Jatinder Singh, a worker employed in the factory, died in the fire, police said.
The fire broke out in the factory of Surinder Singh, who was not present in the factory at the time of the incident, police said, adding, his son Amarpreet Singh was present who sustained burn injuries.
Fire tenders from Batala and Gurdaspur reached the spot and brought the fire under control after two hours.
Prem Paul, a bank manager and another person Sham Lal who were going towards bus stand sustained minor injuries.
Deputy Commissioner Gurdaspur Abhinav Trikha ordered a magisterial inquiry into the incident.