WORTH Trust vs. WORTH Trust Workers Union: Landmark Ruling on Bonus Applicability to Charitable Trust's Commercial Ventures.


02 April 2025 Industrial Law >> Business & Commercial Law   |   Civil Appeals >> Civil & Consumer Law   |   Wills/Trusts >> Family Law  

In a significant judgment of The Management of Worth Trust Vs The Secretary Worth Trust Workers Union., the Supreme Court of India has upheld the right of workmen employed by the Workshop for Rehabilitation and Training of the Handicapped Trust (WORTH) to receive bonus under the Payment of Bonus Act, 1965. The ruling dismisses the trust's appeal against earlier orders of the Industrial Disputes Tribunal and the Madras High Court, thereby affirming that the Bonus Act applies to the workmen engaged in the trust's commercial manufacturing activities, notwithstanding the trust's charitable objectives.

The case originated from a demand raised in 1998 by the WORTH Trust Workers Union for bonus and ex-gratia payment for the year 1996-97. The union's contention rested on the fact that its members were employed as workmen in factories operated by the trust, falling under the purview of both the Factories Act, 1948, and the Industrial Disputes Act, 1947, thus making them eligible for bonus under the Payment of Bonus Act.


 

 

WORTH Trust, initially established as the Swedish Red Cross Rehabilitation Trust, argued for exemption from the Bonus Act under Section 32(v)(a) and (c). The trust claimed it was either an institution akin to the Indian Red Cross Society or an institution established not for profit. While acknowledging its charitable work, including the rehabilitation of leprosy-cured and differently-abled individuals, the court noted that since 1985, the trust had significantly expanded into commercial ventures, manufacturing automobile parts and industrial machinery, generating profits termed as "surplus."

The Industrial Disputes Tribunal, Chennai, partly allowed the workmen's claim, awarding a minimum bonus of 8.33% of their annual earnings, in addition to the ex-gratia amount they were already receiving. This decision was upheld by a Single Judge Bench of the Madras High Court, with a modification allowing for the deduction of the ex-gratia amount from the bonus payable. A subsequent appeal by the trust to the Division Bench of the High Court was also dismissed.

The Supreme Court, after hearing both sides and examining the records, affirmed the High Court's decision. The apex court meticulously analyzed the applicability of the Bonus Act, highlighting that Section 1(3)(a) explicitly states its application to "every factory." The term "factory" under the Bonus Act adopts the same definition as in Section 2(m) of the Factories Act, 1948, which clearly encompasses the manufacturing units operated by WORTH Trust where the workmen are employed.

Dismissing the trust's claim for exemption under Section 32(v) of the Bonus Act, the court concurred with the Tribunal and the High Court that there was no evidence to establish that WORTH 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. The court further reasoned that while some of the trust's objectives might align with those of the Indian Red Cross Society, this alone was insufficient to grant an exemption under the Act, especially considering the trust's active engagement in profitable commercial activities.

The court also rejected the argument that the trust qualified as an institution "established not for purposes of profit" under Section 32(v)(c). It emphasized that the trust was indeed generating profits from its manufacturing operations, even if these profits were reinvested in its charitable endeavors. The existence of profit-generating commercial activities brought the workmen squarely within the ambit of the Bonus Act.

The court acknowledged the trust's argument that it was already paying an ex-gratia amount to the workmen as a measure of charity. However, it firmly stated that this voluntary payment could not absolve the trust of its statutory obligation to pay bonus, which is a right of the workmen under the law. The Supreme Court upheld the High Court's modification allowing the adjustment of the already paid ex-gratia against the bonus amount.

In its final order, the Supreme Court directed WORTH Trust to pay bonus to its workmen in accordance with the provisions of the Payment of Bonus Act, 1965, from the year 1996-1997 until the date of the order. This payment must be made within one month. The appeal was accordingly dismissed.

This judgment serves as a crucial precedent, clarifying that charitable trusts engaging in commercial manufacturing activities are not exempt from the provisions of the Payment of Bonus Act with respect to the workmen employed in those commercial ventures. It underscores the principle that the nature of the activity in which the workmen are engaged, rather than the overarching charitable objectives of the employer, determines the applicability of labor welfare legislations like the Bonus Act.


Payment of Bonus Act, 1965  

THE FACTORIES ACT, 1948  

Industrial Disputes Act, 1947