Whether, as per Indian employment law, exemption can be granted under the Payment of Bonus Act, 1965?

As per the Indian employment law namely, The Payment of Bonus Act; the appropriate Government may, after considering the financial condition of a certain establishment grant it exemption under the Act, via notification in the official Gazette.

Section 36 of the Payment of Bonus Act, 1965 provides as follows –

“If the appropriate Government, having regard to the financial position and other relevant circumstances of any establishment or class of establishments, is of opinion that it will not be in public interest to apply all or any of the provisions of this Act thereto, it may, by notification in the official Gazette, exempt for such period as may be specified therein and subject to such conditions as it may think fit to impose, such establishment or class of establishments from all or any of the provisions of this Act.”

NOTE –

The Court has jurisdiction to consider whether the powers under Section 36 have been properly exercised by the Government.

According to Section 36 of the Payment of Bonus Act, 1965, a Company may make an application to the appropriate Government seeking exemption from the provisions of the Payment of Bonus Act, 1965 owing to its inadequate financial situation and the Government may, having regard to the financial position of the Company and other circumstances, by notification in the Official Gazette, grant exemption to such Company from the provisions of the Payment of Bonus Act, 1965.

In Navbharat Potteries Limited vs. State of Maharashtra (W.P. No. 718 of 1982, decided on 25.06.1986) the Hon’ble Bombay High Court, in dismissing the reasons furnished by the Government for not granting exemption under Section 36 to the petitioner Company stated that –

“The losses were suffered by the petitioner not only because of short supply of quality coal but in addition thereto the irresponsible, unco-operative attitude adopted by the workmen. It was necessary for the State Government to bear this aspect in mind before rejecting the applications of exemption by a cursory order. The State Government also overlooked the third important aspect and that is that the exemption was granted in respect of payment of bonus for the years 1976 and 1977. Admittedly the financial condition of the petitioner went from bad to worse subsequent to year 1976-77 and it is difficult to appreciate how the State Government could overlook this important aspect and decline the exemption.”

Again, in J. K. Chemicals Ltd. V/s Government of Maharashtra & Ors. (W.P. No. 717/1984, decided on 16.08.1995) the Hon’ble High Court of Bombay held that –

“As per section 36, if the appropriate Government, having regard to the financial position and other relevant circumstances of any establishment or class of establishments, is of opinion that it will not be in public interest to apply all or any of the provisions of the Act thereto, it may, by notification in the official Gazette, exempt for such period as may be specified therein and subject to such conditions as it may think fit to impose, such establishment or class of establishments from all or any of the provisions of the Act. In other words, by providing for exemption from any or all the provisions of the Act, the legislature has cast a duty on the appropriate Government to examine the financial position and other circumstances of the establishment concerned and decide them as to whether grant or rejection of such application is in the public interest or not. Section 36 thus creates right in the parties as also duty on the part of the appropriate Government to consider the application on merits and dispose it of in accordance with scheme of the Act.”