Bonus Act_Practical Problems_2

An employer had been paying to his employees every year at the time of Deepawali one month's basic wages as Deepawali bonus for the last 10 years in addition to the bonus payable under the Payment of Bonus Act, 1965. The bonus had been paid even in those years when there were losses. The employer now wants to adjust Deepawali bonus paid by him for the current accounting year against the bonus payable by him under the Act, for the current accounting year. State with reference to the provisions of the Payment of Bonus Act, 1965, whether it is possible for the employer to make the above adjustments.

Section 17 of the Payment of Bonus Act, 1965 provides that if in any accounting year, an employer has paid any Puja bonus or other customary bonus to any employee, then he (the employer) shall be entitled to deduct the amount of bonus so paid from the amount of bonus payable by him to the employee under this Act in respect of that accounting year. The employee shall be entitled to receive only the balance. Payment of customary bonus over a period of time is immaterial. It does not create a statutory right.

Hence, employer, in the given case, shall be entitled to adjust the Deepawali bonus against the bonus payable under the Act.

Bonus Act_Practical Problems_1

The Model Mills, Nagpur refused to pay bonus to its employees on the ground that its management was controlled by an authorised controller appointed by the Government and as such it was entitled to exemption from the liability to pay bonus. Decide.

Section 32 of the Payment of Bonus Act, 1965 provides that the Act shall not apply to employees employed by an establishment engaged in any industry carried on by or under the authority of any Department of the Central Government or a State Government or a local authority.

However, in RMS vs. The Model Mills Hon. supreme court has held held that the exemption as aforesaid will not extend to cases contemplated in the given problem, i.e., where the establishment was not under the direct authority of the Central/State Government or local authority. Appointment of a controller may be a temporary phenomenon. The company was, therefore, held liable to pay bonus to its workmen. The claim of the company shall, therefore, be not tenable.