’s ruling in Lanco Anpara Power Ltd. vs. State of Uttar Pradesh reaffirms the applicability of the BOCW Act to industrial projects under construction. The judgment ensures that construction workers engaged in large-scale infrastructure development receive statutory welfare benefits. It also clarifies that mere registration under the Factories Act does not exempt companies from their obligations under the BOCW Act. This ruling has far-reaching implications for power projects, infrastructure companies, and the construction workforce in India.

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Download Judgment: Lanco Anpara Power L vs State of Uttar Prade Supreme Court of India Judgment Dated 18-10-2016.pdf

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