Why Stay at Retrospective effect on Bonus

There are large number of queries about obligation of the employers (establishments) to pay additional bonus for the year 2014-15.  Hence it become imperative to know the current status of the amendment particularly its retrospective effect.    

The Kerala High Court in United Planters’ Association of Southern India and another vs. Union of India, vide Writ Petition(C) No.3025/2016(C) dated 27.1.2016 and also by Karnataka High Court in Karnataka Employers Association and another, Writ Petition No.5272 & 5311/2016 dated 2.2.2016 have stayed the Amendment to the Payment of Bonus Act to the extent it gives the retrospective effect from 1.4.2014. 

 

It is pertinent to state that any order passed in a writ petition by any High Court questioning the constitutional validity of a Parliamentary Act whether interim or final, keeping in view the provisions contained in Clause (2) of Art.226 of the Constitution of India, it will have effect throughout the territory of India.
In this context it is pertinent to refer to the judgment of Supreme Court in M/s. Kusum Ingots and Alloys Ltd. vs. Union of India and another, AIR 2004 SC 2321 wherein it has been held that :

“The Court must have the requisite territorial jurisdiction. An order passed on writ petition questioning the constitutionality of a Parliamentary Act, whether interim or final, keeping in view the provisions contained in clause (2) of Art.226 of the Constitution of India, will have effect throughout the territory of India subject, of course, to the applicability of the Act.”

The Labour Office of Madhya Pradesh, Karnataka, & Allahabad has followed the above rulings and issued the instructions that no retrospective effect will be given to the amendment till the subject matter is finally decided. 

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Linking with Minimum Wages

The amended section 12 of the Payment of Bonus Act provides that for the words ‘‘three thousand and five hundred rupees’’ at both the places where they occur, the words ‘‘seven thousand rupees or the minimum wage for the scheduled employment, as fixed by the appropriate Government, whichever is higher’’ shall respectively be substituted.

The Parliament has overlooked the stark difference in the definition of “salary or wage” under the Payment of Bonus Act, 1965 and that under the Minimum Wages Act, 1948. 

The “salary or wage” as defined by sub-section 12 of section 2 of the Payment of Bonus Act, 1965 excludes all the allowances whereas the “wages” as defined by clause (h) of the Minimum Wages Act amongst other allowances includes house rent allowance.  In addition, the following :

1. Most of the establishments as covered under the Payment of Bonus Act are functioning on PAN Indian level and the minimum wages are not common in all the States hence the calculation of hours will be a big problem.
2. Even in one State for different industries the minimum wages differ from one industry/trade to another.  Even in one States, the rates of minimum wages vary in different zones.
3. The amendment is against the sprite and background of the Payment of Bonus Act. 
4.  The amendment without amending the definition of “salary or wage” as given in the Payment of Bonus Act and its contentment with the ‘wages’ under the Minimum Wages Act is unrealistic and even illegal.

Note : The above aspects are also part of the writ petitions before Kerala, Karnataka and Allahabad High Courts