BINNY LTD. versus THEIR WORKMEN

Citation: [1972] 3 S.C.R. 462 · Decided: 15-02-1972 · Supreme Court of India · Bench: G.K. MITTER · Disposal: Dismissed

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Judgment (excerpt)

462 
)INNYLTD. 
v. 
THEIR WORKMl!:N 
February 15, 1972 
[C. A. VAIDIALINGAM, I. D. DuA AND G. K. MITTER, 1J.] 
The Payment of Bonus Act, 1965. $1'. 17 and l~Direcll'o# to' pay 
half yearly bonus-If justified-Payment of additional bonus-Metliod of 
calculation. 
B 
The appellant company was making two payments of bonus every year 
one for too half year ending 30th June and the other for the half year c 
ending 3 !st Dece111ber, The payment wao on the basi• of profits earned 
by it and the payment was not a condition of service and had nothing 
to do with any custom or festival. 
When the Payment of Bonus Act, 
1%5 came into force, the appellant issued a circular that as bonus was 
payable under Jaw only within a period.of 8 months from the end·of the 
accounting year (the appellant's accounting year was the calendar year), 
no bonus was payable for the accounting year 1965 until the accoun!S for · 
the year are closed, and the announced payment· of one month's basic 
D 
wages as advance against wages for the half year endi~g. 30th June 1965. 
The questions, (l) whether the appellant was justified in.announcing 
the payment as advance against wages iiistead of as advance bonus, and 
(2) whether the respondents were justified in claiming bonus for the years 
1962 and 1963, in addition to what had already been paid by the appellant 
were referred to the Industrial Tribunal. 
On the first question the Tribunal held that the appellant was not 
justified ln anncunc1ng the payment towards advance wages and directed 
the appellant to pay profit bonus in .two instalments-one as advmce 
against the final declaration of bonus, and the balance; if any, as the second 
instalment. 
On the second question the Tribunal held that the question of 
bonus payable was to be calculated in accordance with the Labour' Appel-
late Tribunal Full Bench Formula approved in AS30Ciated Cement Com-
panies Ltd. v. Workmen, [19591 S.C.R.25; that in calculating the re~ on 
Reserves the claim of the appellant to iJtclude in the working C84>ltal the 
amounts sunk in \a) fixed assets and (b) capital work in progress should 
be disallowed; and that the claim of the appellant for a provision for re-
habilitation should be rejected: 
In apeal to this Court. · 
HELD; (I) (a) Under the Act, bonus for a particular accoiJnting'year 
will have to be computed in accordance with the provisions of the Act (Ill 
the basis of the gross profits determined at the close af the accounting 
year. . The Act makes pr~vision as to how the gross profits, available and 
allocable surplus are to be calculated, and s, 19 prescribes 8 montha from 
ll>c close of the accounting year as the period within which the ,bonus 
was to be normally paid., The scheme of the Act shows that a claim for 
llonus can be made only after the close of the accounting year, because, 
groa profits and the ~vailable and allocable surplus can be worked out 
only at the end of the accounting year and not earlier, whereas the direction' 
given by the Tribunal requires the employer to make two computati~ at 
the end of each half y~ar. /469 E-H; 470 A-Bl 
E. 
F 
G 
H 
A 
B 
c 
D 
E 
F 
G 
H 
BINNY LTD. 1'. WORKMEN 
463 
(b) The direction given by the Tribunal making it obligatory on the 
ntanagement to make half yearly payments of bonus apart from being 
.. ipposed to the scheme of the Act. runs counter to s. 19. Under the 
section, whether it is the minimum bonus of 4% under s. 19 or the 
maximum bonus of 20% under s. 11, they have to be paid only within 
a period 'bf 8 months from the closing of the accounting year. [470 C-E] 
( c) Section 17 (b) is an enabling section in favour of the employer 
in that it visualises a situation when he may have paid during the accounting 
year a part of the bonus payable under the Act, before the date on which 
such bonus becomes payable. lf the payment was by way of profit bonu8, 
he is entitled to deduct it from the final amount that may be payable 
under the Act. 
But that provi:;ion does not give a right to an emplo)'ee 
to claim payment of bonus by way of part payment during the currency 
of the accounting year. Therefore, the mere fact that the appellant has 
heen making payments on previous occasions half yearly, does not confer 
a right on the employee to 'have such payments by way of bonus in the 
same manner after the Act has come into force. 
Hence, the Tribunal 
had r:io jurisdiction to give a direction to ~he appellant to pay bonus at the 
end of each half ye

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