Holding

A charitable trust that runs profit‑making factories is not exempt under section 32 of the Payment of Bonus Act and must pay bonus to its workmen.

Summary

The Worth Trust, a charitable organization that also runs commercial factories, was challenged by its workers' union for payment of bonus and ex-gratia for the year 1996-97. The union argued that the workers, employed in the Trust's factories, fall within the definition of "workmen" under the Factories Act and are therefore covered by the Payment of Bonus Act, 1965. The Trust contended that it was exempt under section 32(v)(a) and (c) of the Bonus Act because it is a charitable institution akin to the Indian Red Cross Society and is not established for profit. The Supreme Court held that the Trust’s commercial activities and operation of factories bring it within the ambit of the Bonus Act and that no evidence showed it was an institution exempt under section 32. Consequently, the Court ordered the Trust to pay the statutory bonus from 1996-97 onward, rejecting the exemption claim. The appeal was dismissed.

Issues considered

Whether a charitable trust engaged in commercial manufacturing activities is exempt from the Payment of Bonus Act, 1965 under section 32(v)(a) or (c).
Whether workers employed in such factories are covered by the definition of "workmen" and entitled to statutory bonus.

Legislation cited

Factories Act, 1948
Industrial Disputes Act, 1947
Payment of Bonus Act, 1965s. 10, s. 11, s. 32

Headnote

Issue for Consideration Issue arose as to whether the appellant-trust which is engaged in charitable and also commercial activities can be exempted under section 32 of the Payment of Bonus Act, 1965 and thus, not liable to pay any bonus to its workmen. Headnotes† Payment of ss.10, 11, 32 – Factories Act, 1948 – Industrial Disputes Act, 1947 – Appellant-trust was doing charitable activities and it was also engaged in industrial activities of commercial nature – Workmen employed by appellant-trust largely comprise of workers cured of

Subjects

Section 32 of Payment of Bonus Act, 1965Workshop for Rehabilitation and Training of the Handicapped Trust (WORTH)Swedish Red Cross SocietyCharitable activitiesRehabilitation of leprosy‑cured patientsCommercial activitiesWORTH Trust Workers UnionClaim of bonus and ex‑gratiaScheme and applicability of the Bonus ActIndian Red Cross SocietyInstitution of a like naturePayment of bonusEstablished not for the purposes of profitStatutory duty and right of the appellant and workmen

Judgment

[2025] 5 S.C.R. 360 : 2025 INSC 432

The Management of Worth Trust
v.
The Secretary, Worth Trust Workers Union
(Civil Appeal No. 4717 of 2025)
02 April 2025
[Sudhanshu Dhulia* and K. Vinod Chandran, JJ.]

Issue for Consideration
Issue arose as to whether the appellant-trust which is engaged in
charitable and also commercial activities can be exempted under
section 32 of the Payment of Bonus Act, 1965 and thus, not liable
to pay any bonus to its workmen.

Headnotes†
Payment of Bonus Act, 1965 – ss.10, 11, 32 – Factories Act,
1948 – Industrial Disputes Act, 1947 – Appellant-trust was
doing charitable activities and it was also engaged in industrial
activities of commercial nature – Workmen employed by
appellant-trust largely comprise of workers cured of leprosy
and they had formed a union – Respondent-union raised
the issue demanding bonus and ex-gratia for the year 1996-
97 – Tribunal held that respondent-union claim of bonus and
ex-gratia was justified – Tribunal ordered that workmen were
entitled to a bonus of 8.33% on their annual earnings and
further held that they were entitled to an ex-gratia amount –
The Single Judge of the High Court upheld the award of
the Tribunal but modified the relief to the extent that bonus
be awarded after deducting the amount already paid ex-
gratia – Writ appeal filed by the appellant was dismissed –
Correctness:
Held: Workmen do not deny the fact that the appellant has been
doing charitable work and they also admit that most of the workmen
are the persons cured of leprosy who had been rehabilitated by
the trust, but again it is a fact that these workmen are working in
factories and fall within the definition of ‘workmen’ and ‘employee’
under the Factories Act, 1948 as well as the Bonus Act – Since,

* Author
[2025] 5 S.C.R. 361

The Management of Worth Trust v.
The Secretary, Worth Trust Workers Union

admittedly, they work in factories, the Bonus Act is applicable in their
case, as are all other beneficial legislations such as the Factories
Act, Employees’ State Insurance Act, Employees Provident Fund
Act etc. – Just because factories run by the appellant come under
the broad umbrella of the appellant-trust, which is also involved in
some charitable work, the workers cannot be deprived of the benefit
of the Bonus Act – Workmen of the respondent-Union are liable
to receive their bonus under the Payment of Bonus Act – Though
appellant has been already paying some amount, which is called
ex-gratia, as a measure of charity to the workmen – However, same
cannot be ground to avoid paying a bonus, which is a statutory
duty and right of the appellant and workmen respectively – Thus,
appellant is not exempted u/s. 32(v)(a) or (c) of the Bonus Act,
and the workmen of the respondent-Union, who are engaged
by the appellant in its factories, are entitled to get the bonus in
accordance with law. [Paras 14, 16, 17, 19]
Payment of Bonus Act, 1965 – Statement of objects and
reasons – Scheme and applicability – Discussed. [Para 7]

List of Acts
Payment of Bonus Act, 1965; Factories Act, 1948; Industrial
Disputes Act, 1947.

List of Keywords
Section 32 of Payment of Bonus Act, 1965; Workshop for
Rehabilitation and Training of the Handicapped Trust’ (WORTH);
Swedish Red Cross Society; Charitable activities; Rehabilitation
of leprosy-cured patients; Commercial activities; WORTH
Trust Workers Union; Claim of bonus and ex-gratia; Scheme
and applicability of the Bonus Act; Indian Red Cross Society;
Institution of a like nature; Payment of bonus; Established not for
the purposes of profit; Statutory duty and right of the appellant
and workmen.

Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4717 of 2025
From the Judgment and Order dated 20.03.2019 of the High Court
of Judicature at Madras in WA No. 1732 of 2013
362 [2025] 5 S.C.R.

Supreme Court Reports

Appearances for Parties
Advs. for the Appellant:
R. Anand Padmanabhan, Sr. Adv., Arimardhan Sharma, Ms. Ruchi
Arya, Shashi Bhushan Kumar.
Advs. for the Respondent:
Gautam Narayan, Sr. Adv., Ms. Asmita Singh, Abheet Mangleek,
Tushar Nair, Anirudh Anand, Punishk Handa.

Judgment / Order of the Supreme Court

Judgment

Sudhanshu Dhulia, J.

1. Leave granted.
2. The appellant before this Court is a trust presently known as
‘Workshop for Rehabilitation and Training of the Handicapped
Trust’, or ‘WORTH’. Prior to the year 1985, the name of this trust
was ‘Swedish Red Cross Rehabilitation Trust’ as it was initially
established by the Swedish Red Cross Society. This trust has been
doing charitable activities, including the rehabilitation of leprosy-cured
patients and other specially abled persons.
3. For our purpose, it is an admitted fact that since 1985, the trust is
also engaged in many industrial activities which are in the nature of
commercial activities, such as the manufacture of automobile parts
and parts for industrial machineries. This is purely a commercial
venture, and it is again an admitted fact that from the manufacturing
and sale of these parts, which is done in its factories, profits are being
generated. These profits, for our purposes and for the purpose of the
Payment of Bonus Act, 1965 (hereinafter ‘Bonus Act’), are known
as ‘surplus’. Thus, though the factory may be under the control of a
trust, but it is also governed under the Factories Act, 1948.
4. It is again an admitted fact that the workmen who are employed in
the factories in various capacities largely comprise of such workers
who have been cured of Leprosy or are otherwise differently abled.
These workmen have a union known as “WORTH Trust Workers
Union” (hereinafter referred to as ‘Union’). In the year 1998, this
Union raised an industrial dispute demanding bonus and ex-gratia
for the year 1996-97 and ultimately, the dispute was referred to the
[2025] 5 S.C.R. 363

The Management of Worth Trust v.
The Secretary, Worth Trust Workers Union

Industrial Disputes Tribunal, Chennai as per Section 10(2) of the
Industrial Disputes Act, 1947 read with Section 22 of the Bonus
Act. The claim of the workmen union was based on the fact that its
members are workmen who are working in the factories governed
by the provisions of the Factories Act, 1948 and Industrial Disputes
Act, 1947 and thus, the Payment of Bonus Act1 is applicable to them.
5. Before the Tribunal, the Respondent-Union claimed a bonus at the
rate of 20% and ex-gratia at the rate of 5% on the annual earning
of a worker. The Tribunal partly allowed the claim of workmen and
held that workmen’s demand for bonus and ex-gratia is justified.
Tribunal ordered that workmen are entitled to a bonus of 8.33 % on
their annual earnings and further, the Tribunal also held that workmen
are entitled to an ex-gratia amount, which they have already been
receiving from the appellant. This award was challenged before the
High Court by the appellant. The learned Single Judge bench upheld
the award of the Tribunal but modified the relief to the extent that the
bonus shall be awarded after deducting the amount already paid as
ex-gratia. Thereafter, the Writ Appeal, filed by appellant challenging the
findings of the Single Judge, was also dismissed vide the impugned
order dated 20.03.2019. Aggrieved, the appellant is before us.
6. We have heard both sides and perused the material on record.
7. Let us first understand the scheme and applicability of the Bonus
Act. The practice of paying bonus in India originated during the First
World War when some textile mills started giving bonus to their
workers under the Defence of India Rules. Later in 1960, at the
meetings of the Eighteenth Session of the standing Labour Committee
of the Government of India, it was agreed that a Commission be
appointed to evolve norms for payment of bonus. Consequently, a
Bonus Commission was appointed and thereafter, the Government
of India promulgated an Ordinance accepting recommendations of
the Bonus Commission with some modification. This ordinance was
later replaced by the Payment of Bonus Act, 1965. In this regard, the
Statement of Object and Reasons of the Bonus Act states as follows:

1 Section 1(3)(a) of the Payment of Bonus Act makes the Act applicable to every factory. It reads as
follows:
Section 1: Short title, extent and application-
(1) …..
(2) …..
(3) …..it shall apply to-
(a) every factory;…
364 [2025] 5 S.C.R.

Supreme Court Reports

“Statement of Objects and Reasons.—A Tripartite
Commission was set up by the Government of India by their
Resolution No. WB-20(9)/61, dated 6th December, 1961,
to consider in a comprehensive manner, the question of
payment of bonus based on profits to employees employed
in establishments and to make recommendations to the
Government. The Commission’s Report containing their
recommendations was received by the Government on 24th
January, 1964. In their Resolution No. WB˜20(3)/64, dated
the 2nd September, 1964, the Government announced
acceptance of the Commission’s recommendations subject
to a few modifications as were, mentioned therein. With a
view to implement the recommendations of the Commission
as accepted by the Government, the Payment of Bonus
Ordinance, 1965, was promulgated on 29th May, 1965.
The object of the Bill is to replace the said Ordinance.”
8. As already discussed above, Section 1(3)(a) of the Bonus Act makes
the Bonus Act applicable to all the factories. The term ‘factory’ is
defined under Section 2(17) of the Bonus Act as follows:
“(17) “factory” shall have the same meaning as in clause
(m) of section 2 of the Factories Act, 1948;”
Clause (m) of Section 2 of the Factories Act, 1948 reads as follows:
“(m) “factory” means any premises including the precincts
thereof—
(i) whereon ten or more workers are working, or were
working on any day of the preceding twelve months,
and in any part of which a manufacturing process is
being carried on with the aid of power, or is ordinarily
so carried on, or
(ii) whereon twenty or more workers are working, or
were working on any day of the preceding twelve
months, and in any part of which a manufacturing
process is being carried on without the aid of power,
or is ordinarily so carried on,—
but does not include a mine subject to the operation
of the Mines Act, 1952 (35 of 1952), or a mobile unit
belonging to the armed forces of the Union, a railway
running shed or a hotel, restaurant or eating place;
[2025] 5 S.C.R. 365

The Management of Worth Trust v.
The Secretary, Worth Trust Workers Union

Explanation [I]—For computing the number of workers
for the purposes of this clause all the workers in different
groups and relays] in a day shall be taken into account;]
Explanation II.—For the purposes of this clause, the mere
fact that an Electronic Data Processing Unit or a Computer
Unit is installed in any premises or part thereof, shall not be
construed to make it a factory if no manufacturing process
is being carried on in such premises or part thereof;
9. The payment of minimum and maximum bonuses is made as per
Sections 10 and 11 of the Bonus Act. These provisions read as follows:
10. Payment of minimum bonus.—Subject to the other
provisions of this Act, every employer shall be bound to
pay to every employee in respect of the accounting year
commencing on any day in the year 1979 and in respect
of every subsequent accounting year, a minimum bonus
which shall be 8.33 per cent. of the salary of wage earned
by the employee during the accounting year or one hundred
rupees, whichever is higher, whether or not the employer
has any allocable surplus in the accounting year:
Provided that where an employee has not completed fifteen
years of age at the beginning of the accounting year, the
provisions of this section shall have effect in relation to
such employees as if for the words “one hundred rupees”,
the words “sixty rupees” were substituted.
11. Payment of maximum bonus- (1) Where in respect of
any accounting year referred to in Section 10, the allocable
surplus exceeds the amount of minimum bonus payable
to the employees under that section, the employer shall,
in lieu of such minimum bonus, be bound to pay to every
employee in respect of that accounting year bonus which
shall be an amount in proportion to the salary or wage
earned by the employee during the accounting year subject
to a maximum of twenty per cent of such salary or wage.
(2) In computing the allocable surplus under this section, the
amount set on or the amount set off under the provisions
of Section 15 shall be taken into account in accordance
with the provisions of that section.
366 [2025] 5 S.C.R.

Supreme Court Reports

10. The workmen of the Respondent-Union argued that they are engaged
in manufacturing activities and are working in factories run by the
appellant, and thus, in terms of the above provisions of the Bonus
Act, they are entitled to the payment of a bonus. The workmen had
demanded a maximum bonus of 20% of their annual earnings as
per section 11 of the Bonus Act.
11. Under Section 32, the Bonus Act is not made applicable to a certain
class of employees. The appellant has consistently taken the defence
that it is exempted under Section 32(v)(a) and (c) of the Bonus Act,
and thus, not liable to pay any bonus. The relevant portion of Section
32 of the Bonus Act reads as follows:
“32. Act not to apply to certain classes of employees.—
Nothing in this Act shall apply to—
…
…
(v) employees employed by—
(a) the Indian Red Cross Society or any other
institution of a like nature (including its branches);
…
(c) institutions (including hospitals, chambers of
commerce and social welfare institutions) established
not for purposes of profit..
12. The argument of the appellant before the Tribunal and before all other
Courts including this Court therefore is that the Bonus Act does not
apply as its employees are to be treated as employees of ‘the Indian
Red Cross Society’ and if not, then they have to be treated as the
employees of an ‘institution of a like nature’, which is like Indian Red
Cross Society, and thus, exempted from payment of bonus in terms
of Section 32(v)(a) of the Bonus Act. In the alternative, the appellant
also argued that it can be treated as an institution which has been
‘established not for the purposes of profit’ and thus, exempted as
per Section 32(v)(c) of the Bonus Act.
13. After taking evidence from both sides, the Tribunal came to the
conclusion that though trust was established in 1969 as ‘Swedish Red
Cross Rehabilitation Trust’ with the charitable object of rehabilitation
of former leprosy patients or other persons with disabilities, but since
[2025] 5 S.C.R. 367

The Management of Worth Trust v.
The Secretary, Worth Trust Workers Union

the year 1985 there has been a marked shift in the activities of
the trust. Not only did the name of the trust change from ‘Swedish
Red Cross Rehabilitation Trust’ to ‘Workshop for Rehabilitation &
Training of the Handicapped’ (‘WORTH’), but the very object of the
trust also got diluted and its work was expanded since appellant
started commercial activities at a greater scale. These commercial
activities include the manufacturing and sale of certain automobile
parts and other types of equipment. The factories make a profit,
which is called surplus, though this profit is allegedly again invested
in similar rehabilitation activities which the trust has been doing.
14. The workmen do not deny the fact that the appellant has been doing
charitable work and they also admit that most of the workmen are the
persons cured of leprosy who had been rehabilitated by the trust, but
again it is a fact that these workmen are working in factories and fall
within the definition of ‘workmen’ and ‘employee’ under the Factories
Act, 1948 as well as the Bonus Act. Since, admittedly, they work in
factories, the Bonus Act is applicable in their case, as are all other
beneficial legislations such as the Factories Act, Employees’ State
Insurance Act, Employees Provident Fund Act etc.
15. The appellant’s contention that it is exempted under Section 32(v) of
the Bonus Act is without any merit, and the Tribunal rightly observed
that there is no evidence to show that the appellant-trust is run by
Indian Red Cross Society or that the appellant is an institution similar
to Indian Red Cross Society. Nor can it be said that appellant is an
institution exempted under section 32(v)(c) of the Bonus Act. The
learned Single Judge of the High Court also noted that since the
year 1985, appellant has been engaged in commercial activities,
and it is not dependent upon the Red Cross Society.
16. The Division Bench of the High Court, in its well-reasoned order, has
elaborated on this aspect. The Division Bench rightly observed that
the appellant had severed all its links with the Swedish Red Cross
Society by deleting all references to Swedish Red Cross Society from
the trust deed via an amendment in 1989. Further, there is nothing
on record to show that the appellant is akin to the Indian Red Cross
Society, which was established by an Act of Parliament. Some objects
and activities of the appellant might match with that of the Indian
Red Cross Society but that would not be enough to hold that the
appellant is an institution like the Indian Red Cross Society. Moreover,
when it is established that the appellant is running factories, then
368 [2025] 5 S.C.R.

Supreme Court Reports

there can be no doubt regarding the applicability of the Bonus Act.
Just because such factories come under the broad umbrella of the
appellant-trust, which is also involved in some charitable work, the
workers cannot be deprived of the benefit of the Bonus Act. In our
view, workmen of the respondent-Union, who are presently before
us, are liable to receive their bonus under the Payment of Bonus Act.
17. The Appellant has submitted that it has already been paying some
amount, which is called ex-gratia, as a measure of charity to the
workmen and this fact has also been admitted by the respondent-
union. However, by no stretch of argument can this be a ground
to avoid paying a bonus, which is a statutory duty and right of the
appellant and workmen respectively.
18. The Tribunal had awarded the minimum bonus to the workmen i.e.,
8.33 % of the annual earnings and when this award was challenged
by the appellant before the High Court, the learned Single Judge
dismissed the challenge with a slight modification that bonus shall be
paid after deducting the amount of ex-gratia already paid to workmen.
This order of the Single Judge directing adjustment of the amount of
ex gratia against the bonus was never challenged by the workmen.
19. We hold that the appellant is not exempted under section 32(v)(a)
or (c) of the Bonus Act, and the workmen of the respondent-Union,
who are engaged by the appellant in its factories, are entitled to
get the bonus in accordance with law. Therefore, the appellant is
directed to pay bonus to its workmen, as per provisions of the Bonus
Act, from the year 1996-1997 till date. This must be done within a
month of this order.
20. The appeal stands dismissed in the above terms.
21. Pending application(s), if any, stand(s) disposed of.
22. Interim order(s), if any, stand(s) vacated.

Result of the case: Appeal dismissed.

†
Headnotes prepared by: Ankit Gyan