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CHAPTER VI

BONUS
1. DISQUALIFICATION, DEDUCTION,
AND RECOVERY OF BONUS
- C.V.N. Sai Chand*

Synopsis:
1. Introduction
2. Ex-gratia is not a bonus
3. Kinds of bonus
4. Eligibility for bonus
5. Disqualification of bonus
6. Deduction of certain amounts from bonus payable under the act:
7. Payments of bonus and its recovery
8. Conclusion
9. Suggestions
1. INTRODUCTION.— The term bonus is not defined under the payment
of Bonus Act, 1965. According to Black’s law dictionary bonus is a premium
paid to a grantor or vendor in the form of gratuity or an extra consideration
given for their hard work. And according to Webster’s dictionary bonus is
given in addition to wages which is ordinarily receiver, it is said to be a gift
over and above the pay scale. Bonus is paid regarding cash to employees as
a reward in addition to wages.
Sec. 2 of payment of bonus Act say the definitions:
Under sec: 2(1), it speaks about accounting year it says that the company
should maintain a record. In that record, they have to note the profits and loss
to the company on the closing day of the year,and a general meeting is to be
made to know that is a period ofa year or not For ex: if the company is
opened on May 1st then the closing day will be April 30th.
Under sec. 2(5), it speaks about appropriate government it says that if
the company is established under industrial dispute Act under central
* 3rd year, B.A., LLB. (Hons), Damodaram Sanjivayya National Law University,
“Nyayaprastha”, Sabbavaram, Visakhapatnam, India.
155
LaborIuris: An Apprise on Social Security
156 and Labour Welfare Laws [Ch. VI

government or if the company is established under any other establishments


under state then the appropriate government is the head. Under sec: 2(13)
employee means any person who is employed on salary or wage not exceeding
of Rs. 21,000 per mensem in an industry. Whether it may be a skilled or
unskilled manual, managerial, administrative, supervisory, technical or clerical
work of hire or reward. A person who is employedon a regular basis for
regular work can’t be said as a casual worker even if it is a part-time job.
Under sec: 2(14) employer mean, owner of the factory or occupier it includes
agents of such owner, the legal representative of a deceased owner or person
who was named as the manager can also be called as an employer or the
person who is having the ultimate control over the factory and the interaction
of the establishment.
a. Available surplus.— It is defined under sec: 2(6) all deductions
from gross profit of an accounting year is said to be available surplus. Here
deductions mean depreciation, investment allowance, direct taxes, the amount
used for development and that are specified in the 3rd schedule that all will be
calculated as a deduction only.
Gross profit – deductions = available surplus.
b. Allocable surplus.— For givingbonus allocable surplus takes a major
role. Here, after calculating available surplus,then 67% of the available surplus
will be given as a bonus to the employees,not including banking company.
Whereas, the banking company employees will be given 60% of available
surplus. After calculating according to the given percentage then the result of
the amount is called as allocable surplus.
2. EX-GRATIA IS NOT A BONUS: In the earlier period,ex-gratia is
considered as a bonus. In our country for the first time bonus is given in textile
industry inJuly 1917 it is also known as war bonus.
In K.S. Balan and Ors. v. State of Kerala1 , Some of the employees
who have been highly paid were not entitled to get a bonus, for those employees
an employer of the public sector was paying ex-gratia. But the government
has disapproved such payment, and then the board of directors stopped paying
and seeking to recover the amount. Thiswas challenged before the court.
Then the court held that there is no reason for claiming the bonus it neither
linked with profit or production or any connection with the festival. And the
payment was an implied contract could not be accepted.

1. K.S. Balan and Ors. v. State of Kerala, (1952) LAC 423 .


Ch. VI] Bonus 157

Further, Mill Owners Association v. Rashtriya Mill Mazdoor Sangh2 ,


In this case,the full bench of tribunal court said ex-gratia payment no longer
be considered asa bonus. And the court had explained when labour gets the
benefitand in what process; it is that the industry spends deduct some amount
from gross profit and later gets allocable surplus on depending upon it employer
should give benefit. And also said that only the fair labours would get the
benefit if there is some surplus left after meeting the prior and necessary charges.
And a formula has been explained that is gross profit – prior charges = surplus
(available surplus)
Prior charges that should be deducted from gross profit are:
i) Paid returns on capital, generally at the rate of 6%
ii) Return on working capital varying 2% to 4%
iii) Depreciation on a national basis
iv) Rehabilitation and
v) Income tax
After calculating the surplus is left that is given as a bonus to the
employees.
3. KINDS OF BONUS.—
i) Production bonus.— The quantum of bonus depends upon the
production in a particular year. For an illustration: If a company
employee has to sell more than 1000 pairs of cloth,but he sold more
than 2000 pairs then he will be given a bonus as an appreciation of
his work. And the company market is increased on comparative to
the previous year then also the company will be givena bonus to the
employee.
ii) Profit bonus.— Here quantum of bonus depends upon the extent of
profit obtained by the company comparative to the previous year.
iii) Customary bonus.— It is a voluntary payment made given to
employees by the employers to meet special expenses of a
festival.
For an illustration: government use to give some allowances for the
government employees with their salary. In the sameway, employees will be
given some bonus amount by the employer. As they are working under him,
for celebrating festivals they use to give.

2. Mill Owners Association v. Rastriya Mill Mazdoor Sangh, (1995) I L.L.J. 863 (Guj).
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iv) Bonus as an implied term of contract.— It may be claimed as a


matter of right while there is an implied agreement between the employees
and the employer.
For an illustration: when employees were hired they may keep a condition
that they should provide a bonus for them if such agreements took place then
it can be claimed as their right in such cases.3
4. ELIGIBILITY FOR A BONUS.— Under sec: 8 it is defined that every
employee is eligible for bonus and entitled to receive from an employer in an
accounting year. It is paid by the employer basing upon that the employee has
to be worked in the establishment not less than 30 working days in that
particular accounting year.
For example,O.N.G.C Sabarmati v. Sham Kumar Sahegal (died) by
his Legal Representatives4 , In this case, an employee was suspended and
later on reinstated with full wages on a day to day wages. Now the question
of the law raised here is that, whether the employee is eligible for bonus or
not. Then the court held that if the employee has been suspended then, it can’t
be said that such an employee had not worked for that establishment. The
word worked under sec: 8 should mean that “ready and willing to work”.
Therefore we can say that whenever an employee is prevented from his work
by an overt act on the part of an employer, which is ultimately set aside and
when the employee is reinstated is his services then the employer cannot say
that the employee is not eligible for the bonus. The employee is statutorily
eligible for the bonus. But he cannot claim the bonus for the previous work
that’s before the suspension. He can claim only for the work done after
reinstatement.
5. DISQUALIFICATION OF BONUS.— Sec: 9 of the Act disqualify an
employee for the eligibility to receive a bonus that is who so ever was dismissed
from services for the act of:
i) Fraud or
ii) Riotous or violent behaviour in the premises of that establishment or
iii) Theft, misappropriation or sabotage of any property of the
establishment
For an illustration: an unlawful strike made by the employee intentionally
to get a loss to the employer.
3. Proff. Dr Rega Surya Rao,Lectures on Labour & Industrial Laws, 1st ed., 2017.
4. O.N.G.C Sabarmati v. Sham Kumar Sahegal (died) by his Legal Representatives, (1995) I
L.L.J. 863 (Guj).
Ch. VI] Bonus 159

Further, Himalaya Drug Co. Makali v. II Additional Labour Court5 ,


in this case, some of the workers were dismissed for misconduct in Oct 1980,
and he wants to claim the bonus for which the accounting year of 1980 which
ends on March 31 of 1980 which means before doing misconduct. But the
management denied giving the bonus as he is not eligible for a bonus under
sec: 9 of the Act, as he is disqualified for a bonus for misconduct mentioned in
s.9 that is the reason for disqualification of his bonus. The court held that as
the dispute is regarding the consecutive 3 accounting year (due to set off),
there is pending in giving a bonus. Now the employee committed misconduct
after the accounting year. The employer should give the bonus within 8 months
before the next accounting year or after the award of 1 month under sec: 22
of the Act. If the employer sustained a loss due to the misconduct of the
employee, then the employer should deduct the amount from the employee
bonus from that particular accounting year. And the employer cannot withhold
the bonus amount. Now the question raised by the petitioner is that whether
the employer can withhold the bonus for the earlier 2 accounting year. As he
is guilty under sec: 9 of the Act.
The court held that considering literal interpretation we can say that s.9
disqualify the employer for not receiving the bonus if he commits misconduct
or fraud under the provision he will not be eligible for bonus either it may be
for one accounting year bonus or it may be for multiple accounting year bonus.
So he is not entitled to get bonus said by the judge in this case.
In the case of M/s. Sriram Bearings Limited v. The Presiding Officer,
Labour Court, Ranchi & Other6 , a view contrary to that expressed by
Karnataka high court in Himalaya Drug Co. Makali v. II Additional Labour
Court, Bangalore7, In this particular case the court explained that an employee
is guilty under sec: 9 of the Act then he will be disqualified for the bonus for
that particular accounting year. That does not mean he will not be eligible for
the bonus of previous accounting year. And also said that under the act it had
been explained that the employee is not eligible for the bonus if he has done
misconduct does not mean that he will not be eligible for previous accounting
year. It indicates that he is not eligible for that particular accounting year. The
legislator does not mean to disqualify entire bonus. Here we should not take
the literal interpretation of this Act as itis made for the benefit of the workers/
employees.
5. Himalaya Drug Co. Makali v. II Additional Labour Court, (1986) II LLJ 45 (Kant).
6. M/s. Sriram Bearings Limited v. The Presiding Officer, Labour Court, Ranchi & Other,
(1986) II LLJ 45 (Patna).
7. Makali v. II additional labour court, Bangalore, (1986) II LLJ 45 (Kant).
LaborIuris: An Apprise on Social Security
160 and Labour Welfare Laws [Ch. VI

By this judgment, it means that the previous case judgment which we


have discussed is over ruled by this judgment. It means the employee unable
to get the bonus even the misconduct has been done even after the accounting
year or the conduct prescribed under sec: 9 has been done after the accounting
he will not be given a bonus.
For suppose, K.L. I. Plastics limited, Jedimetla v. Labour court III,
Hyderabad and Others8 , In this case, 2nd respondent was an erstwhile workman
(which means past workman) he was employed in the petitioner company in the
post of Supervisor. Later he was dismissed from services for the misconduct by
him,and it has been proved that a riotous and disorder behaviour of assaulting
manager of the company (which means not allowing the manager to do work)
was done by him,and he is found guilty for that act done by him.
Later he filed a suit for getting back wages and also for the bonus. Then
labour court of Hyderabad dismissed the claim and ordered the employer
company to pay bonus amount to the employee. As the court has ordered to
pay bonus to the employee by the employer, the employer filed a petition in
high court that sec: 9 of the payment of bonus Act has been violated as per the
acting employee has to be disqualified for the bonus as he has been found guilty
and he was terminated for that act. As he was terminated he is not eligible for
the bonus. Then the court set aside the judgment of the lower court and gave in
favour of petitioner. Ongoing through this case we can easily identify that in the
above particular case, the previous case has been over ruled and set aside and
the first case Himalaya Drug Co. Makali v. II additional labour court9
judgment has been adopted and maintained the same.
6. DEDUCTION OF CERTAIN AMOUNTS FROM BONUS PAYABLE UNDER
THE ACT.— When an employee is found guilty of misconduct and for such
misconduct, if the employer sustained any loss. Then the employer is eligible
to deduct the amount from the bonus, which has to be given as bonus the
employee in the accounting year. After deducting such amount from the bonus
then the remaining balance will be given to the employee. This can be doneonly
when he is found guilty before the enquiry committee.
Illustrations:
a) If an employee negligently broke the glass, which will be subjected
to a loss for the employer, then he can cut the amount from the
8. K.L.I. Plastics Limited, Jedimetla v. Labour Court III, Hyderabad and Others, (2002) III LLJ
619 (A.P).
9. Ibid.
Ch. VI] Bonus 161

bonus amount and in some cases, there may be an agreement


between employer and employee for deducting the amount from
salary or wages if such kind of loss has been taking place.
b) And even if the employee has to deliver the goods to the customer
and in such transport due to the negligent of the employee the good
have been spoiled then the employer will sustain a loss of amount
for the goods and even he has to pay some compensation for non-
delivering of goods within the time in such situations arises in such
case the employer can deduct the loss of amount from the bonus
which has to be given as a bonus to the employee and if in the
agreement says he can deduct from his salary then he can also deduct
from the salary or wages also.
c) In a construction field the worker has to take precaution,
andatsometimes an injury may cause to the worker even after taking
necessary precaution. Then the employee will be given medical
benefit or the amount which has been spent for the medical expenses
that will be given by the employer,and after that, the amount cannot
be deducted by the employer from the bonus amount.
d) If a penalty has been imposedon the employee then, if the employee
is unable to pay the amount then the employer can deduct the amount
of loss occurred to him from the bonus amount.
In Surendranathan Nari and Other v. Senior Divisional Personal
Officer10, some employees applied casual leave for participation in the agitation
against railway administration. So the railway authority rejected the casual
leave. Even though the employees went for agitation. So the employer
deducted the amount from the wages. The court held it is valid.
In Baldeo Pandey v. Presiding Officer and Another11, this case
employee was dismissed as he was under the prosecution for the criminal
offence. Later he was acquitted by the high count. Then he filed a petition in
labour court for reinstatement and full back wages,and the court gave in favour
of the petitioner. Now the employer reinstated the employee,but he denied
giving back wages and other benefits, so the employee filed a suit in labour
court for wages and other benefits. The employer took a plea that as the
employee is in the absence,so he had deducted the amount from wages. Court
ordered to give wages,and some benefits and other benefits were rejected.

10. Surendranathan Nari and Other v.Senior Divisional Personal Officer, (1988) I LLJ 227 (Kerala).
11. Baldeo Pandey v. Presiding Officer and Another , (2003) II LLJ 309 (Jhar).
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162 and Labour Welfare Laws [Ch. VI

Then the employer went on appeal and led that benefits were illegal. Then on
observation, the H.C decidedto set aside the medical benefits which were
given by labour court.
7. PAYMENTS OF BONUS AND ITS RECOVERY.— Every employer has a
responsibility to pay a bonus to every employee in the respected accounting
year under the act. The amount has not at been specified in the Act. But the
Act has specified the minimum amount of bonus has to be paid under sec: 10
of the Act. That the minimum bonus shall be 8.33 % of the salary or wage
earned by the employee in that particular accounting year or Rs: 100/- which
so ever is highest that should be paid by the employer. Whether the employer
is getting surplus or not is not mandatory in customary bonus and on depending
upon the allocable surplus, the statutory bonus will be given.
But if the employee age is less than 50 years or when the accounting
year is started he did not complete his age of 50 years then at that time sec: 10
will be effective that instated of Rs: 100, Rs: 60 should be substituted. And
even the Act has prescribed how much of maximum bonus can be given to the
employee under sec: 11 of the Act that is:
If the employer in the accounting year has to give a minimum bonus to
the employee under sec: 10 of the Act that is 8.33%. Instead of that 8.33%,
he may give more than the minimum bonus which may be increased to 20%
that is from allocable surplus calculated depending upon their earned capacity
wage or salary and for all establishment 67% as allocable surplus and 60%
for banking purpose. In this amount the bonus will be given to the employee
and if the employer is unable to pay the amount it will be carried forward to
the next year that is to be recovered by the employee.
If the employer has to pay a due amount to the employee, then he has to
pay to the same employee or it there is an agreement between them then it will
pay to the person specified in the agreement,or else it will be given to the legal
heir or the legal representative of the deceased person. Then they will keep
an application to the appropriate government for the recovery of such amount.
Then the authority will send a notice to the employer to give the due amount
to the collector. The employee family will collect the amount from the
collector,and the same should be sent to the appropriate government that the
employee will receive money from the collector. Within 1 year the employee
should apply the application to the appropriate government from the due date.
Further, if the period of 1 year for applying the application has been expired
even then the employee can file the application and has to show the sufficient
Ch. VI] Bonus 163

cause for applying after the expiry of time. If the appropriate government
feels that enough sufficient cause then it will accept the application.
Moreover, Labour Inspector v. Authority, P.W. Act12 , In this case, a
principle laid down that recovery of bonus is available only through settlement
or an award or an agreement. It will not apply to recover the bonus which is
payable under the Act. The court also stated in M/s. Falcon Tyres Ltd v. The
President, Falcon Tyres Badali Karmikara Sangha (Reg), Mysore and
Anr, in this case, employer and employees have a dispute regarding payment
of bonus and ex-gratia after that they conclude to pay in the settlement.
Later the employer paid the amount to permanent employees,and for badli
employees he just paid bonus amount and said they were not eligible for ex-
gratia amount. Then the badli employees failed a suit for the recovery of an
amount under Sec. 21 of the Act. The employer took a plea that as they were
not permanent employees, it is not necessary to pay. The court held that as in
the settlement agreement under sec: 33C (1) they agreed to pay,so the employer
is liable to pay the ex-gratia amount to the employees.
8. CALCULATION OF BONUS.— Firstly after known the gross profit then
available surplus will be calculated. After calculating available surplus then it
should convert it into allocable surplus. By that if the employer wants to give
minimum bonus then 8.33% of the wage or salary. If the employer wants to
give a maximumbonus, then it will be calculated in 20% of the wage or salary.
If the employer is unable to pay minimum bonus or even after paying
maximum bonus also if the employer has money then what will be done with
that money. To know this concept, we have to know the concept of the set on
and set off.
a. Set on.— In an accounting year, the allocable surplus is calculated,and
the employer after giving 20% as a bonus even though the amount is left as the
allocable surplus is more than it is carried forward to the next year. If the later
year there is a loss then this carry forward amount is used to pay as a bonus
to the employees.
In an accounting year, the allocable surplus is calculated,and the employer
is even unable to pay a minimum amount of bonus that is 8.33% then the
amount has to be paid that will be carried to the next year that is known as set
off. That means the employer has to pay this amount in the next accounting
year.

12. Labour Inspector v. Authority, P.W. Act, (1976) I LLJ 511 (M.P).
LaborIuris: An Apprise on Social Security
164 and Labour Welfare Laws [Ch. VI

Under this Act, the recovery of the amount is the person who is entitledto
the bonus amount. But he is no longer in employment.
For example:
a) Let us think the allocable surplus is 2,00,000/-,and minimum bonus
to the employees is 8.33% that is 2,00,000/- then here set on and
set off is nil.
b) If the allocable surplus is 5,00,000/- and the minimum bonus is
1,20,000 for 8.33%,and maximum bonus is 2,88,000/- for 20%
now the employer will pay 20% as a bonus then the remaining
balance amount that is 2,12,000 that is set on, basing
uponcarryforward rule.
c) If the allocable surplus is 8,00,000/-,and minimum bonus is 1,20,000
for 8.33%,and maximum bonus is 2,88,000/- for 20% now the
employer will pay 20% as bonus then the remaining balance amount
that is 5,12,000/- then the amount for set on is 2,88,000/- only
because according to payment of bonus act set on can be 20% of
the wage or salary of the employees.
And if such amount can be carried forward only for 4 years later such
amount cannot be carried forward and if set off is there then the first set on
amount will be deducted if up to 4 years it is not used as there is no set off
then the amount will be removed from carry forward rule.
d) If the allocable surplus is 1,00,000- and the minimum bonus is
1,20,000 for 8.33%, and maximum bonus is 2,88,000/- for 20%
now the employer is unable to pay even minimum bonus. So after
paying bonus from the allocable surplus, the remaining amount for
set-off is 20,000/- which has to be paid in the next accounting year.
b. Time limit for paying a bonus under the act.— Bonus should be
paid to the employee by the employer within 8 months from the closer of the
accounting year or within 1 month from the award after the settlement of the
dispute regarding payment of bonus Act. And bonus should always be paid in
cash.
9. CONCLUSION.— Through this article, we can easily find out that every
employee is eligible for bonus only thing is to know whether he is getting a
customary bonus or statutory bonus. If it is a statutorybonus, then the bonus
will be given on the accounting year. And on basing on the growth of the
establishment means on profit. It mean if there is more surplus then the will be
eligible to get more bonus. Through this article, we can easily understand why
Ch. VI] Bonus 165

the bonus is deducted and on what basis, disqualifications and how the
employee can recover the bonus amount from the employer and the process
of calculating the bonus.
10. SUGGESTIONS.— In the present situation, the workers were mainly
uneducated,and they do not know how to recover the bonus,and even they
don’t know their rights in that establishment and their benefits. Even the
employer does not know the proper rights of the employee. So, in every
establishment, there must be a help desk,and the employee in the help desk
must be appointed by the government for the benefit of employees, if any
question rises for the right of an employee then they approach the help desk
and find their solution.
If possible the government should appoint a law known person for every
factory and industries by that employees will be in a better position and they
use to think in a matured way. By that there will be a great systematic process
and the employees should be known about this.
Due to lack of information, only such kind of problems has been faced
by the employees. And many of the workers do not know that they have to
approach appropriate government if the employer denied giving a bonus.
___________*__________
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166 and Labour Welfare Laws [Ch. VI

2. AN ANALYSIS ON CASES RELATED TO


DISQUALIFICATION, DEDUCTION &
RECOVERY OF BONUS
-Srikanth Rao*

1. INTRODUCTION:
In India bonus was originally regarded as a gratuitous payment by an
employer to his employees. However, in industrial law, it has now acquired
the meaning of an annual payment which the employees may claim as a matter
of right on two main considerations, viz., (i) that there is an “available surplus”
out of the profits from which bonus can be paid and (ii) that there is a gap
between the present wages and the living wage which bonus is intended to
shorten. It has been observed in some decisions of courts that bonus partakes
the character of the employees sharing in the prosperity of the concern to
whose profits they have contributed. This conception is scarcely distinguishable
from profit sharing. Moreover, ‘bonus’ is not defined under the Act, nor there
exists any definition of ‘bonus’ under any other enactment. One of the terms
of reference to ‘Bonus Commission’ was to define the concept of bonus. The
commission in its report said: “it is difficult to define in rigid terms the concept
of bonus, but it is possible to urge that once profits exceed a certain base,
labour should legitimately have a share in them. In other words, we think it
proper to construe the concept of bonus as sharing by the workers in the
prosperity of the concern in which they are employed. Thisalso has the
advantage that in case of low-paid workers such sharing in prosperity augments
their earnings and so helps to bridge the gap between the actual wage and
need-based wage. If it is not feasible to better the standard of living of all the
industrial and agricultural workers, there is nothing wrong in endeavouring to
do so in respect of at least those workers whose efforts have contributed to
the profits of the concern in which they have worked. The validity of such a
conception of bonus is not affected by the difficulty of determining or qualifying
precisely the ‘living wage’ or even the ‘need based’ wage at any given time
and place.”1
This Paper analyses various cases with respect to disqualification,
deduction and recovery of bonus to understand various disputes related to
* 3 rd year, B.A., LLB. (Hons), Damodaram Sanjivayya National Law University,
“Nyayaprastha”, Sabbavaram, Visakhapatnam, India.
1. Malik Sumeet, Labour and Industrial Law, Edition 13th, Eastern Book Company, Allahabad,
2010.

166
Ch. VI] Bonus 167

bonus payment that can arise in due course of a person’s employment. This
paper is however an illustrative and not an exhaustive list of disputes that can
arise with respect to the payment of bonus.
2. CASE ANALYSIS.— In the case of K. L. J. Plastics Limited v Labour
Court-III2 the facts are that the second respondent was the erstwhile workman
of the petitioner company employed as a supervisor and was dismissed from
service for proved misconduct of riotous and disorderly behaviour of assaulting
4 Managers of the petitioner company by virtue of an order of dismissal dated
April 2, 1993. The second respondent is a workman had filed a petition
under Section 33-C(2) of the Industrial Disputes Act, 1947 and Payment of
Bonus Act, 1965, was disentitled from claiming bonus under the aforesaid
Act. The first respondent has ordered payment of subsistence allowance,
leave wages and bonus and the respondents, the Management aggrieved by
the same, had preferred the present writ petition. The issue before the court is
whether the second respondent is entitled to the payment of any bonus at all
in the light of the disqualification for bonus imposed under S. 9 of the Act?
The court observed that the analysis of Section 9 and 18 of the Act
would reveal the differing scopes of each Section as follows: (a) S. 9 contains
a total disqualification for bonus whereas S. 18 enables the employer to deduct
the amount of loss from the amount of bonus payable. (b) S. 9 can be
invokedonly if an employee is dismissed on the grounds specified therein,
whereas, S. 18 deals with an employee found guilty of misconduct causing
financial loss to the employer and the penalty can be any penalty short of
dismissal. (c) S. 9 specifies the misconduct whereas S. 18 does not specify
the misconduct, but at the same time, the misconduct must result in causing
financial loss to the employer. (d) S. 9 does not limit the disqualification to the
accounting year, but S. 18 does. (e) S. 9 opens with non-obstante clause
“notwithstanding anything contained in this Act.” Thereby, it has an overriding
effect on all the provisions of the Act including S. 18. Whereas, it is not so in
the case of S. 18.”
Further, the court held that the provision of the Act is to be interpreted in
letter and spirit, as they are available on the statute book and not otherwise.
After thoroughly going through the different provisions of the Act and also
taking into consideration the scheme and the object of the Act, the bar of
disqualification for bonus imposed under S. 9 of the Act is a clear and
unequivocal bar and if the wording of the provisions also is carefully gone
through, a distinction cannot be drawn between the bonus payable subsequent
2. K. L. J. Plastics Limited v. Labour Court-III, (2002) III LLJ 619 (AP).
LaborIuris: An Apprise on Social Security
168 and Labour Welfare Laws [Ch. VI

to the order of termination or prior to the order of termination and the bar is
applicable to the bonus as such payable under the Act. The impugned order
of the first respondent so far as it relates to the awarding of bonus is concerned
is illegal and unsustainable in law. The petition was allowed.
In the case of Tmt. A.Prakasi v. The Accountant General3 the facts
are that the petitioner while working as B.T. Assistant, was awarded one
bonus increment in the year 1998. On attaining superannuation, the petitioner
retired from service on 31.05.2005. After the petitioner retired from service,
without issuing any show-cause notice, the impugned order was passed,
ordering recovery of bonus increments paid to the petitioner. The issue before
the court of law is whether the petitioner was entitled to claim bonus? The
court observed that the petitioner was entitled to bonus increment, even in the
absence thereof, it is not open to the respondents to recover an amount paid
to an employee, even erroneously, in the absence of allegations of
misrepresentation or fraud on the part of the employee in getting that benefit.
In the present case, there were no allegations of misrepresentation or fraud
against the petitioner. Therefore, no recovery from the pensionary benefit or
pension payable to the petitioner could be ordered. The impugned order,
otherwise is also, not sustainable in law, as it was passed in violation of the
principles of natural justice. The court held that the petitioner was entitled to
bonus increment. Therefore, the petition was allowed.
In the case of Divisional Manager, L.I.C. v. Shobhana Manish Kumar
Thesia,4 therecovery Applications filed by the respondents as per averments
made in Para 1, the concerned applicants were not permanent on 31st March
1984 and one case of Smt. Shobhanaben Manishkumar Thesia who is
appointed on 17th November 1983 for a period of three months, i.e. 7th
November 1983 to 6th February 1984 who remained as ‘Trainee’ and after
that, she became permanent. The salary, which was paid during the probation
and training, was the same. She was appointed on probation on 7th February
1984 to 6th May 1984, and from 7th May 1984, she was made permanent
by the petitioner. For the claim of bonus for the year 1983-84, the application
was filed by the respondents before the Labour Court, Rajkot under Section
33C(2) of the Industrial Disputes Act, 1947. Therefore, learned Advocate
Mr. Clerk submitted that Page 14 - Annexure ‘C’ eligibility requires that
employee concerned must be permanent in service of the Corporation on
31st March 1984, and those, who have completed at least six months service

3. Tmt. A. Prakasi v.The Accountant General, MANU/TN/3293/2011.


4. Divisional Manager, L.I.C. v. Shobhana Manish Kumar Thesia, (2008) 1 GLR 694.
Ch. VI] Bonus 169

as on that date, shall be considered eligible for the payment in lieu of bonus.
Therefore, he submitted that present respondents have not complied the
eligibility above condition as per Annexure ‘C’ - Page 14, a circular from
Central Office. Therefore, respondents have not proved their pre-existing
right for claiming the amount of bonus and Labour Court has committed a
gross error in granting the same. The issue before the court of law iswhether
applicants are entitled for the amount of bonus as claimed in the application?The
court held that the after looking into the provisions of the Payment of Bonus
Act, 1965, respondents are employees within the meaning of Section 2(13)
and satisfied eligibility required under Section 8 and not disqualified as per
Section 9. The respondents were not apprentices in the year 1983-84. The
trainee period is covered by Act. The statutory bonus is the pre-existing right
of the employee, 15% decided by petitioner being a part of the statutory
bonus under the L.I.C. of India Class III and Class IV Employees’ Bonus
and Dearness Allowances Rules, 1981, which is applicable after the year
1989 to the respondents. Therefore, Circular - Annexure ‘C’ is not applicable
and same was not produced before the Labour Court by petitioner. The Labour
Court relied upon the Rules, 1981 which is not disputed by the petitioner
before the Labour Court. Section 22 of the Payment of Bonus Act, 1965 is
separate and independent industrial dispute which can be raised for getting
bonus and claim of bonus under Section 22. When bonus is payable to an
employee and is not paid, he is deprived of money which he is entitled to
receive. The court finallyheld that they were entitled to claim bonus under the
Act.
In the case of LML Limited, Through Manager v. State of Uttar
Pradesh and Others5 , the facts are that the Petitioner was a public company
engaged in the business of manufacture of geared scooters. The Petitioner
Company incurred substantial losses, the lockout was consequently declared
by management to protect the property of the company and due to acute
financial difficulties petitioner did not pay statutory bonus. Respondent No. 3/
President of petitioner Company filed application for payment of bonus u/s.
21 of 1965 Act. The petitioner Company filed detailed objection raising that
application is not maintainable. Respondent no. 2 (Additional Labour
Commissioner, U. P., Kanpur Region, Kanpur Nagar) by impugned order
directed petitioner to pay sum as bonus to employees of Petitioner Company.
Hence, instant writ petition has been filed. The issues raised before the court
law is whether, claimants are covered by the definition of employees as provided
5. LML Limited, Through Manager v. State of Uttar Pradesh and Others, 2010 All LJ 2520.
LaborIuris: An Apprise on Social Security
170 and Labour Welfare Laws [Ch. VI

under Section 2/13 of Payment of Bonus Act? Whether the claimants are
entitled to bonus under the Act? The court held that in view of the definition of
the employees as provided under Section 2/13 of Payment of Bonus Act the
application filed by respondent no. 3 was not maintainable and the provisions
of Payment of Bonus Act were not applicable to the members of LML Mazdoor
Ekta Sanghthan as admittedly they were receiving salary/wages more than
Rs. 3500/- per month. The appeal was dismissed and the matter was remitted
back to the Respondent No. 2 for consideration.
In the case of Falcon Tyres Limited v. President Falcon Tyres Badali
Karmikara Sangha and Another6, after protracted negotiations between
the management and permanent employees of the petitioner company (Falcon
Tyres Employees Union), a settlement was arrived between them on
11.03.2010 for the period from 01.10.2009 to 31.12.2012. However, the
1st respondent, i.e. Union of badli workers was not part of the Union
representing the permanent employees. The Union representing permanent
employees also gave a letter dated 22.09.2011 inter alia stating that the badli
workers are not the members of their Union. The Union of permanent
employees had raised a demand for 20% bonus and 20% ex gratia payment
for the period from 2009 to 2010 on actual earning of the workmen during
the said period. Further, it is contendedthat the badliworkers, are not the
members of the said Union representing the permanent employees, the
settlement arrived at between the management and the Union representing
the permanent employees as such it was not applicable to badli workers. It
was also contendedthat the badli workers, being not permanent employees,
they have no legal right to claim ex gratia, and advance amount under the
settlement arrived at between the Union of the permanent employees and the
management. Hence it was contended that there being no settlement, nor
legal right, the claim under Section 33C(1) of the Industrial Disputes Act,
1947 filed by the Badli workers is not maintainable. This writ petition is by the
management questioning the order dated 02.02.2012 and for a declaration
that the badli workers are not entitledfor advance and ex gratia under the
terms of the settlement dated 27.09.2010 on par with the permanent workers.
The issues raised before the court law is whether the settlement also
covered claim of badli employees at par with permanent employees? Badli
workmen are different from permanent employees. Badli workmen may not
have a legal character. However, if the management had entered into a
6. Falcon Tyres Limited v. President Falcon Tyres Badali Karmikara Sangha and Another, 2012
Indlaw KAR 2252.
Ch. VI] Bonus 171

settlement covering claims of the badli workmen and in consonance with the
terms of the settlement, had made a payment towards bonus, it cannot be
said that part of the settlement is not enforceable on the ground that they are
not permanent employees. If the management, had agreed to make payment
of bonus and ex gratia to all the workers, which includes badli workers also
and having paid them bonus, it cannot now say that it is not liable to pay ex
gratia and advance in terms of other clauses of the settlement, which is paid to
the other employees. The writ petition was partly allowed, and the badli
workers are entitledfor payment of bonus.
In the case of Sh. Ram Krishna and Another v. Managing Director
and Other7, the facts are that the Petitioner No. 1 was appointed on daily
wage basis in the respondent Corporation in the year, 1993. Petitioner No. 2
was appointed on daily wage basis in the year, 1994. They were declared
surplus on 20.08.2007. Petitioner No. 1 was regularised as Water Carrier in
the office of Superintendent of Police Kinnaur, District Kinnaur, Himachal
Pradesh. Petitioner No. 2 was regularised as Attendant in the Animal Husbandry
Department vide order, dated 20.08.2007. Petitioner No. 1 made a
representation for payment of gratuity to the respondent Corporation on
11.09.2011. The representation made by the petitioner was rejected on
29.09.2011. Mr . Devender Sharma was a learned vice counsel for the
petitioners has vehemently argued that his clients are entitled to gratuity under
the Payment of Gratuity Act, 1972/ as per Clause 3.6(1) of Service Bye-laws
of the Corporation. He also contended that his clients are entitled to statutory
bonus as per Section 8 of The Payment of Bonus Act, 1965. The issue raised
before the court of law whether a daily wage worker entitled to bonus under
the Act?
The Division Bench after going through various provisions of The Payment
of Bonus Act, 1965 has laid down that the Act does not make any difference
as to whether an employee is a temporary, ad-hoc, permanent, daily wager
etc. The only pre-condition for entitlement is work in the establishment for not
less than 30 days in that year. The respondent Corporation has not disputed
that the provisions of The Payment of Bonus Act, 1965 are applicable to the
establishment. The petitioners have put in more than 15 years continuous
service with the respondent-Corporation. The Division Bench has held that
the daily wage workmen of the Corporation are entitled to bonus under The
Payment of Bonus Act, 1965. The petitioners have only sought statutory bonus

7. Sh. Ram Krishan and Another v. Managing Director and Other, (CWP No. 4350 of 2012-E),
Decided on 20/05/2013, High Court of Himachal Pradesh.
LaborIuris: An Apprise on Social Security
172 and Labour Welfare Laws [Ch. VI

at the prescribed rate. The scheme of the Act was also analysed by the Act
by considering the reasoning of the Apex court in the case of M/s. Jalan
Trading Co. Private Ltd. vs. Mill Mazdoor Sabha. The petitioners were
held entitled to bonus under the Act irrespective of the fact that they were
daily wage workers.
In the case of Municipal Corporation of Greater Mumbai v.
Municipal Mazdoor Union8 the facts are that the Industrial Court partly
allowed complaint filed by Respondents and held that by denying exgratia
payment to one class of employees on ground that they had participated in
strike, Petitioners/Corporation had committed unfair labour practice under
item-5 and 9 of Act and directed Petitioners to make payment towards exgratia
as per circular to employees with interest. Hence, this Petition.
The issue raised before the court of law is whether Petitioners/
Corporation could restrict and refuse to grant exgratia amount to certain class
of employees as mentioned in circular?
Petitioners by circular would provide exgratia payment to Corporation
employees for the financial year 2010-2011. It was clear from circular that
Petitioners/Corporation had taken their usual decision as they used to take
since long to provide exgratia payment to all employees including temporary,
ad-hoc and covering period of leave, without pay, absence without leave,
period of suspension and on basis of actual days of workings by taking note
of their services.This showed as per regular practice, Petitioners always take
the decision to grant exgratia payment based upon amount for the respective
financial year. Admittedly in a circular, reference period grant of exgratia period
was for the financial year 2010-2011. This circular nowhere provide or
disentitle any of employees, if they fall within the ambit of their permissibility
clause to deny their right of exgratiapayment. Therefore all employees in view
of this permissibility clause entitled to get exgratia payment as they covered
within said ambit. Hence there was no question of taking away rights of
employees. Further before 19 September 2011 itself Petitioners had circulated
and published their line of action against all those who would participate in the
strike. Those circular nowhere mentioned about such steps except disciplinary
actions. Therefore the whole action of Petitioners and their officers were illegal
and contrary and misunderstanding of their own settlement terms and circulars.
Moreover, strike in question unless adjudicated finally could not be treated as

8. Municipal Corporation of Greater Mumbai v. Municipal Mazdoor Union, 2013 (3) ABR
609; 2012 (5) ALLMR 646; (2012) IVLLJ 45 Bom; MANU/MH/1264/2012.
Ch. VI] Bonus 173

illegal at the instance of Petitioners Corporation as even their circular nowhere


expressly mentioned.
So mere participation in the strike could be reason or Petitioners had no
power to take away accrued and crystallised right of the year 2010-2011 for
an alleged act committed by them in accounting/financial year 2011-2012.
Hence such action to take away crystallised right by such retrospective
administrative order in such fashion fall and cover unfair practice under
respective items of Act. Thus order passed by Industrial Court was
maintained.All employees shall entitle to get exgratia payment if they fall within
the ambit of permissibility clause as provided in the circular.
In the case of Babasaheb Kedar Shetkari Sahakari Sut Girni, Hingna
(Wanadongri) and another v. Madhukar Ghodmare and others9 , the facts
are thatthe employer had already paid 20% bonus to the employees for the
wage ceiling up to 2500/. Later when the amendment came, the employer is
not ready to pay 20% bonus based on the reason that the employer is not
having the available allocable surplus during the relevant accounting years.
Hence the employer seeks exemption from paying the increased bonus. The
Industrial Court directed the petitioner-employer to pay the difference of bonus
for the years 2006-2007 and 2007-08 as per the provisions of the amended
S. 12 of the Payment of Bonus Act, 1965 on the basis of monthly salary or
wages of Rs.3,500/- instead of Rs.2,500/-, after deducting the amount of
bonus already paid for the said period to such employees. The employer,
therefore, filed a writ petition before the high court.
The issue raised before the court of law is Whether non-payment of
bonus on the basis of monthly salary or wages of employees liable to be
treated as ‘industrial dispute’ u/s. 22 of Payment of Bonus Act, 1965 with
respect to bonus payable under Act, i.e. the jurisdiction of the industrial
tribunal?
A mere dispute regarding calculation of bonus under S. 12 of the said
Act can be dealt with under Section 21. However, such a remedy under S.
21 of the said Act is without prejudice to any other mode of recovery available
to the employees. It is thus an additional remedy, which is provided under S.
21 of the said Act. The recourse to any other mode of recovery is not barred
by S. 21 of the said Act. Hence, it cannot be said that the jurisdiction of the
Industrial Court was not available to recover bonus due from the employer.
9. Babasaheb Kedar Shetkari Sahakari Sut Girni, Hingna (Wanadongri) and another v.Madhukar
Ghodmare and Others, 2014 Indlaw MUM 276; 2014(4) ALL MR 533; 2014 (3) Bom.C.R.
40; 2015 (146) FLR 633; 2014 (6) MahLJ 170.
LaborIuris: An Apprise on Social Security
174 and Labour Welfare Laws [Ch. VI

Further the petitioner employer has not led any evidence to prove the balance-
sheets for the concerned period in respect of his claim that the allocable surplus
u/s. 15 of the Payment of Bonus Act available with him does not permit
declaration of bonus at the maximum limit of 20% on the basis of monthly
salary of each employee to be considered at Rs.3,500/- for the accounting
years 2006-2007 and 2007-2008
The court held that the Payment of Bonus Act is a Central legislation,
which came into force with effect from 25-9-1965. When the said enactment
was brought into force, there were only two enactments in force providing
machinery for investigation and settlement of industrial disputes one was the
Bombay Industrial Relations Act, 1946, which is a State legislation; and the
other was the Industrial Disputes Act, 1947, which is a Central legislation.
The Parliament, therefore, must have thought that it is not necessary to provide
a separate machinery under the Payment of Bonus Act to decide any dispute
between an employer and his employees with respect to the bonus payable
under Act and the machinery already available under the Industrial Disputes
Act or any corresponding legislation in force in the State, can be utilized or
entrusted with the function of deciding any such dispute. Hence the industrial
tribunal will have the jurisdiction in the present case.
In the case of Pradip Lamp Works, through its Partner, Chandra
Krishna Rohatgi, Patna v State of Bihar, through Commissioner-cum-
secretary, Department of Labour, Employment and Training, Government
of Bihar, New Secretariat, Patna and others10, the facts are that the appellant
is a registered partnership firm and has warded off the liability to pay bonus to
his employees under the Payment of Bonus Act for the financial year 1976-
77 to 1983-84. In addition to that, the firm has been litigating for the last 40
years, and there have been one-much rounds of litigation. The appellant also
seeks exemption from paying bonus contending that his financial position has
deteriorated but had not placed any application before the competent authority.
The learned Single judge bench of the High Court had ordered the appellants
to pay the bonus. Hence, this appeal. The issue before the court of law is
whether the firm can be exempted from paying bonus under the Payment
of Bonus Act?
The reading of Section 36 of the Act shows that if an establishment or
class of establishments can make an application seeking exemption from the
10. Pradip Lamp Works, through its Partner, Chandra Krishna Rohatgi, Patna v. State of Bihar,
through Commissioner-cum-secretary, Department of Labour, Employment and Training,
Government of Bihar, New Secretariat, Patna and Others, 2017 Indlaw PAT 63; 2017 (152)
FLR 1101.
Ch. VI] Bonus 175

application of the provisions of the Act, then in that case, if the appropriate
Government/ competent authority taking into consideration the financial position
and all other relevant circumstances comes to a conclusion that in the public
interest the provisions of the Act is not required to be applied, then in that
case a notification is required to be issued in the official gazette granting
exemption to such establishment or class of establishment for a specified period
indicated in that official gazette.
So far the present case is concerned, if the financial position of the
petitioner firm had deteriorated and it was not in a position to pay the statutory
bonus to its employees, then the petitioner firm was required to make an
application before the appropriate Government/ competent authority for grant
of such exemption during the period in question. However, the petitioner has
not brought any document on record to show that the petitioner firm filed an
application during any of the accounting year when statutory bonus became
payable to its employees or before the commencement of any accounting
year during the periods in question. It appears that when the State authorities
took punitive action against the petitioner firm for non-payment of statutory
bonus to its employees, then suddenly it woke up from its deep slumber and
approached this seeking a direction to the respondents to grant an exemption
to the petitioner firm from liability to pay bonus to its employees. Since the
petitioner firm did not approach the competent authority during the period in
question, and/or before the close of each accounting year or before the
commencement of each accounting year, there was/is absolutely no question
for consideration of its claim for grant of such exemption in terms of Section
36 of the Act. It was obliged to pay bonus to its employee within eight months
from the date of close of every accounting year during 1976 to 1984, i.e. the
period in question, but that has not been done by the petitioner. The appellants
have to pay bonus to the employees, and the appeal is dismissed.
In the case of Snowcem Paints Private Limited v. Snowcem Paints
Kamgar11 , the facts are thatby orders of the petitioner, 11 employees were
transferred. Respondent filed a complaint alleging the commission of unfair
labour practices by petitioner u/s.28 (1) r/w. Items 3,9 and 10 of Schedule
IV of 1971 Act. During the pendency of complaint, respondent filed an
application, praying for stay of transfer orders on the ground of malafide. By
order, Industrial Court allowed application and stayed transfer orders. Industrial
Court also directed Petitioner Company to allot work to 11 workers whose
11. Snowcem Paints Private Ltd. v. Snowcem Paints Kamgar Karmachari, 2015 (145) FLR 289;
MANU/MH/0771/2015.
LaborIuris: An Apprise on Social Security
176 and Labour Welfare Laws [Ch. VI

transfer orders were stayed. Also one of the points was regarding non-payment
of bonus. Hence, instant Petition has been filed. The issue before the court of
law is whether the petitioners were entitled to bonus under the Act?
It was contended that each employee is drawing salary about ‘ 10,000/
- per month and is, therefore, outside the purview of the Payment of Bonus
Act. The court observed Section 8 and Section 9 of the Payment of Bonus
Act and held that the payment which was made was an ex gratia payment and
they are outside the purview of the Act.The court dismissed the writ petition
and held that the petitioners were not entitled to the bonus.
3. CONCLUSION.— The term bonus has not been defined under nay
enactment, but it has been considered as a payment which is given on the
profits of the establishment. Before the Act, it was considered as an ex gratia
payment, but then in the landmark case the Supreme Court came up with the
‘Full Bench Formula’. In the year 1965, the Act made the situation clear on
the concept of bonus and made it a statutory obligation on the employers to
pay bonus. The Act also laid down certain disqualifications on certain grounds
like fraud, violent or riotous behaviour etc. under Section 9 of the Act. Further,
the Act states that if the employee has caused any kind of financial loss to the
employer, the employer has the liberty to deduct the amount of profits. Further,
if the employer fails to fulfil his liability to pay bonus, then the employee can
recover the same by taking recourse to Section 1. But it is to be noted that the
employee can take recourse of Section 21 only when there is a settlement,
agreement or award. In other cases, when there is a dispute between the
employer and employee, then the aggrieved party can take action under
Section 22 of the Act.
Although the Act has clarified the situation regarding bonus in many
aspects. Howeverin a situation is still dicey when it comes to the application
of Section 9. The question whether the employee will be disqualified for that
particular accounting year or all the years, the Bombay High Court and
Karnataka High Court are of the view that Section 9 should be beneficially
construed and it will apply to that accounting year only. But the Madras High
Court and Patna High Court hold the opposite view. Therefore, we may see
that the situation is not yet clear regarding the application of Section 9.
Therefore by the end of this paper one can understood the concept of
bonus, disqualification of bonus, deduction of bonus and the procedure
regarding the recovery of bonus.
. ___________*__________
Ch. VI] Bonus 177

3. MACHINERY TO RESOLVE BONUS DISPUTES


-Sai Naveen Kethineedi*

Synopsis
1. Introduction.
2. Case Laws.
3. Conclusion.
1. INTRODUCTION.— This Act is intended to provide for the payment of
bonus to persons employed in certain establishments on the basis of profits or
on the basis of production or productivity. It came into force from September
25, 1965. This act extends to the whole of India.
a. The Act is Designed To:
i. Impose a statutory obligation on an employer of every establishment
covered by the act to pay the bonus to employees in the establishment:
Under S.10 of Payment of Bonus Act, every employer shall be bound
to pay to every employee in respect of the accounting year, minimum bonus
which shall be 8.33 percent of the wage drawn by the employee during that
accounting year.
ii. Lay down principle and formula for calculation of bonus:
Available surplus means Gross profit of that year after deducting amount
of income tax under provision 32(1) or agriculture income tax law.
iii. Provide machinery for enforcement of liability for payment of
bonus.
Under S.28 of Payment of Bonus Act, the penalty will be imposed on
the persons or company (S.29 of the Payment of Bonus Act) who are not
following in accordance with the provisions when allocating the bonus.
Where any dispute arises between an employer and his employees with
respect to the bonus payable under this Act or with respect to the application
of this Act to an establishment in public sector, then, such dispute shall be
deemed to be an industrial dispute within the meaning of the 1947(ID) Act, or
of any corresponding law relating to investigation and settlement of industrial
disputes in force in a State and the provisions of that Act or, as the case
* 3rd year, B.A., LLB. (Hons), Damodaram Sanjivayya National Law University,
“Nyayaprastha”, Sabbavaram, Vishakhapatnam, India.

177
LaborIuris: An Apprise on Social Security
178 and Labour Welfare Laws [Ch. VI

may be, such law, shall, save as otherwise expressly provided, apply
accordingly.1
When employer declares a definite or fixed percentage of bonus to
employees over and above maximum bonus under S.10 of Payment of Bonus
Act, it no longer remains a matter of dispute but becomes a statutory right
under S.11(1) to get bonus as percentage or quantum of bonus declared by
the employer2 .
Where any workman is entitled to receive from the employer any money
or any benefit which is capable of being computed in terms of money and if
any question arises as to the amount of money due or as to the amount at
which such benefit should be computed, then the question may, subject to any
rules that may be made under this Act, be decided by such Labour Court as
may be specified in this behalf by the appropriate Government.3
Where an employer has infringed the provisions of Sec.33, the aggrieved
workman has been given the opportunity to write a complaint to higher official
in which dispute is pending, the dispute referred to workman.
In the case of Sanghi Jeevaraj Ghewar Chand & Ors v. Secretary,
Madras Chillies4 , facts are that the some workers working in the kirana
shops were members of respondents union. On December 13, 1965, the
workman demanded for bonus of the year 1964-65 equivalent to four months
wages. So the matter was went to conciliation. But the proceedings were
failed. Then the dispute was referred to Industrial Tribunal, of Madras. The
appellant company was a public sector establishment to which S.20 of Payment
of Bonus Act was not applicable. The tribunal held that the S.20 of Payment
of Bonus Act was not applicable firstly because of S.1(3) and secondly by
S.32(ix). In appeal, the Apex Court held that considering the background
and circumstances in which the act enacted, the object and its scheme, it’s not
tenable to accept the plea of the respondent that Payment of Bonus Act was
not exhaustive act dealing exclusively with bonus disputes in all aspects to the
legislature left open to whom the Payment of Bonus Act not apply by
technicalities of provisions either as to exclude or exempt a dispute with regard
to bonus through industrial adjudications under the 1947 act. Therefore the
construction given by tribunal was set aside.

1. S.22 Payments Of Payment Of Bonus Act, 1965.


2. Babasaheb Kedar Shetkari v. Madhukar, (2014) 6 Mah Lj 170 (Bom).
3. S.33C (2), Industrial Disputes Act, 1947.
4. Sanghi Jeevaraj Ghewar Chand & Ors v. Secretary, Madras Chillies, 1969 I LLJ 719 SC.
Ch. VI] Bonus 179

2. CASE ANALYSIS :In the case of K.K Mohd Hanif v. Jhnasi Bidi
Mazdoor Union5, the facts are that the certain persons were engaged by the
petitioner concerned for packing of bidis, and they had the option to work in
the factory or not but is worked under the control and supervision of the
petitioner. The question whether those persons were employees within the
meaning of the Payment of Bonus Act. It was held that the packers who were
claiming payment of bonus did not constitute casual, heterogeneous,
miscellaneous and irregular group but were regularly working as packers in
the premises of the petitioner. It is true that on any particular day they may
choose to attend to the work at the premises of the factory or not but
nonetheless they were employees of the petitioner within the meaning of the
Payment of Bonus Act since on those days on which they did work, they
worked under the control and supervision of the petitioner, and the mere fact
that the payment was on daily wages did not affect their status as employees.
In this case, a dispute had arisen between the petitioner and his employees
concerning the bonus. Under S.22 of Payment of Bonus Act applies towards
dispute of this kind.
In the case of Major D Aranha v. Universal Radiators6, facts are
thatthe appellant applied under S. 33C(2), of 1947(ID) Act, 1947, to compute
the bonus amount Rs. 2,100. He claimed that his services were terminated on
March 31, 1966, his bonus was not settled. The bonus for the year (1965-
1966 had not been even declared by the management. The respondent-
management resisted the claim on the ground inter-alia that on April 2, 1966,
the appellant was paid Rs. 3,000 towards all the benefits due to him, inclusive
of bonus for 1965-1966. The Presiding Officer, Labour Court, posed for his
determination the question, whether the petitioner (appellant herein) was entitled
to a bonus for 1965-1966. Court held the dispute in the instant case was such
as would not fall within the possibility of S.33 C(2), of the Act and that the
appellant’s remedy was to apply under S.22 of Payment of Bonus Act, 1965.
The aggrieved- erstwhile employee is before us on appeal. The Apex court
held that the learned Judge was right. S.33 C(2), is machinery. Construed by
Courts to have a wide scope, the computation embracing not merely simple
arithmetical calculation. Whatever claim may or may not be attracted within
the scope of S.33 C(2), an industrial dispute as well-defined in the Act, as we
think, will not be within the purview of that provision. Because of the scheme
of the Industrial Dispute Act, 1947, which provides for a specific forum and
procedure for adjudicating industrial disputes. S.22 of Payment of Bonus
5. K.K Mohd Hanif v. Jhnasi Bidi Mazdoor Union, 1980 II LLJ 283 ALL.
6. Major D Aranha v. Universal Radiators,1980 ILR MAD 2 160.
LaborIuris: An Apprise on Social Security
180 and Labour Welfare Laws [Ch. VI

Act, 1965, deems any dispute that ascended amid an employer and his
employees concerning the bonus payable under the Act to be an industrial
dispute within the meaning of the 1947(ID) Act, 1947. A dispute will have to
be adjudicated in a regular way and not resolved by an application under
S.33-c (2). Our attention was invited to S.39 of the payment of Payment of
Bonus Act, but that does not assist us or compel us to take a different view.
Court viewed that S.22 of Payment of Bonus Act does not override S.33-c
(2) of 1947(ID) Act, 1947. But when S.22 of the former act deems a dispute
with respect to bonus payable under the Act to be an industrial dispute within
the meaning of the 1947(ID) Act, then the forum and the procedure under the
1947(ID) Act will be the only means by which the dispute can find a solution,
and it is not through S.33C (2). Appellant, the contention is supported by,
Allahabad Labour Supply Agency v. First Labour Court, Nagpur7 that an
individual dispute will be outside the scope of S.22 of Payment of Bonus Act.
After the amendment of the 1947(ID) Act to attract individual disputes too
within the scope of an industrial dispute, it does not appear to us to be
reasonable that S.22 of Payment of Bonus Act will be inapplicable to individual
disputes. Another contention for the appellant is that since the first respondent
did not question the appellant’s entitlement to the bonus but only pleaded that
the consolidated payment made to the appellant included bonus too, the dispute
would not be comprehended within the scope of S.22 of Payment of Bonus
Act. Court held that the words “any dispute with respect to bonus payable
under the Act” are wide enough to cover not merely questions relating to
entitlement but also the quantum and a plea of discharge. The appeal is
dismissed.
In the case, Alind Supervisory Staff vs. Aluminium Industries
Limited8 supervisory personnel of the company who are not covered by virtue
of the workmen definition under industrial dispute act and on other hand
workmen had made agreement under S.18 of industrial dispute act, the
workmen can claim BONUS as their cover under ‘employee’ definition of
Payment of Payment of Bonus Act, 1965. Supervisory personnel had claimed
in the High Court of Kerala.
The claim has been rejected by the Kerala High Court and made some
observations:
1. S.22 of the Payment of Bonus Act is a deeming provision as it says
that any dispute relating to bonus payable under the Act is deemed
7. Allahabad Labour Supply Agency v. First Labour Court, Nagpur, [1970] 39 F.J.R. 409.
8. Alind Supervisory Staff v. Aluminium Industries Limited, 1981 I Llj 418 Kerala.
Ch. VI] Bonus 181

to be an industrial dispute.
2. Payment of Bonus Act does not provide for any machinery to resolve
disputes relating to a bonus. Such disputes can be resolved by
recourse to the machinery provided under I.D. Act, and this resource
is available even to those persons claiming bonus who are not
workmen within the meaning of I.D. Act but are employees within
the case the workmen with whom there is an agreement meaning on
bonus.
3. Have no complaint and no dispute has been raised by them The
complaint is only that of the “employees” who are not workmen,
and their claim for bonus has to be settled strictly in terms of the
Payment of Bonus Act and with the aid of the machinery incorporated
for such purpose by means of the deeming provisions of S.22 of the
Payment of Bonus Act.
4. There is no agreement with the employees. If that is so the only
substantive right available to them under the Payment of Bonus Act
is for profit bonus. Whatever be the substantive right available to
workmen under the I.D. Act, employees other than workmen cannot
enforce those rights.
5. All that S.22 of the Payment of Bonus Act seeks to achieve is
enforcement of substantive right under that Act using the machinery
under the 1947(ID) Act.
Therefore in the present case since the agreement under S.18 of the
1947(ID) Act was made only with workmen and not with the ‘employees’
who were not covered by the definition of workmen and also that the non-
workmen employees had no substantive right under the Payment of Bonus
Act either. Therefore, the benefit of S.22 of the Payment of Bonus Act cannot
be claimed by the supervisory staff.
In the case of Kohinoor Tobacco Pro... v. Presiding Officer9 the two
question are raised in the case are
1. Whether the payment of Payment of Bonus Acts, 1965 is a complete
Code for bonus payable under the said Act?
2. Whether an application under S. 33-c (2) of the 1947(ID) Act,
1947, is maintainable for claiming minimum bonus payable under S.
10 of the payment of Payment of Bonus Act, 1965?
These two questions need determination by the Full Bench. The reference

9. Kohinoor Tobacco Pro... v. Presiding Officer, AIR 1986 Bom 340.


LaborIuris: An Apprise on Social Security
182 and Labour Welfare Laws [Ch. VI

is made by a Division Bench of this Court in Letters Patent. In 1977, the


employees applied under S. 33-C (2) of the 1947(ID) Act, 1947 for calculation
of claims for minimum bonus payable under S. 10 of the payment of Payment
of Bonus Act, 1965. Initially, the claim covered period commencing from
1964-1965 to 1974-1975, it came to be restricted to period commencing
from 1st Nov. 1970. The claim is against a Bidi industry, the management of
which has been changing hands. Previously it was with a partnership firm
“Mohanlal Hargovinddas”. A Private Limited Company Mohanlal
Hargovinddas Tobacco Products Private Limited” (the original petitioner) took
over the management from 1st Nov. 1970. During the pendency of this appeal,
it was taken over by “Kohinoor Tobacco Products Pvt. Ltd. All the employees
are quite old whose services are not affected by the changes in management.
Some of them are in employment since 1960. The Company resisted the
claiminter-alia on the ground that
(i) An establishment newly set up it was exempted from the liability of
payment of a statutory minimum bonus for the relevant period under
S. 16 of the Payment of Bonus Act.
(ii) Proceedings under S. 33 C (2) were not tenable. After enquiry
and on certain disputed positions, the Labour Court Nagpur held
that
(iii) (i) employees worked for a requisite number of days during the
relevant period, (ii) the establishment was not newly set up, and
merely management had changed, and (iii) submission under S. 33
C (2) was maintainable. The Labour Court awarded to each of the
employees a sum of Rs. 360/- towards a claim for a minimum bonus
for the period 1970-1971 to 1974-1975.
This order was challenged in High Court in writ jurisdiction. A single
Bench heard this petition along with three other petitions involving some
common points. The writ petition came to be dismissed. Filed letters patent
appeal. During the hearing of the appeal before the Division Bench, it was
pointed out that with reference to the scope of s. 22 of the Payment of Bonus
Act, “When such a special statute containing special right also creates a special
forum, for the trial of a dispute under the Act, it is settled law that any dispute
arising out of that Act must go before the special tribunal created under the
Act. It is not possible to treat this as a direct authority on the points at issue.
Madras High Court in the case of Aranha v. Management10 has no doubt
held that even a simple plea of discharge of liability to pay bonus is covered
10. Aranha v. Management, 1975 Lab IC 1180.
Ch. VI] Bonus 183

by S. 22 of the Payment of Bonus Act and proceedings under S. 33 C (2) are


not entertainable. But with respect, for the reasons, which need not be repeated,
Court did not accept this view. Authority deals with the jurisdiction of the
Civil Courts under S. 9 of the C.P Code, to try and adjudicate upon an
industrial dispute if it concerns with enforcement of certain rights or liabilities
created only under the I.D Act. Two other different Division Benches of this
Court have taken divergent views, and it was requested that the controversy
should be set at rest by reference to a larger Bench.
In the case of, Pappu v. Raja Tile and Match Works11 question was
whether paid for national and festivals holidays could be included in computing
bonus. The appellants moved the Labour court as per sub clause (2) of S.33c
of the act of 1947(ID) Act. The employer contended that the dispute could
not be decided as per sub clause (2) of S.33c of the act of 1947(ID) Act.
Apex Court cannot agree with this statement in view of the Supreme Court
ruling in Sanghvi Jeevaraj v. M.C.G. & K.M.W. Union12. A dispute under
S.22 of the Payment of Bonus Act is expressly considered to be an industrial
dispute. When S.22 operates, it is not possible to hold that the dispute is not
an industrial dispute simply because the dispute was raised by an individual
employee. It is open to the legislature to treat a dispute raised by one individual
employee also as an industrial dispute as has been done under S.2-a of the
industrial dispute act. The Apex court held that Payment of Bonus Act did not
create independent machinery for the resolving of bonus disputes, although
the disputes arising out referred to the Industrial tribunal for its enforcement.
The payment of Payment of Bonus Act has not disbarred the relevance of the
1947 (ID) Act applied to the claim for a bonus.
In this case is the question of quantum of bonus not on liability to pay
bonus. The right to a bonus is in respect of a particular accounting year. The
year is the unit of payment. Bawa Singh v. State of Punjab13 Punjab and
Haryana High Court held that unable to construe S.22 of Payment of Bonus
Act, 1965, in the manner that every minor dispute regarding the payment of
bonus, even when there is no dispute regarding the rate at which it is to be
paid,and the only dispute is regarding the exact amount to be paid, should be
termed as Industrial Dispute. Apex court held that disputes regarding the
quantum of bonus could be rightly decided as per subclause (2) of S.33c of
the act of the 1947(ID) Act.
11. Pappu v. Raja Tile and Match Works, 1989 I Llj 14 Kerala.
12. Sanghvi Jeevaraj v. M.C.G. & K.M.W. Union, (1969-I-Llj-719) (SC).
13. Bawa Singh v. State Of Punjab, (1974) Lab. I.C. 425.
LaborIuris: An Apprise on Social Security
184 and Labour Welfare Laws [Ch. VI

In the case of Ashok Leyland vs. Second Addl. Labour Court14 , the
question before Supreme Court was that whether the employees can claim
the difference in the bonus by virtue of payment of bonus ordinance, 1985. In
this ordinance ceiling in wages were revise and enlarged the coverage of
employees in the industrial disputes with reference to the bonus payable under
the act as envisages by S.22 of the payment of the Payment of Bonus Act.
The supreme court held that any claim made by the employees with regard to
the payment of differences in bonus, it could be decided only by an industrial
tribunal on reference and no such claims can be made as per subclause (2) of
S.33c of the act of the 1947(ID) Act.
In this case, H.P. State Electricity Board and Anr. v. Presiding
Officer15 This batch of writ petitions is being dealt with together since they
involve the identical question of law as to the maintainability of a claim petition
under S.33-c (2) of the 1947(ID) Act, 1947. By the claims the Labour Court
formulated the question as to whether the various applicants before the Labour
Court are entitled to minimum bonus of 8.33 percent from the date of their
engagement and for that matter are further entitled to having the same computed
by means of such applications as per subclause (2) of S.33c of the act or
whether the Labour Court has no jurisdiction to entertain and deal with such
applications. TheLabour Court held that the applications filed as per subclause
(2) of S.33c of the act for claiming the minimum bonus is maintainable, and
the respective petitioners/management is bound to satisfy the claim of the
workers concerned. The contention on behalf of the petitioners, in the forefront,
was that the application filed as per subclause (2) of S.33c of the act for the
relief of the nature in question could not have been entertained by the Labour
Court and the subject-matter at issue is one which could only form the subject-
matter of an industrial dispute and that has to be adjudicated only by the
Industrial Tribunal and the orders passed by the Labour Court are liable to be
set aside.Counsel contended that the claim which is the subject matter not
concerned with any payment of minimum bonus but the claim really pertains
to the payment of difference in wages payable for a person working as a
Beldar and that of a clerk, the claim of the worker is that though he was
engaged as a Beldar he was really out in charge of and made to work as clerk
and wages payable to a clerk ought to have been paid.When a claim is made
before the Labour Court as per subclause (2) of S.33c of the act that Court
must clearly understand the limitations under which it is to function.It was held
in State Bank of Bikaner and Jaipur v L. Khandelwal16 , that a workman
14. Ashok Leyland v. Second Addl.Labour Court, 1992 Ii Llj 128 Madras.
Ch. VI] Bonus 185

cannot put forward a claim in an application as per subclause (2) of S.33c of


the act in respect of a matter which is not based on an existing right and which
can be appropriately the subject matter of an industrial dispute which requires
a reference under S.10 of the Act.” Full Bench of the Bombay High Court in
Kohinoor Tobacco Pro vs. Presiding Officer17 while following the decision
of the Full Bench of the Andhra Pradesh High Court held that an application
under S.33-C(2) of the Act for claiming minimum bonus under S.10 of the
Payment of Bonus Act is maintainable. Counsel for the workmen, while
adopting the reasons given by the Labour Court and also the ratio of the
decisions rendered by the Full Bench of the Andhra Pradesh High Court and
the Bombay High Court, and contended that the orders of the Labour Court
call for no interference and no exception can be taken to the principles laid
down therein.Apex court held that class, nature and category of a claim has
been held not to be admissible or permissible to be dealt with and countenanced
in an application as per subclause (2) of S.33c of the act in the decision of
Apex Court in P.K. Singh and Ors. v. Presiding Officer Labour18, Court
held that the remedy as per sub clause (2) of S.33c of the act was available
only in those cases where there is no dispute about the entitlement of the
workman itself, and the relief claimed by way of difference in salary in an
application as per sub clause (2) of S.33c of the act on the basis of “equal pay
for equal work” formula was held not permissible and such relief depending
upon re-classification of workmen could be granted or obtained only on a
reference made to the competent authority under S.10 of the Act. On this
ground alone the order of the Labour Court judgment set aside.
In this case, A.P Foods v. Samuel and Others19 employees are in
working in an establishment of Appellant. As the employees are paid ex gratis
one month salary instead of bonus paid to them from the year 1984-85 was
stopped from November 1993. Aggrieved by that filed a writ petition for
relief that was allowed and the order was upheld in writ appeal. Therefore,
the employer filed an appeal to the Supreme Court. The Supreme Court held
that disputed questions of fact were involved and alternative remedy under
ID Act, 1947 was available. Therefore, the High Court should not have
entertained the writ petition. The Supreme Court pointed out that S.22 of
Payment of Bonus Act, 1965 provided that a dispute as to bonus payable
15. H.P. State Electricity Board and Anr. v. Presiding Officer, (2000) Illj 544 HP.
16. State Bank of Bikaner and Jaipur v. L. Khandelwal, (1968-II-LLJ-589) (SC).
17. Kohinoor Tobacco Pro v. Presiding Officer, AIR 1986 Bom 340(Supra).
18. P.K. Singh and Ors. v.Presiding Officer Labour,1988 AIR 1618.
19. A.P Foods v. Samuel and Others, 2006 Iii Llj 18 SC.
LaborIuris: An Apprise on Social Security
186 and Labour Welfare Laws [Ch. VI

under the Act or as to its applicability to the public sector should be deemed
to be an industrial dispute within the meaning of the 1947(ID) Act.
In the case of Shivanand Misra vs. M.P. Road Transport
Corporation20, facts are thatthe petitioner who is workmen of respondent
claim bonus underpayment of Payment of Bonus Act and petitioner made
representation to the authorities under Payment of Bonus Act. A claim is been
rejected. Aggrieved by the decision given by the authority. Petitioner
approached Labour court for the address of the payment of bonus and over
time. Respondents contended that the relief claimed by the petitioner is
disputation in nature so the claim cannot withstand and it also has an alternate
remedy under industrial dispute act. Finally, Madras high court held that bonus
by any employee canbe claimed before the authority underpayment of Payment
of Bonus Act or Labour court and high court issue the direction to the
corporation to consider a claim of the petitioner for payment of bonus.
In the case of H.P State Electricity Board and Another v. Ranjeet21 ,
facts are thatthe respondents were employed on the daily-wage basis. Labour
Court by order dated 6-7-1991 held that there were entitled to be paid
minimum statutory bonus within the stipulated time. High Court held that daily
wagers cannot get a bonus. Additionally, the Labour Court has no jurisdiction
to adjudicate such a matter. The High Court held that since there was a statutory
obligation to pay minimum bonus the application as per sub clause (2) of
S.33c of the act was maintainable. The Act has application only when the
employees concerned get salaries or wages. Dearness allowance is not payable
to daily wagers. The reference to S.8 of the Payment of Bonus Act to decide
eligibility was not correct. Merely because a person is working for 30 days in
a year that does not entitle him to the bonus and an appeal to Supreme Court.
The claim was made for the period from 1977 to 1986. But the application
was filed long after in 1991. The High Court was wrong in saying that only the
quantum and not the question of liability can be decided in a reference under
S.22. S.33-c (2) is in the nature of execution application. S.33-c (2) relates
to pre-existing right and the claim for the bonus cannot be included within the
scope of S.33-c (2) of the Act. But the Labour Court and the High Court
wrongly decided the entitlement of interest @ 12%. Counsel for the
respondents submitted that sections 10 and 11 of the Payment of Bonus Act
deal with payment of minimum bonus. S.22 of the Payment of Bonus Act uses
the expression “bonus payable”. It relates to the quantum and varies between
20. Shivanand Misra v. M.P. Road Transport Corporation, [2008(119) FLR819].
21. H.P State Electricity Board and another v. Ranjeet, 2008 LLR 765 (SC) 244.
Ch. VI] Bonus 187

a minimum and the maximum. The High Court was right in holding that the
application in terms of S.33-c (2) of the Act was maintainable. The scope and
ambit of S.33-c (2) have been examined by this Court in several cases. In
U.P.S.R.T.C v. Birendra22 held that the benefit that can be enforced as per
sub clause (2) of S.33c of the act is a pre-existing benefit or one flowing from
a pre-existing right. The Apex court further held that High Court seems to
have lost sight of the fact that the Labour Court under the Act can decide only
the matters specified in the Second Schedule. The Second Schedule does not
cover “Bonus”. Item 6 of the Second Schedule says that it deals with all
matters except those covered by the Third Schedule. “Bonus” appears as
Item 5 in the Third Schedule. Therefore, the Labour Court could not have
decided the question of entitlement to bonus. In case of pre-existing rights,
there must be agreements by both sides about the existence of such rights. If
there is disagreement this has to be decided by the competent authority. The
stand that the expression “bonus payable” relates to the quantum and not
playability is also not correct. Court said that the High Court has not considered
the above aspects; we remit the matter to it for considering (i) the applicability
of S.33-c (2) of the Act; (ii) the jurisdiction of the Labour Court to decide the
matter; and (iii) the applicability of the Payment of Bonus Act to daily wagers.
The appeals are allowed
In the case of Promod Kumar Sharma v State of Uttaranchal,23 the
facts are that the petitioner was a workman in the Irrigation Department in the
State and his services were retrenched on 11.05.1990. He raised an industrial
dispute and thereafter an award dated 21.08.1995 was given in his favor by
the Labour Court, Haldwani by which the petitioner was reinstated in service
and termination order was set aside. The order was challenged before the
High Court of Judicature of Allahabad by the State. The writ petition was
dismissed. Special Leave Petition before the Apex Court, which was also
dismissed, a review petition was also filed before the Apex Court, but the
same was also dismissed. The petitioner was reinstated in service with wages
and allowances minus bonus. Hence the present writ petition.
The Apex Court in Hamdard (Wakf) Laboratories vs. Dr Labour
Commissioner & Others24 held that the amount of back wages has to be
paid to the employee on the basis of the award, which has been given in his
favour and the award of wages and allowances does not include bonus unless
22. UPSRTC v.Birendra, AIR 2006 SC 3220.
23. Promod Kumar Sharma v. State of Uttaranchal, 2010 II LLJ 136. Uttar.
24. Hamdard (Wakf) Laboratories v. Dr Labour Commissioner & Others, (2007) 5 SCC 281.
LaborIuris: An Apprise on Social Security
188 and Labour Welfare Laws [Ch. VI

specifically stated as said inter alia. Apart from this, there was another aspect
touched by the Apex Court in the above judgment, which is that the payment
of bonus can only be raised by way of an industrial dispute under S.6 h (1) of
the U.P. 1947(ID) Act
In view of the above observation made by the Apex Court as well as
considering the provision of Industrial Dispute Act, the bonus has rightly been
denied to the petitioner. Therefore, the petitioner has no claim of bonus. The
writ petition was dismissed.
3. CONCLUSION.— The Payment of Bonus Act, 1965 does not constitute
certain machinery to resolve the bonus disputes. S.22 of Payment of Bonus
Act, explains that disputes arising out are deemed to be an industrial dispute.
Court will determine by facts and circumstances of each case whether it is a
bonus dispute or not. The applicability and maintainability of the said dispute
will be judged by the court. In the recent amendment of 2015 of Payment of
Payment of Bonus Act, the legislature did notincorporate any special
mechanism for dealing bonus disputes.
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