2025 INSC 432 REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO._______________ OF 2025

[@ SPECIAL LEAVE PETITION (CIVIL) NO. 20474 OF 2019]

THE MANAGEMENT OF WORTH TRUST …APPELLANT(S)

Versus

THE SECRETARY, WORTH

TRUST WORKERS UNION …RESPONDENT(S)

JUDGMENT

SUDHANSHU DHULIA, J.

1. Leave granted.

2. The appellant before this Court is a trust presently known as

‘Workshop for Rehabilitation and Training of the Handicapped

Trust’, or ‘WORTH’. Prior to the year 1985, the name of this

trust was ‘Swedish Red Cross Rehabilitation Trust’ as it was

initially established by the Swedish Red Cross Society. This

Signature Not Verified trust has been doing charitable activities, including the
Digitally signed by
Nirmala Negi
Date: 2025.04.02

rehabilitation of leprosy-cured patients and other specially

[Link] IST
Reason:

abled persons.
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3. For our purpose, it is an admitted fact that since 1985, the

trust is also engaged in many industrial activities which are in

the nature of commercial activities, such as the manufacture

of automobile parts and parts for industrial machineries. This

is purely a commercial venture, and it is again an admitted

fact that from the manufacturing and sale of these parts,

which is done in its factories, profits are being generated.

These profits, for our purposes and for the purpose of the

Payment of Bonus Act, 1965 (hereinafter ‘Bonus Act’), are

known as ‘surplus’. Thus, though the factory may be under

the control of a trust, but it is also governed under the

Factories Act, 1948.

4. It is again an admitted fact that the workmen who are

employed in the factories in various capacities largely

comprise of such workers who have been cured of Leprosy or

are otherwise differently abled. These workmen have a union

known as “WORTH Trust Workers Union” (hereinafter referred

to as ‘Union’). In the year 1998, this Union raised an industrial

dispute demanding bonus and ex-gratia for the year 1996-97

and ultimately, the dispute was referred to the Industrial

Disputes Tribunal, Chennai as per Section 10(2) of the

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 Industrial Disputes Act, 1947 read with Section 22 of the

Bonus Act. The claim of the workmen union was based on the

fact that its members are workmen who are working in the

factories governed by the provisions of the Factories Act, 1948

and Industrial Disputes Act, 1947 and thus, the Payment of

Bonus Act1 is applicable to them.

5. Before the Tribunal, the Respondent-Union claimed a bonus

at the rate of 20% and ex-gratia at the rate of 5% on the annual

earning of a worker. The Tribunal partly allowed the claim of

workmen and held that workmen’s demand for bonus and ex-

gratia is justified. Tribunal ordered that workmen are entitled

to a bonus of 8.33 % on their annual earnings and further, the

Tribunal also held that workmen are entitled to an ex-gratia

amount, which they have already been receiving from the

appellant. This award was challenged before the High Court

by the appellant. The learned Single Judge bench upheld the

award of the Tribunal but modified the relief to the extent that

the bonus shall be awarded after deducting the amount

1 Section 1(3)(a) of the Payment of Bonus Act makes the Act applicable to every factory. It
reads as follows:
Section 1: Short title, extent and application-
(1) …..
(2) …..
(3) …..it shall apply to-
(a) every factory;…

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 already paid as ex-gratia. Thereafter, the Writ Appeal, filed by

appellant challenging the findings of the Single Judge, was

also dismissed vide the impugned order dated 20.03.2019.

Aggrieved, the appellant is before us.

6. We have heard both sides and perused the material on record.

7. Let us first understand the scheme and applicability of the

Bonus Act. The practice of paying bonus in India originated

during the First World War when some textile mills started

giving bonus to their workers under the Defence of India Rules.

Later in 1960, at the meetings of the Eighteenth Session of the

standing Labour Committee of the Government of India, it was

agreed that a Commission be appointed to evolve norms for

payment of bonus. Consequently, a Bonus Commission was

appointed and thereafter, the Government of India

promulgated an Ordinance accepting recommendations of the

Bonus Commission with some modification. This ordinance

was later replaced by the Payment of Bonus Act, 1965. In this

regard, the Statement of Object and Reasons of the Bonus Act

states as follows:

“Statement of Objects and Reasons.—A

Tripartite Commission was set up by the
Government of India by their Resolution No.
WB-20(9)/61, dated 6th December, 1961, to

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 consider in a comprehensive manner, the
question of payment of bonus based on
profits to employees employed in
establishments and to make
recommendations to the Government. The
Commission's Report containing their
recommendations was received by the
Government on 24th January, 1964. In their
Resolution No. WB˜20(3)/64, dated the 2nd
September, 1964, the Government
announced acceptance of the Commission's
recommendations subject to a few
modifications as were, mentioned therein.
With a view to implement the
recommendations of the Commission as
accepted by the Government, the Payment of
Bonus Ordinance, 1965, was promulgated
on 29th May, 1965. The object of the Bill is
to replace the said Ordinance.”

8. As already discussed above, Section 1(3)(a) of the Bonus Act

makes the Bonus Act applicable to all the factories. The term

‘factory’ is defined under Section 2(17) of the Bonus Act as

follows:

“(17) “factory” shall have the same meaning

as in clause (m) of section 2 of the Factories
Act, 1948;”

Clause (m) of Section 2 of the Factories Act, 1948 reads as

follows:

“(m) “factory” means any premises including the

precincts thereof—
(i) whereon ten or more workers are working,
or were working on any day of the
preceding twelve months, and in any part of

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 which a manufacturing process is being
carried on with the aid of power, or is
ordinarily so carried on, or
(ii) whereon twenty or more workers are
working, or were working on any day of the
preceding twelve months, and in any part of
which a manufacturing process is being
carried on without the aid of power, or is
ordinarily so carried on,—
but does not include a mine subject to the
operation of the Mines Act, 1952 (35 of 1952),
or a mobile unit belonging to the armed forces
of the Union, a railway running shed or a
hotel, restaurant or eating place;
Explanation [I]—For computing the number of
workers for the purposes of this clause all the
workers in different groups and relays] in a
day shall be taken into account;]
Explanation II.—For the purposes of this
clause, the mere fact that an Electronic Data
Processing Unit or a Computer Unit is installed
in any premises or part thereof, shall not be
construed to make it a factory if no
manufacturing process is being carried on in
such premises or part thereof;

9. The payment of minimum and maximum bonuses is made as

per Sections 10 and 11 of the Bonus Act. These provisions read

as follows:

10. Payment of minimum bonus.—Subject

to the other provisions of this Act, every
employer shall be bound to pay to every
employee in respect of the accounting year
commencing on any day in the year 1979
and in respect of every subsequent
accounting year, a minimum bonus which

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 shall be 8.33 per cent. of the salary of wage
earned by the employee during the
accounting year or one hundred rupees,
whichever is higher, whether or not the
employer has any allocable surplus in the
accounting year:
Provided that where an employee has
not completed fifteen years of age at the
beginning of the accounting year, the
provisions of this section shall have effect in
relation to such employees as if for the words
“one hundred rupees”, the words “sixty
rupees” were substituted.

11. Payment of maximum bonus- (1)

Where in respect of any accounting year
referred to in Section 10, the allocable
surplus exceeds the amount of minimum
bonus payable to the employees under that
section, the employer shall, in lieu of such
minimum bonus, be bound to pay to every
employee in respect of that accounting year
bonus which shall be an amount in
proportion to the salary or wage earned by
the employee during the accounting year
subject to a maximum of twenty per cent of
such salary or wage.
(2) In computing the allocable surplus under
this section, the amount set on or the amount
set off under the provisions of Section 15
shall be taken into account in accordance
with the provisions of that section.

10. The workmen of the Respondent-Union argued that they are

engaged in manufacturing activities and are working in

factories run by the appellant, and thus, in terms of the above

provisions of the Bonus Act, they are entitled to the payment

of a bonus. The workmen had demanded a maximum bonus

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 of 20% of their annual earnings as per section 11 of the Bonus

Act.

11. Under Section 32, the Bonus Act is not made applicable to a

certain class of employees. The appellant has consistently

taken the defence that it is exempted under Section 32(v)(a)

and (c) of the Bonus Act, and thus, not liable to pay any bonus.

The relevant portion of Section 32 of the Bonus Act reads as

follows:

“32. Act not to apply to certain classes of

employees.—Nothing in this Act shall apply to—
…
…
(v) employees employed by—
(a) the Indian Red Cross Society or any other
institution of a like nature (including its
branches);
…
(c) institutions (including hospitals, chambers
of commerce and social welfare institutions)
established not for purposes of profit..

12. The argument of the appellant before the Tribunal and before

all other Courts including this Court therefore is that the

Bonus Act does not apply as its employees are to be treated as

employees of ‘the Indian Red Cross Society’ and if not, then

they have to be treated as the employees of an ‘institution of a

like nature’, which is like Indian Red Cross Society, and thus,

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 exempted from payment of bonus in terms of Section 32(v)(a)

of the Bonus Act. In the alternative, the appellant also argued

that it can be treated as an institution which has been

‘established not for the purposes of profit’ and thus, exempted

as per Section 32(v)(c) of the Bonus Act.

13. After taking evidence from both sides, the Tribunal came to

the conclusion that though trust was established in 1969 as

‘Swedish Red Cross Rehabilitation Trust’ with the charitable

object of rehabilitation of former leprosy patients or other

persons with disabilities, but since the year 1985 there has

been a marked shift in the activities of the trust. Not only did

the name of the trust change from ‘Swedish Red Cross

Rehabilitation Trust’ to ‘Workshop for Rehabilitation &

Training of the Handicapped’ (‘WORTH’), but the very object of

the trust also got diluted and its work was expanded since

appellant started commercial activities at a greater scale.

These commercial activities include the manufacturing and

sale of certain automobile parts and other types of equipment.

The factories make a profit, which is called surplus, though

this profit is allegedly again invested in similar rehabilitation

activities which the trust has been doing.

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14. The workmen do not deny the fact that the appellant has been

doing charitable work and they also admit that most of the

workmen are the persons cured of leprosy who had been

rehabilitated by the trust, but again it is a fact that these

workmen are working in factories and fall within the definition

of ‘workmen’ and ‘employee’ under the Factories Act, 1948 as

well as the Bonus Act. Since, admittedly, they work in

factories, the Bonus Act is applicable in their case, as are all

other beneficial legislations such as the Factories Act,

Employees’ State Insurance Act, Employees Provident Fund

Act etc.

15. The appellant’s contention that it is exempted under Section

32(v) of the Bonus Act is without any merit, and the Tribunal

rightly observed that there is no evidence to show that the

appellant-trust is run by Indian Red Cross Society or that the

appellant is an institution similar to Indian Red Cross Society.

Nor can it be said that appellant is an institution exempted

under section 32(v)(c) of the Bonus Act. The learned Single

Judge of the High Court also noted that since the year 1985,

appellant has been engaged in commercial activities, and it is

not dependent upon the Red Cross Society.

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16. The Division Bench of the High Court, in its well-reasoned

order, has elaborated on this aspect. 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.

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17. The Appellant has submitted that it has already been paying

some amount, which is called ex-gratia, as a measure of

charity to the workmen and this fact has also been admitted

by the respondent-union. However, 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.

18. The Tribunal had awarded the minimum bonus to the

workmen i.e., 8.33 % of the annual earnings and when this

award was challenged by the appellant before the High Court,

the learned Single Judge dismissed the challenge with a slight

modification that bonus shall be paid after deducting the

amount of ex-gratia already paid to workmen. This order of the

Single Judge directing adjustment of the amount of ex gratia

against the bonus was never challenged by the workmen.

19. We hold 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.

Therefore, the appellant is directed to pay bonus to its

workmen, as per provisions of the Bonus Act, from the year

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 1996-1997 till date. This must be done within a month of this

order.

20. The appeal stands dismissed in the above terms.

21. Pending application(s), if any, stand(s) disposed of.

22. Interim order(s), if any, stand(s) vacated.

…......………………………….J.
[SUDHANSHU DHULIA]

..….....………………………….J.
[K. VINOD CHANDRAN]

NEW DELHI,
APRIL 2, 2025.

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