Payment Of Bonus Act | Workers Can't Be Denied Bonus Saying Factories Are Run By Charitable Trust : Supreme Court

The Supreme Court held that an entity running factories cannot deny bonus to workers on the ground that the factories are being run by a charitable trust.

Observing that entitlement to bonus is a statutory right under the Payment of Bonus Act, 1965 (“Bonus Act”), the Supreme Court dismissed the plea of the factory management who resisted payment of bonus to its workmen citing its dependence on the Red Cross Society, which is exempted under the Bonus Act from payment of Bonus.

A bench of Justices Sudhanshu Dhulia and K. Vinod Chandran heard the case involving a charitable trust that worked for rehabilitation of the leprosy patients. Over time, the trust expanded into commercial activities, including manufacturing and selling automobile parts, leading to the employment of rehabilitated patients as factory workers.

The Respondent-Workmen Union, consisting of rehabilitated patients from the Appellant Trust, sought a bonus under the Bonus Act for their work in the factory established by the Appellant for its commercial activities. However, the Appellant denied their claim, citing exemption under Section 32 of the Bonus Act, which excludes employees of the Indian Red Cross Society, similar institutions, and non-profit establishments such as hospitals and social welfare organizations.

The appellant argued before the Tribunal and all courts, including the Supreme Court, that the Bonus Act does not apply as its employees should be considered part of the Indian Red Cross Society or a similar institution, making them exempt under Section 32(v)(a). Alternatively, it claimed exemption under Section 32(v)(c) as a non-profit institution.

Rejecting the Appellant's argument, the judgment authored by Justice Dhulia noted that no evidence was presented by the Appellant to support its contention that they were part of the Indian Red Cross Society to seek exemption from the payment of bonus to the Respondents.

The Court held that the Appellant's alleged association with the Red Cross Society does not exempt it from its statutory obligation to pay bonuses to its workmen once it begins operating factories and engaging in profit-driven commercial activities.

“there is nothing on record to show that the appellant is akin to the Indian Red Cross Society, which was established by an Act of Parliament. Some objects and activities of the appellant might match with that of the Indian Red Cross Society but that would not be enough to hold that the appellant is an institution like the Indian Red Cross Society. Moreover, when it is established that the appellant is running factories, then there can be no doubt regarding the applicability of the Bonus Act. Just because such factories come under the broad umbrella of the appellant-trust, which is also involved in some charitable work, the workers cannot be deprived of the benefit of the Bonus Act. In our view, workmen of the respondent-Union, who are presently before us, are liable to receive their bonus under the Payment of Bonus Act.”, the court observed.

“We hold that the appellant is not exempted under section 32(v)(a) or (c) of the Bonus Act, and the workmen of the respondent-Union, who are engaged by the appellant in its factories, are entitled to get the bonus in accordance with law. Therefore, the appellant is directed to pay bonus to its workmen, as per provisions of the Bonus Act, from the year till date. This must be done within a month of this order.”, the court ordered.

In terms of the aforesaid, the Court dismissed the Appeal and decided in the Workmen Union's favor emphasizing that the labor welfare statutes must be liberally interpreted.

Case Title: THE MANAGEMENT OF WORTH TRUST Versus THE SECRETARY, WORTH TRUST WORKERS UNION

Citation : 2025 LiveLaw (SC) 386

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Appearance:

For Petitioner(s) Mr. R.Anand Padmanabhan, Sr.Adv. Arimardhan Sharma, Adv. Ms. Ruchi Arya, Adv. Mr. Shashi Bhushan Kumar, AOR

For Respondent(s) Mr. Gautam Narayan, Sr. Adv. Ms. Asmita Singh, AOR Mr. Abheet Mangleek, Adv. Mr. Tushar Nair, Adv. Mr. Anirudh Anand, Adv. Mr. Punishk Handa, Adv.