The Supreme Court has ruled that workers cannot be denied their statutory bonuses simply because their employer operates under a charitable trust. In a case involving a trust that initially focused on rehabilitating leprosy patients but later expanded into manufacturing automobile parts, the Court made it clear that engaging in commercial activities comes with legal obligations—including the payment of bonuses under the Payment of Bonus Act, 1965.
Rejecting the trust’s argument that it was exempt from bonus payments under Section 32 of the Bonus Act—an exemption that applies to organizations like the Indian Red Cross Society—the Court found no evidence linking the trust to such exempted institutions.
A bench of Justices Sudhanshu Dhulia and K. Vinod Chandran ruled that once a charitable trust operates factories and engages in profit-generating activities, it cannot evade statutory responsibilities. The trust’s claim that it remained a non-profit entity despite running factories was dismissed, with the Court emphasizing that workers’ rights under labor laws must be upheld.
“The mere fact that the trust is involved in charitable activities does not mean it can deny bonuses to workers engaged in its commercial operations,” the judgment stated. The Court ordered the trust to pay all outstanding bonuses within a month, reaffirming that labor welfare laws should be interpreted in favor of workers.
With this decision, the Supreme Court has set a precedent that charitable status does not grant immunity from legal obligations when an entity engages in business activities.
