Supreme Court clarifies Payment of Bonus Act 1965 on customary bonuses

The Supreme Court ruled in a case involving the interpretation of the Payment of Bonus Act, 1965, as amended by Act 23 of 1976. The Court held that the 1976 amendment did not nullify customary bonuses, emphasizing that the Act primarily addressed profit-oriented bonuses and did not govern customary, traditional, or contractual bonuses. The Court distinguished between statutory bonuses under the Act and customary bonuses, concluding that they operated in separate spheres and did not conflict. The appeal challenging the legality of customary bonuses under the 1976 amendment was dismissed, with each party bearing their respective costs.

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Issues involved: Interpretation of the Payment of Bonus Act, 1965, specifically regarding the legality of customary bonus u/s the amending Act 23 of 1976.

Summary:
The Supreme Court examined the appellant-management's challenge to the award of the Industrial Tribunal regarding the Payment of Bonus Act, 1965, as amended by Act 23 of 1976, focusing on the issue of whether the amendment annulled customary and contractual bonuses. The dispute centered around the denial of customary bonus claimed by the workmen, with the Tribunal's decision and subsequent appeal revolving solely around customary bonus. The Court emphasized that the Bonus Act primarily dealt with profit-oriented bonuses and did not govern customary, traditional, or contractual bonuses. The Court concurred with the view that the Act left customary bonus untouched. The appellant's argument that the 1976 amendment nullified all bonus claims except profit or productivity-based bonuses was refuted based on the legislative intent and the specific provisions of the Act.

The Court analyzed the amendments brought about by Act 23 of 1976, noting that the new long title of the Bonus Act specified payment of bonus based on profits, production, or productivity, excluding customary or contractual bonuses. The Court highlighted that Section 17 of the Act distinguished between bonus payable under the Act and customary bonuses, indicating that customary bonuses were not covered by the amended Act. The appellant's reliance on Section 31A was dismissed, as it pertained to productivity bonuses and did not affect other types of bonuses like customary bonuses. The Court concluded that statutory and customary bonuses operated in separate spheres and did not conflict with each other.

Ultimately, the Court held that the appeal challenging the legality of customary bonus under the 1976 amendment Act must fail, as the claim was rooted in custom but quantified by contract, and the Act did not impede customary bonuses. While costs could have been awarded to the respondent workmen, the Court, noting the respondent's attitude during the proceedings, dismissed the appeal, directing each party to bear their respective costs.

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