Trust-Run Manufacturing Units Remain Liable To Pay Bonus; Supreme Court Dismisses Appeal, Directs Payment From 1996-97

A bench of Justice Sudhanshu Dhulia and Justice K. Vinod Chandran heard an appeal by the Management of WORTH Trust challenging awards that workmen employed in the trust’s factories were entitled to bonus under the Payment of Bonus Act, 1965. The key issue before the Court was whether the trust fell within the exemption in Section 32(v)(a) or (c) of the Bonus Act as an institution like the Indian Red Cross Society or as an institution “established not for purposes of profit”, and whether its factory employees were therefore excluded from statutory bonus entitlements.

The Court dismissed the appeal and held that the Bonus Act applied to the trust’s factory employees. The judges found that the trust had, since 1985, engaged in commercial manufacturing activities that generated allocable surplus and that it had severed formal links with the Swedish Red Cross Society. The Court noted that “some objects and activities of the appellant might match with that of the Indian Red Cross Society but that would not be enough” to attract the exemption. The Court, in its reasoning, observed: “The Division Bench rightly observed that the appellant had severed all its links with the Swedish Red Cross Society by deleting all references to Swedish Red Cross Society from the trust deed via an amendment in 1989. Further, there is nothing on record to show that the appellant is akin to the Indian Red Cross Society, which was established by an Act of Parliament. Some objects and activities of the appellant might match with that of the Indian Red Cross Society but that would not be enough to hold that the appellant is an institution like the Indian Red Cross Society. Moreover, when it is established that the appellant is running factories, then there can be no doubt regarding the applicability of the Bonus Act. Just because such factories come under the broad umbrella of the appellant-trust, which is also involved in some charitable work, the workers cannot be deprived of the benefit of the Bonus Act. In our view, workmen of the respondent-Union, who are presently before us, are liable to receive their bonus under the Payment of Bonus Act.” The Court also observed that “by no stretch of argument can this be a ground to avoid paying a bonus, which is a statutory duty and right of the appellant and workmen respectively.”

Background The dispute began when the WORTH Trust Workers Union demanded bonus and ex-gratia for the year 1996-97 and subsequent accounting years, claiming application of the Payment of Bonus Act to employees working in factories run by the trust. The trust (earlier named Swedish Red Cross Rehabilitation Trust, renamed and reconstituted since 1985) admitted that it ran factories manufacturing automobile and industrial parts and that these operations generated profits. The Industrial Disputes Tribunal, Chennai, allowed the workmen a minimum bonus of 8.33% of annual earnings and recognised that ex-gratia payments were being made. The Single Judge of the High Court upheld the award but modified relief to permit deduction of ex-gratia already paid from the bonus. A Division Bench later dismissed the Writ Appeal. The Management of WORTH Trust challenged those conclusions before the Supreme Court.

The appellant argued that it was exempt under Section 32(v)(a) as akin to the Indian Red Cross Society or, alternatively, under Section 32(v)(c) as an institution established not for profit. The Tribunal and the High Court found these pleas untenable on the evidence, noting amendment of the trust deed in 1989 removing references to the Swedish Red Cross and the absence of any statutory or organisational parity with the Indian Red Cross Society. The Supreme Court agreed that the presence of manufacturing units brought the establishment within the definition of “factory” and thus within the Bonus Act’s ambit. The Court directed the appellant to pay bonus to its factory workmen from 1996-97 to date in accordance with the Act, within one month, and dismissed the appeal. Interim orders, if any, were vacated.

Case Details: Case No.: 2025 INSC 432 (Special Leave Petition (Civil) No. 20474 of 2019) Case Title: The Management of WORTH Trust v. The Secretary, WORTH Trust Workers Union Appearances: For the Petitioner(s): Counsel not indicated in the judgment For the Respondent(s): Counsel not indicated in the judgment