Indian Kanoon - Search engine for Indian Law

The Government of India accepted a majority of the recom- mendations and the President issued on May 29, 1965 the Payment of Bonus Ordinance, 1965, providing for payment of bonus to all employees drawing salary not exceeding Rs. 1600 under the formula devised by the Commission. It is not necessary to set out the provisions of the Ordinance, for the Ordinance was replaced, by the Payment of Bonus Act 21 of 1965 and by s. 40(2) it was provided that notwithstanding such repeal, anything done or any action taken under the Payment of Bonus Ordinance, 1965, shall be deemed to have been done or taken under the Act as if the Act had commenced on May 29, 1965. Since the action taken under the Ordinance is to be deemed to have been taken under the Act, in these cases validity of the provisions of the Act alone need be considered.

By sub-s. (2) it is provided that where for any accounting year, there is no available surplus or the allocable surplus in respect of that year falls short of the amount of minimum bonus payable to the employees in the establishment under s. 10, and there is no amount or sufficient amount carried forward and "set on" under sub-s. (1) capable of being utilised for the purpose of payment of the minimum bonus, then, such minimum amount or the deficiency, shall be carried forward for being set off in the succeeding accoun- ting year up to and inclusive of the fourth accounting year. By sub-s. (3) it is provided that principle of "set-on" and "set-off" as illustrated in the Fourth Schedule shall apply to all other cases not covered by sub-s. (1) or sub-s. (2) for the purpose of payment of bonus under the Act. Bonus payable to an employee drawing wage or salary exceeding Rs. 750 per mensem has to be calculated as if the salary or wage were Rs. 750 per mensem, and an employee who has not worked for all the working days in an accounting year, the minimum bonus of Rs. 40 or Rs. 25 would be proportionately reduced (ss. 12 & 13). Section 16 makes special provisions relating to payment of bonus to employees of establishments which have been newely set up. Sections 18, 19, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30 & 31 deal with certain procedural and administrative matters. By s. 20 establishments in the public sector are in certain eventualities also made subject to the provisions of the Act. Section 32 excludes from the operation of the Act employees of certain classes and certain industries specified therein. By s. 33 the Act is made applicable to pending industrial disputes (regarding payment of bonus relating to any accounting year not being an accounting year earlier than the accounting year ending on any day in the year 1962) immediately before May 29, 1965, before the appropriate Government or any Tribunal or other authority under the Industrial Disputes Act, 1947, or under any corresponding law, or where it is pending before the Conciliation officer or for adjudication. By s. 34(1) the provisions of the Act are declared to have effect, not- withstanding anything inconsistent therewith contained in any other law for the time being in force or in the terms of any award, agreement, settlement or contract of service made before May, 29, 1965. Sub-s. (2) of s. 34 makes special overriding provisions regarding payment of bonus to employees computed as a percentage of gross profits reduced by direct taxes payable for the year, (subject to the maximum prescribed by s.11), when bonus has been paid by the employer to workmen in the "base year" as defined in Explanation 11. By s. 36 the appropriate Government is authorised, having regard to the financial position and other relevant circumstances of any establishment or class of establishments, to exempt for such period as may be specified therein such establishment or class of establishments from all or any of the provisions of the Act, and by s. 37 power is conferred upon the Central Government by order to make provision, not inconsistent with the purposes of the Act, for removal of difficulties or doubts in giving effect to the provisions of the Act.

The scheme of the Act, broadly stated, is four dimensional:

(1) to impose statutory liability upon an employer of every establishment covered by the Act to pay bonus to employees in the establishment:

(2) to define the principle of payment of bonus according to the prescribed Formula; (3) to provide for payment of minimum and maximum bonus and linking the payment of bonus with the scheme of "set-off " and "set-on"; and (4) to provide machinery for enforcement of the liability for payment of bonus.

The Act then takes note of establishments which did not pay bonus in an accounting year earlier than the one mentioned in s. 1(4), establishments which either paid bonus in an earlier accounting year with or without a dispute but no dispute was pending on May 29, 1965, and establishments in which a dispute was pending on May 29, 1965 in regard to bonus in respect of a year not earlier than the accounting year ending on any day in 1962 although no such dispute may be pending for subsequent accounting years. In respect of establishments for which the Act is made retrospective beyond what is laid down in S. 1(4) bonus is to be calculated in the manner laid down in s. 34(2). Those establishments, which come under the Act for the first time as laid down in s. 1(4), are to be governed by the Act without the modifications envisaged by ss. 33 and 34. These are establishments without a prior history of bonus payment. Establishments with a history of bonus payment come under ss. 33 and 34. They are divided into two categories. Establishments in which a dispute was pending on the date of the passing of the Ordinance in regard to bonus relating to an accounting year not earlier than the accounting year ending on any day in the year 1962 are in one class and those in which no such dispute was pending are in another class. The Explanation to S. 33 determines when dispute is to be deemed to be pending. In either of these two cases bonus is payable according to the provisions of the Act but as specially laid down in sub-s. (2) of s. 34. The Bonus Commission met for the first time on January 4, 1962 and the Ordinance came into force on May 29, 1965. These two dates determine the class of establishments to which the special provisions of ss. 33 and 34 are made applicable. The scheme may be summarized thus. The Act applies to all establishments from the accounting year commencing on any day in the year 1964 and in respect of any subsequent year. Establishments having no prior history of bonus payment are governed by the provisions of the Act without the modifications contained in ss. 33 and 34. In respect of establishments with a prior history we have two classes: