4 April 2025 Legal Updates

PAYMENT OF BONUS ACT | WORKERS CAN'T BE DENIED BONUS SAYING FACTORIES ARE RUN BY CHARITABLE TRUST: SUPREME COURT

a. Case Title:

• The Management of Worth Trust vs. The Secretary, Worth Trust Workers Union

b. Court:

• Supreme Court of India

c. Date of Decision:

• April 2, 2025

d. Bench:

• Justice Sudhanshu Dhulia and Justice K. Vinod Chandran

Case Summary

This judgment addresses the applicability of the Payment of Bonus Act, 1965 to employees working in factories run by a charitable trust. The Supreme Court dismissed the appeal filed by the Management of Worth Trust, confirming that workers in their factories are entitled to receive bonus payments.

Background Facts

• The appellant, Worth Trust (formerly "Swedish Red Cross Rehabilitation Trust" until 1985), was established for charitable activities including rehabilitation of leprosy-cured patients and differently-abled persons.
• Since 1985, the trust has engaged in commercial activities, manufacturing automobile parts and industrial machinery components in its factories, generating profits.
• The workers, largely comprising people cured of leprosy or differently-abled individuals, formed the "WORTH Trust Workers Union."
• In 1998, the Union raised an industrial dispute demanding bonus and ex-gratia for 1996-97.

Legal Issue

Whether the appellant's workers were entitled to bonus under the Payment of Bonus Act, 1965, or if the trust was exempt under Section 32(v)(a) and (c) of the Act.

Appellant's Arguments

The appellant claimed exemption under:

• Section 32(v)(a): as being the Indian Red Cross Society or an "institution of a like nature"
• Section 32(v)(c): as an "institution established not for purposes of profit"

Court's Findings

1. The Tribunal had awarded minimum bonus (8.33% of annual earnings) to the workers.

2. The High Court upheld this with a modification that the bonus would be paid after deducting ex-gratia amounts already paid.

3. The Supreme Court held:

• The appellant's factories fall under the definition of "factory" in the Factories Act, 1948, making the Bonus Act applicable.
• Since 1985, the trust had shifted focus to commercial activities on a greater scale.
• No evidence showed the trust was run by Indian Red Cross Society or was similar to it.
• The appellant had severed all links with the Swedish Red Cross Society in 1989.
• The fact that factories operate under a trust engaged in charitable work doesn't deprive workers of benefits under the Bonus Act.
• Ex-gratia payments cannot substitute for statutory bonus.

Decision

The Supreme Court dismissed the appeal and directed the appellant to pay bonus to workers as per the Bonus Act from 1996-1997 till date. Compliance to be done within one month.

Key Legal Principles

1. The Payment of Bonus Act applies to all factories as defined in the Factories Act, regardless of whether they are run by charitable trusts.
2. Charitable institutions cannot avoid statutory obligations to workers by claiming exemptions under Section 32 if they are engaged in commercial/profit-making activities.
3. Ex-gratia payments cannot replace statutory entitlements under labor laws.

  S. 138 NI ACT | COMPLAINANT HAS NO ONUS TO PROVE FINANCIAL CAPACITY AT THE THRESHOLD : SUPREME COURT  

a. Case Title:

• Ashok Singh vs. State of Uttar Pradesh & Ravindra Pratap Singh

b. Court:

• Supreme Court of India

c. Date of Decision:

• April 2, 2025

d. Bench:

• Justice Sudhanshu Dhulia and Justice Ahsanuddin Amanullah

Case Summary

This judgment addresses key principles concerning dishonored cheques under Section 138 of the Negotiable Instruments Act, 1881, particularly focusing on statutory presumptions, burden of proof, and the level of evidence required from both complainant and accused.

Background Facts

• The appellant (Ashok Singh) alleged he had advanced a loan of Rs. 22,00,000 to the respondent no. 2 (Ravindra Pratap Singh).
• When repayment was demanded, the respondent issued a cheque (No. 726716 dated 17.03.2010) for Rs. 22,00,000.
• The cheque was dishonored with the endorsement "payment stopped by drawer" when presented for encashment.
• After sending a legal notice which received no response, the appellant filed a complaint case.

Procedural History

• The Trial Court found the accused guilty under Section 138 of the Negotiable Instruments Act, sentencing him to one year imprisonment and Rs. 35,00,000 fine (with Rs. 30,00,000 as compensation).
• The Appellate Court confirmed this conviction and sentence.
• The High Court allowed the accused's revision petition and set aside the conviction, noting that the complainant failed to prove his case by not disclosing details of his bank account, withdrawal dates, and circumstances of obtaining the cheque.
• The appellant challenged this acquittal in the Supreme Court.

Key Issues

• Whether the High Court erred in overturning concurrent findings of the lower courts.
• Applicability of the statutory presumption under Sections 118 and 139 of the Negotiable Instruments Act.
• The necessary burden of proof on complainant and accused in cheque dishonor cases.
• The defense claim that the cheque was lost rather than issued against a debt.

Supreme Court's Analysis and Findings

1. On Statutory Presumption:

• The Court held that Sections 118 and 139 create a presumption in favor of the holder of the cheque. Once a cheque is shown to be issued, the burden shifts to the accused to rebut the presumption of a legally enforceable debt.

2. On Burden of Proof:

• The complainant is not required at the threshold to prove financial capacity to advance the loan.
• Such proof is needed only if the accused specifically objects to the complainant's financial capacity.
• The accused must adduce evidence to establish their defense, not merely make counter-statements.

3. On the Accused's Defense:

• The Court found the accused's claim that the cheque was lost unconvincing, noting that the police intimation about the lost cheque was made in 2011 but backdated to 12.03.2010.
• This sequence strengthened the statutory presumption in favor of the appellant.

4. On the Partnership Firm Issue:

• The Court rejected the argument that the complaint was not maintainable because the Partnership Firm (M/s Sun Enterprises) was not made a party.
• Since the respondent was a partner and signatory of the cheque, and there was no denial that he was in charge, the complaint was held maintainable.

Decision and Order

 Supreme Court:

• Allowed the appeal and set aside the High Court's order.
• Modified the sentence to only a fine of Rs. 32,00,000 (considering the accused's age) to be paid within four months.
• Specified that failure to pay would result in restoration of the original sentence (imprisonment plus fine).

Key Legal Principles

• In cheque dishonor cases, Sections 118 and 139 of the Negotiable Instruments Act create a statutory presumption in favor of the holder that a legally enforceable debt exists.
• The complainant need not initially prove their financial capacity to advance the loan unless the accused specifically challenges it with some basis.
• The accused must provide evidence to support their defense; mere statements without substantiation are insufficient to rebut the statutory presumption.
• When a signatory of a cheque is also a person in charge of a company/firm, the complaint against such person is maintainable even without making the company/firm a party.