Case Note & Summary
The dispute arose between a sugar factory management and its workmen regarding the inclusion of a retaining allowance in the calculation of bonus under the Payment of Bonus Act, 1965. The factory, which operates seasonally, paid workmen a retaining allowance during the off-season to incentivize their return for the next crushing season. The Industrial Court initially ruled that this allowance could not be included in the bonus calculation. However, the Gujarat High Court overturned this decision, stating that the retaining allowance fell within the definition of 'salary or wage' as per Section 2(21) of the Act. The Supreme Court was approached for special leave to appeal against this ruling. The court analyzed the nature of the retaining allowance, concluding that it constituted deferred wages and was essential for retaining the services of the workmen. The court emphasized that the allowance was remuneration correlated to service and should be included in the bonus calculation. Consequently, the Supreme Court upheld the High Court's decision, dismissing the special leave petition and affirming that the retaining allowance must be considered for bonus computation under Section 10 of the Act.
Headnote
A) Labour Law - Definition of Salary or Wage - Inclusion of Retaining Allowance - Payment of Bonus Act, 1965, Section 2(21) - The retaining allowance paid to employees during the off-season is considered remuneration correlated to service and falls within the definition of 'salary or wage' under Section 2(21) of the Act. The court held that such allowance must be included in the calculation of bonus payable under Section 10 of the Act, as it does not fall within the exclusionary clause (Paras 741A-D).
Issue of Consideration
Whether the retaining allowance paid to workmen during the off-season should be included in the calculation of bonus under the Payment of Bonus Act, 1965.
Final Decision
The Supreme Court dismissed the special leave petition, upholding the Gujarat High Court's ruling that the retaining allowance is part of the 'salary or wage' under Section 2(21) of the Payment of Bonus Act, 1965, and must be included in the bonus calculation.
Law Points
- Payment of Bonus Act
- 1965
- definition of salary or wage
- retaining allowance
- calculation of bonus
