Summary
A charitable trust running factories that manufacture automobile and industrial machinery parts, staffed largely by leprosy-cured and differently abled workmen, resisted a bonus claim on the ground that it was exempt under Section 32(v)(a) and (c) of the Payment of Bonus Act, 1965 as an institution like the Indian Red Cross Society or one established not for profit. The Supreme Court held that the trust, which severed its Red Cross links in 1989 and has run profit-generating commercial factories since 1985, is not exempt, and that workmen employed in its factories are entitled to statutory bonus; ex-gratia payments cannot substitute for it.
Issues
- Whether a trust engaged in charitable rehabilitation but also running commercial factories is exempt from the Payment of Bonus Act, 1965 under Section 32(v)(a) as the Indian Red Cross Society or an institution of a like nature.
- Whether such a trust is exempt under Section 32(v)(c) as an institution established not for purposes of profit.
- Whether voluntary ex-gratia payments to workmen can be a ground for not paying statutory bonus.
Provisions considered
- Section 1(3)(a) read with Section 2(17), Payment of Bonus Act, 1965The Act applies to every factory, and 'factory' bears the meaning in Section 2(m) of the Factories Act, 1948. Since the workmen admittedly work in factories carrying on manufacturing, the Bonus Act applies to them as do other beneficial labour legislations. (¶¶ 8, 14, 16)
- Section 2(m), Factories Act, 1948Defines 'factory' as premises where ten or more workers (with power) or twenty or more (without power) carry on a manufacturing process. The appellant's manufacturing units fall within it, so the Bonus Act is attracted. (¶¶ 3, 8, 14)
- Sections 10 and 11, Payment of Bonus Act, 1965Section 10 obliges every employer to pay a minimum bonus of 8.33 per cent of salary or wage irrespective of allocable surplus; Section 11 provides a maximum of 20 per cent where allocable surplus permits. The Tribunal awarded the 8.33 per cent minimum, which the Court left undisturbed. (¶¶ 9, 10, 18, 19)
- Section 32(v)(a) and (c), Payment of Bonus Act, 1965Exempts employees of the Indian Red Cross Society or institutions of a like nature, and institutions established not for profit. There was no evidence the trust is run by or akin to the Indian Red Cross Society (a body created by Parliament); it deleted all references to the Swedish Red Cross from its trust deed in 1989 and has run profit-making factories since 1985, so neither exemption applies. (¶¶ 11, 12, 13, 15, 16, 19)
- Section 10(2) read with Section 22 of the Payment of Bonus Act, 1965, Industrial Disputes Act, 1947The bonus dispute raised by the union in 1998 for the year 1996-97 was referred under these provisions to the Industrial Tribunal, Chennai. Not separately construed. (¶ 4)
Held
- Workmen employed in factories run by the appellant trust fall within 'workmen' and 'employee' under the Factories Act and the Bonus Act; because they admittedly work in factories, the Bonus Act applies to them irrespective of the trust's charitable character. Workers cannot be deprived of statutory bonus merely because the factories come under the umbrella of a trust also doing charitable work. (¶¶ 14, 16)
- The trust is not exempt under Section 32(v)(a): there is no evidence it is run by the Indian Red Cross Society, and some overlap of objects with that Society is not enough to make it an institution 'of a like nature', particularly after it severed all links with the Swedish Red Cross by amending its trust deed in 1989. (¶¶ 15, 16, 19)
- The trust is not an institution 'established not for purposes of profit' under Section 32(v)(c), since from 1985 its activities shifted markedly to commercial manufacture and sale of automobile and machinery parts generating profit (surplus), even if the surplus is reinvested in rehabilitation. (¶¶ 13, 15, 19)
- Payment of ex-gratia amounts as a measure of charity is no ground to avoid paying bonus, which is a statutory duty of the employer and a statutory right of the workmen. The Single Judge's direction that ex-gratia already paid be adjusted against bonus, which the workmen never challenged, stands. (¶¶ 17, 18)
Result
Appeal dismissed; the appellant held not exempt under Section 32(v)(a) or (c) and directed to pay bonus to the workmen of the respondent union in accordance with the Payment of Bonus Act from the year 1996-97 till date within one month. Pending applications disposed of; interim orders vacated.