Note on Supreme Court Judgment on the issue of retrospective effect of Payment of Bonus Act Amendment in 2015 –Linking Minimum Wages and fixation at Rs.7000 with retrospective effect, from 2014-2015

As we are aware, by the said Amendment Act of 2015, two major changes were introduced to the Payment of Bonus Act, 19652 : one being the amendment of clause (13) of Section 2, raising the salary limit from Rs. 10,000/- to Rs. 21,000/- per month for the purpose of coverage under the Act; and the other being raising the wage ceiling for calculating the bonus under Section 12 from Rs. 3,500/- to Rs. 7,000/- per month or the minimum wages for the scheduled employment as fixed by the appropriate Government, whichever be the higher. Further, by way of Explanation to Section 12, it was clarified that the expression “scheduled employment” shall have the same meaning as assigned to it in clause (g) of Section 2 of the Minimum Wages Act, 1948. These amendments were given retrospective effect in Section 1 of the Amendment Act of 2015 by providing that it shall be deemed to have come into force on 01.04.2014.

The said amendments have been challenged in various writ petitions pending before different High Courts mainly on two counts: first, against the requirement of payment of bonus as per the amended provisions with retrospective effect from the year 2014-15; and secondly, against the validity of linkage to the minimum wages in regard to the calculation of bonus.

As we are aware, almost all the respective High Courts, granted stay as far as retrospective applicability, and transfer the matter to the Supreme Court for its final verdict, in the years 2016 to 2018. Karnataka High Court also filed its transfer application.

Relating to the retrospective operation of the amended provisions and linkage of calculation of bonus with minimum wages for the scheduled employment, are forming the subject-matter of more than 140 writ petitions filed across the country in as many as 18 High Courts.

As noticed, in the wake of challenge to the Amendment Act of 2015 in different High Courts; and the respective High Courts having passed different interim orders, the petitioners led by the Union of India seek transfer of all the pending writ petitions to this Court. Some of the respondents in these petitions have filed their reply, either opposing or supporting these petitions, as per their respective stands.

After detailed deliberations before the Hon’ble Supreme Court, finally have passed the judgment. JULY 11, 2022.

Relevant paragraph of the judgment:
“We need not multiply the reference to various other orders passed by this Court relating to the prayer for transfer because, ultimately, the decision to transfer or not, to this Court or to one High Court, has been taken by this Court in exercise of its jurisdiction under Article 139A of the Constitution of India with reference to the given set of facts and circumstances. No hard and fast rule or any structured formula is provided nor appears desirable; a comprehensive view of all the facts and relevant surrounding factors is the best guiding light for exercise of this jurisdiction under Article 139A of the Constitution of India.

In the present set of facts and circumstances, for what has been noticed and discussed hereinabove, we are clearly of the view that transfer of the pending writ petitions from the respective High Courts is not called for. The likelihood of divergence of views, looking to the framework of the statute itself, cannot be a ground for transfer. Equally, there appears no reason to transfer the matters to any one High Court; rather it appears just and proper that the petitions in the jurisdictional High Courts are decided with reference to their own factual background and the law applicable.

Accordingly, the prayer for transfer of the subject petitions is declined and all the interim stay orders are vacated while providing that it shall be permissible for the parties to request the respective High Courts for expeditious hearing and disposal of the pending writ petitions. For that matter, we would also request the respective High Courts to proceed with the matters expeditiously, while assigning them reasonable priority”

Arising out of this judgment, stay for applicability for the year 2014-2015, payment of bonus on revised formula, since vacated, it implies automatic applicability.

Arising out of this, the Patna High Court, held
“Payment of Bonus [Amendment], Act.2015 is constitutionally valid. Enhancement of eligibility of bonus to Rs.21, 000 per month is retrospective.

Magadh Sugar & Company Ltd Vs Union of India & others 2023 LLR 1202 [Patna HC].
 
Hence, it is better all the employers and HR fraternity  be aware of this latest legal position.

K.Vittala Rao
Management Consultant, ​Bangalore ​

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