Court Rules Retrospective Application of Bonus Amendment Act, 2015 is Constitutional and Does Not Violate Vested Rights
In a significant judgment, the Allahabad High Court has upheld the retrospective application of the Payment of Bonus (Amendment) Act, 2015, rejecting challenges that the amendment infringes vested rights and imposes unreasonable financial burdens on employers. The Division Bench, comprising Justices Saral Srivastava and Sudhanshu Chauhan, delivered the verdict on a series of petitions challenging the constitutional validity of the retrospective implementation of the Amendment Act, 2015.
The petitioners, including Benara Udyog Ltd., contended that the retrospective application of the amendment, which increased the eligibility limit for bonus payment from Rs. 10,000 to Rs. 21,000 and raised the ceiling for bonus calculation from Rs. 3,500 to Rs. 7,000, violated their vested rights and imposed significant financial burdens. They argued that the amendment should apply prospectively and not retrospectively, as the latter would disrupt their accounting practices and infringe Article 14 of the Constitution.
However, the court found these claims unfounded, emphasizing that the payment of bonus is a statutory obligation under the Payment of Bonus Act, 1965, and does not constitute a vested right immune from retrospective legislative changes. The court reasoned that the amendment aimed to effectuate the Directive Principles of State Policy, promoting employee welfare, and thus, could not be deemed arbitrary or unconstitutional.
Addressing the financial concerns raised by the petitioners, the court pointed to provisions like 'set on' and 'set off' under Section 15 of the Act, which mitigate financial difficulties by allowing surplus or deficit adjustments over subsequent accounting years. The court also noted the legislative competence to enact retrospective laws, provided they align with constitutional principles and are not discriminatory.
The judgment referenced prior consultations with various stakeholders, including labor unions and employers, before the amendment was enacted, underscoring the government’s efforts to balance interests. The court dismissed arguments that the retrospective application lacked proper deliberation, highlighting approvals under Rule 12 of the Government of India (Transaction of Business) Rules, 1961, which permits departures from standard procedures in exceptional cases.
The ruling aligns with earlier judgments from the Patna and Madras High Courts, which similarly upheld the amendment's validity. The decision reaffirms the judiciary's stance on the constitutionality of retrospective welfare legislation, emphasizing its role in advancing social justice.
Bottom Line:
Retrospective application of the Payment of Bonus (Amendment) Act, 2015 upheld, rejecting claims of vested rights infringement and unreasonable classification.
Statutory provision(s): Payment of Bonus Act, 1965 Section 2(13), Section 12, Section 19, Amendment Act, 2015.
Benara Udyog Ltd. v. Union of India, (Allahabad)(DB) : Law Finder Doc id # 2859735
