Court in Madras rejects appeals against Bonus Act modifications

The Payment of Bonus Act, 1965 was amended, as requested by many industrial entities in the state, to raise the minimum and maximum limits on salaries for bonus fixation. The Madras High Court declined to declare the revisions invalid.

Recently, the Employers’ Federation of Southern India and industrial houses, including KCP Limited, Sundaram Clayton Limited, and Rane Engine Valve Limited, filed petitions. The first bench of Chief Justice SV Gangapurwala and Justice D Bharatha Chakravarthy dismissed the cases, stating that the Payment of Bonus (Amendment) Act, 2015 did not affect the petitioners’ vested interests.

They had contested the Act’s section 2(13) change, which raised the salary cap for bonus eligibility from Rs 10,000 to Rs 21,000. In addition, they questioned whether section 12 should be amended to establish the bonus cap at Rs 7,000 instead of Rs 3,500, as well as if the Amendment Act should have retroactive effect starting on April 1, 2014.

The petitioners claimed that the changes are capricious, would impact workers at lower pay levels, and would upset the delicate equilibrium that is maintained when dividing up the allocable surplus among various employee groups.

“The amending Act’s goal is to improve, alter, or change the quantity in accordance with the prevailing circumstances. Adopting minimum wages has a reasonable link to the goals the legislation seeks to accomplish where, at least with regard to a portion of the workforce, an effective mechanism in the shape of such wages is available,” the court said.

It also said that as a result, we cannot support the petitioners’ claims that the contested law is discriminatory and amounts to class legislation. In response to the one-year challenge to the Act’s retroactive aspect, the bench said it could not identify any justification for intervention.

Referring to the Rajasthan High Court’s ruling in the JK Acrylics case, the bench affirmed the legislation and said that managements cannot argue an extra bonus sum since it is in the nature of salaries and does not violate any vested rights. “We wholeheartedly concur with the same.”