Charitable Status Cannot Override Applicability of Labour Welfare Laws: Supreme Court Holds Bonus Act Applicable to Workers of WORTH Trust

“Ex Gratia is No Substitute for Statutory Bonus” — Supreme Court Orders Payment of Bonus to Differently-Abled Workmen of WORTH Trust. Supreme Court dismissed the appeal of WORTH Trust and upheld the award of statutory bonus to the workmen under the Payment of Bonus Act, 1965. The Court emphatically held that “the appellant is not exempted under Section 32(v)(a) or (c) of the Bonus Act, and the workmen of the respondent-Union, who are engaged by the appellant in its factories, are entitled to get the bonus in accordance with law.”

The appellant-trust, which was initially a charitable institution established as the Swedish Red Cross Rehabilitation Trust, had transitioned into a commercial venture by 1985. The Court found, “since the year 1985 there has been a marked shift in the activities of the trust… manufacturing and sale of automobile parts and other types of equipment is done generating profits, called surplus.” The Court rejected the argument that merely because the appellant continued charitable activities, its workers could be deprived of statutory benefits.

The appellant claimed exemption under Section 32 of the Bonus Act, contending that it was an institution “of like nature” to the Indian Red Cross Society or established not for profit. The Court dismissed this plea, holding that, “The Division Bench rightly observed that the appellant had severed all its links with the Swedish Red Cross Society by deleting all references to the Swedish Red Cross Society from the trust deed via an amendment in 1989.”

The Court further noted, “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.”

Since the appellant was running factories governed by the Factories Act, 1948, employing more than ten workmen, the Court held, “When it is established that the appellant is running factories, then there can be no doubt regarding the applicability of the Bonus Act.”

The Bench clarified that the payment of ex gratia could not replace the statutory mandate. The Court held, “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.”

Upholding the award of minimum bonus of 8.33% of annual earnings, as directed by the Tribunal and affirmed by the High Court (after adjusting ex gratia already paid), the Court directed, “the appellant is directed to pay bonus to its workmen, as per provisions of the Bonus Act, from the year 1996-1997 till date. This must be done within a month of this order.”

Date of Decision: April 2, 2025