Sources said a powerful blast took place at the factory at about 2.45pm.
The three-room factory was being run by one Surinder Singh. As the blast occurred, a fire broke out and the factory was soon engulfed in flames.
SSP Rajpal Singh told Hindustan Times that owner Surinder Singh, his son Amanpreet Singh and the workers were present in the factory when the accident took place.
A fire tender from Batala was pressed into service, which ran out of water within minutes and another fire tender was called.
Deputy commissioner Abhinav Trikha and Batala SSP Rajpal Singh Sandhu rushed to the spot to oversee the rescue operations.
The injured were identified as owner Surinder Singh, his son Amanpreet Singh, Paramjit Singh of Bham village and a passerby cyclist Sham Lal.
Meanwhile, the Qadian police have arrested Surinder Singh after registering a case against him.
Trikha said he had ordered a magisterial inquiry into the incident to be conducted by Batala SDM Jagwinderjit Singh Grewal.
Batala civil hospital SMO Dr Sukhdeep Singh said all victims had suffered 70% to 80% burns.
In the past two years, there have been four fires in cracker factories in the area and three people have been killed during these incidents; but still six to seven such factories are operational in the area.