Case Study: Employer’s Obligation to Pay Minimum.

Case:

Maharashtra State Farming Corporation & Anr. v. Sakhar Kamgar Sabha
Writ Petition No. 14171 of 2023

Court and Date:

High Court of Bombay
Hon’ble Justice S.G. Chapalgaonkar
Date of Judgment: 28 July 2025

Relevant Law:

Payment of Bonus Act, 1965

• Section 8: Eligibility – Every employee who has worked in an establishment for at least 30 working days in an accounting year is entitled to receive a bonus.
• Section 10: Obligation to pay minimum bonus – The employer must pay a minimum of 8.33% of the wages earned by the employee, regardless of profit or loss.

Background:

The respondent union, Sakhar Kamgar Sabha, issued a notice to the Maharashtra State Farming Corporation demanding bonus payment for the accounting years 2008–09 and 2011–12. Since the conciliation proceedings failed, the matter was referred to the Industrial Court at Ahmednagar.

The Industrial Court passed an interim order directing the Corporation to pay eligible employees a minimum bonus of 8.33% of wages under the Payment of Bonus Act, 1965.
Aggrieved, the Corporation filed a writ petition before the Bombay High Court under Article 227 of the Constitution, challenging this order.

Legal Issue:

Whether an employer can avoid payment of the statutory minimum bonus on the ground of financial loss or absence of sufficient material proving employee eligibility for bonus under the Payment of Bonus Act, 1965.

Key Legal Findings:

1. Statutory Duty to Pay Minimum Bonus

The Court reaffirmed that the employer has a statutory obligation under Section 10 to pay a minimum bonus of 8.33% of wages. The right to receive an accruals automatically once an employee has worked for more than 30 days in an accounting year.

2. Profit or Loss Irrelevant

The High Court made it clear that the liability to pay minimum bonus does not depend on the profit or loss of the industrial establishment. It is a statutory right, not a discretionary benefit.

3. Sufficient Material on Record

The Industrial Court had before it a list of employees (obtained under the RTI Act) prepared by the Estate Manager, showing the services rendered between 2008 and 2012. This list was sufficient to establish that employees had worked the required number of days to qualify for bonus.

4. No Blanket Order Passed

The Industrial Court’s order was not a general direction but was limited to employees who were found eligible as per the records. Thus, the High Court found no merit in the Corporation’s claim that the order was excessive.

5. Claim Not Time-Barred

The Court rejected the petitioner’s argument that the claim was stale, noting that disputes regarding wages and bonus were under negotiation and conciliation up to 2018, and payments had been made in 2015 and 2017. Hence, the reference was within a reasonable time frame.

Judgment:

Justice S.G. Chapalgaonkar dismissed the writ petition, holding that:

• The employer is legally bound to pay a minimum bonus of 8.33% of wages earned.
• The right to bonus arises once an employee works for more than 30 days.
• The Industrial Court’s interim order was in line with statutory requirements.
• There was no reason to interfere with the Industrial Court’s order under Article 227 of the Constitution.

Result:
✅ Writ Petition dismissed
✅ Bonus to be paid at 8.33% of wages to eligible employees

Conclusion:

The Bombay High Court has once again reinforced that bonus is a statutory right, not dependent on an organization’s financial performance. Employers cannot escape their minimum statutory obligations by citing financial losses or procedural excuses. Once an employee completes 30 working days, they earn a legal right to under Section 8 of the Act.

This case is a strong reminder to employers to ensure timely and compliant payment of bonuses and maintain proper employment and wage records to avoid disputes.

Key Learnings:

• 💼 Minimum bonus of 8.33% of wages must be paid to all eligible employees.
• 🧾 Profit or loss is irrelevant to the employer’s liability under the Payment of Bonus Act.
• 📅 Employees who have worked for more than 30 days automatically qualify for bonus.
• ⚖️ Courts treat bonus as a statutory entitlement, not an optional benefit.
• 🕒 Delay in dispute does not invalidate claims if conciliation and wage negotiations are ongoing.

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