Supreme Court Upholds Workers’ Right to Bonus Under Payment of Bonus Act in WORTH Trust Case
The Supreme Court of India recently delivered a significant judgment in the case of The Management of WORTH Trust vs. The Secretary, WORTH Trust Workers Union, addressing the applicability of the Payment of Bonus Act, 1965, to workers employed in factories run by a charitable trust. The judgment, pronounced on April 2, 2025, by Justices Sudhanshu Dhulia and K. Vinod Chandran, dismissed the appeal filed by the management of WORTH Trust and upheld the rights of the workers to receive bonuses under the Act.
Background of the Case
The appellant, WORTH Trust, originally known as the ‘Swedish Red Cross Rehabilitation Trust,’ was established in 1969 with the charitable objective of rehabilitating leprosy-cured patients and differently-abled persons. However, since 1985, the trust expanded its activities to include commercial ventures, such as manufacturing automobile parts and industrial machinery. These factories generated profits, referred to as ‘surplus,’ and employed workers, many of whom were leprosy-cured or differently-abled individuals.
In 1998, the WORTH Trust Workers Union raised an industrial dispute demanding a bonus and ex-gratia payment for the year 1996-97. The dispute was referred to the Industrial Disputes Tribunal, Chennai, which partially allowed the workers’ claim, awarding them a bonus of 8.33% of their annual earnings. The tribunal also recognized the ex-gratia payments already made by the trust. The trust challenged this decision in the High Court, which upheld the tribunal’s award but modified it to deduct the ex-gratia amount from the bonus. The trust then appealed to the Supreme Court.
Key Arguments
Arguments by the Appellant (WORTH Trust)
The appellant contended that the Payment of Bonus Act did not apply to its workers for the following reasons:
- The trust was exempt under Section 32(v)(a) of the Bonus Act, which excludes employees of the Indian Red Cross Society or similar institutions.
- Alternatively, the trust claimed exemption under Section 32(v)(c), arguing it was an institution ‘established not for purposes of profit.’
- The appellant also argued that the ex-gratia payments made to workers should suffice, eliminating the need for additional bonus payments.
Arguments by the Respondent (Workers Union)
The workers union countered these claims with the following points:
- The factories run by the trust were governed by the Factories Act, 1948, and the Industrial Disputes Act, 1947, making the Bonus Act applicable.
- The workers were engaged in manufacturing activities, and the trust’s commercial ventures generated profits, disqualifying it from exemption under Section 32(v)(c).
- The union demanded a maximum bonus of 20% of their annual earnings under Section 11 of the Bonus Act.
Court’s Analysis and Decision
Applicability of the Payment of Bonus Act
The Supreme Court examined the provisions of the Bonus Act, particularly Section 1(3)(a), which makes the Act applicable to every factory. The court referred to the definition of a factory under the Factories Act, 1948, and concluded that the trust’s manufacturing units qualified as factories. The court noted:
“The workmen do not deny the fact that the appellant has been doing charitable work… but again it is a fact that these workmen are working in factories and fall within the definition of ‘workmen’ and ‘employee’ under the Factories Act, 1948 as well as the Bonus Act.”
Exemption Under Section 32(v)
The court rejected the appellant’s argument that it was exempt under Section 32(v)(a) or (c). It observed:
“The appellant’s contention that it is exempted under Section 32(v) of the Bonus Act is without any merit… there is no evidence to show that the appellant-trust is run by Indian Red Cross Society or that the appellant is an institution similar to Indian Red Cross Society.”
The court also noted that the trust had severed its ties with the Swedish Red Cross Society in 1989 and had been engaged in commercial activities since 1985, making it ineligible for exemption under Section 32(v)(c).
Ex-Gratia Payments
The court clarified that ex-gratia payments, being voluntary, could not substitute the statutory obligation to pay bonuses:
“By no stretch of argument can this be a ground to avoid paying a bonus, which is a statutory duty and right of the appellant and workmen respectively.”
Final Judgment
The Supreme Court dismissed the appeal and directed the trust to pay bonuses to its workers as per the Bonus Act from the year 1996-97 onwards. The payment was to be made within a month of the judgment. The court upheld the High Court’s modification that the ex-gratia amount already paid should be deducted from the bonus.
Conclusion
This judgment reinforces the principle that workers in factories, regardless of the charitable nature of the employing institution, are entitled to statutory benefits like bonuses under the Payment of Bonus Act. The court’s decision ensures that commercial activities undertaken by trusts do not deprive workers of their rightful benefits.
Petitioner Name: The Management of WORTH Trust.Respondent Name: The Secretary, WORTH Trust Workers Union.Judgment By: Justice Sudhanshu Dhulia, Justice K. Vinod Chandran.Place Of Incident: Chennai.Judgment Date: 02-04-2025.
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