Bonus Mandatory for Factory Workers of Charitable Trust: Supreme Court Upholds Employee Rights.


02 April 2025 Civil Appeals >> Civil & Consumer Law   |   Employment, Labor & Service >> Corporate Law  

In The Management of Worth Trust v/s The Secretary, Worth Trust Workers Union., Supreme Court of India has affirmed the right of factory workers employed by a charitable trust, "Workshop for Rehabilitation and Training of the Handicapped Trust" (WORTH), to receive bonus under the Payment of Bonus Act, 1965. The Court dismissed the trust's appeal, upholding the concurrent findings of the Industrial Disputes Tribunal and the High Court of Madras.

The appellant-trust, initially established as the "Swedish Red Cross Rehabilitation Trust" with the primary aim of rehabilitating leprosy-cured and differently-abled individuals, diversified its activities in 1985. It began engaging in significant industrial activities, including the manufacture of automobile parts and industrial machinery components. These manufacturing units operate as factories under the Factories Act, 1948, and generate profits termed "surplus."


 

 

The workmen employed in these factories, many of whom are leprosy-cured or differently-abled individuals and members of the "WORTH Trust Workers Union," raised an industrial dispute in 1998 demanding bonus and ex-gratia for the year 1996-97. Their claim was based on their status as workmen in factories governed by labor laws, including the Payment of Bonus Act, which explicitly applies to "every factory" as per Section 1(3)(a).

Before the Industrial Disputes Tribunal, the workmen's union sought a bonus at the maximum rate of 20% and ex-gratia at 5% of their annual earnings. The Tribunal partly allowed their claim, holding them entitled to a minimum bonus of 8.33% and acknowledging their existing receipt of ex-gratia. This award was challenged by the trust before the High Court. The single-judge bench upheld the Tribunal's decision but modified it to allow the trust to deduct the ex-gratia amount already paid from the bonus payable. The trust's subsequent writ appeal against this order was also dismissed by the Division Bench, leading to the present appeal before the Supreme Court.

The trust's primary defense rested on the exemptions provided under Section 32(v)(a) and (c) of the Bonus Act. It argued that its employees should be treated as employees of the "Indian Red Cross Society" or an institution "of a like nature," thus exempting it from bonus payment under Section 32(v)(a). Alternatively, the trust contended that it was an "institution established not for purposes of profit" and therefore exempt under Section 32(v)(c).

The Industrial Disputes Tribunal, after examining the evidence, concluded that while the trust was initially established for charitable purposes, its activities had significantly shifted since 1985 with the large-scale commencement of commercial manufacturing. The Tribunal noted that the factories generated profits, and the workmen were indeed working in factories, falling under the definitions of "workman" and "employee" under relevant labor laws.

The Supreme Court concurred with these findings. It observed that the trust had even amended its trust deed in 1989, removing all references to the Swedish Red Cross Society, severing its initial connection. The Court found no evidence to establish that the trust was run by or was an institution similar to the Indian Red Cross Society, which is a statutory body established by an Act of Parliament. While some of the trust's objectives might align with those of the Indian Red Cross Society, this was deemed insufficient for exemption.

Furthermore, the Court rejected the argument that the trust qualified as an institution "not for purposes of profit." It emphasized that the trust was demonstrably engaged in profitable commercial activities through its factories. The fact that these profits might be reinvested in charitable activities did not alter the commercial nature of the manufacturing operations or negate the applicability of the Bonus Act to the workmen employed therein. The Court firmly stated that the broad charitable umbrella of the trust could not deprive factory workers of their statutory right to bonus.

The Supreme Court acknowledged that the trust was already paying an "ex-gratia" amount to the workmen. However, it unequivocally stated that this voluntary payment could not substitute the mandatory bonus payable under the statute. The learned Single Judge's modification allowing for the adjustment of the ex-gratia amount against the bonus, which was not challenged by the workmen, was noted by the Supreme Court.

In its final verdict, the Supreme Court held that WORTH Trust was not exempt under Section 32(v)(a) or (c) of the Bonus Act, and the workmen employed in its factories were legally entitled to bonus. The Court directed the trust to pay bonus to its workmen as per the provisions of the Bonus Act from the year 1996-97 until the date of the order, within one month.


Payment of Bonus Act, 1965  

THE FACTORIES ACT, 1948