PAYMENT OF BONUS ACT, 1965

17. ADJUSTMENT OF CUSTOMARY OR INTERIM BONUS AGAINST BONUS PAYABLE
UNDER THE ACT
Where in any accounting year -
(a) An employer has paid any puja bonus or other customary bonus to an employees ; or
(b) An employer has paid a part of the bonus payable under this Act to an employee before
the date on which such bonus becomes payable;
Then, the employer shall be entitled to deduct the amount of bonus so paid from the
amount of bonus payable by him to the employee under this Act in respect of that
accounting year and the employee shall be entitled to receive only the balance.
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18. DEDUCTION OF CERTAIN AMOUNTS FROM BONUS PAYABLE UNDER THE ACT
Where in any accounting year, an employee is found guilty of misconduct causing financial
loss to the employer, then, it shall, be lawful for the employer to deduct the amount of loss
from the amount of bonus payable by him to the employee under this Act in respect of that
accounting year only and the employee shall be entitled to receive the balance, if any.
19. TIME-LIMIT FOR PAYMENT OF BONUS
All amounts payable to an employee by way of bonus under this Act shall be paid in cash by hi
employer.
(a) Where there is a dispute regarding payment of bonus pending before any authority under
Sec.22, within a month from the date on which the award becomes enforceable or the
settlement comes into operation, in respect of such dispute;
(b) In any other case, within a period of eight months from the close of the accounting year :
Provided that the appropriate Government or such authority as the appropriate
Government may specify in this behalf may, upon an application made to it by the employer
and for sufficient reasons, by order, extend the said period of eight months to such further
period or periods as it thinks fit ; so, however, that the total period so extended shall not in
any case exceed two years.
20. APPLICATION OF ACT TO ESTABLISHMENTS IN PUBLIC SECTION IN CERTAIN
CASES
If in any accounting year an establishment in public section sells any goods produced or
manufactured by it or renders any services, in competition with an establishment in private
sector, and the income from such sale or services or both is not less than twenty per cent of the
gross income of the establishment in public sector for that year, then, the provisions of this Act
shall apply in relation to such establishment in public sector as they apply in relation to a like
establishment in private sector.
21. RECOVERY OF BONUS DUE FROM AN EMPLOYER
Where any money is due to an employee by way of bonus from his employer under a settlement
or an award or agreement, the employee himself, or any other person authorised by him in
writing in this behalf, or in the case of the death of the employee, his assignee or heirs may,
without prejudice to any other mode of recovery made an application to the appropriate
Government for the recovery, of the money due to him, and if the appropriate Government or
such authority as the appropriate Government may specify in this behalf is satisfied that any
money is so due, it shall issue a certificate for that amount to the Collector who shall proceed to
recover the same in the same manner as an arrear of land revenue :
Provided that every such application shall be made within one year from the date on which
the money became due to the employee from the employer :
COMMERCIAL & INDUSTRIAL LAWS A 281
Provided further that any such application may be entertained after the expiry of the said
period of one year, if the appropriate Government is satisfied that the applicant had sufficient
cause for not making the application within the said period.
Explanation - In this section “employee” includes a person who is entitled to the payment of
bonus under this Act but who is no longer in employment.
22. REFERENCE OF DISPUTE UNDER THIS ACT
Where any dispute arises between an employer and his employees with respect to the bonus
payable under this Act or with respect to the application of this Act to an establishment in
public sector, then, such dispute shall be deemed to be an industrial dispute within the meaning
of the Industrial Dispute Act, 1947 (14 of 1947), or of any corresponding law relating to
investigation and settlement of industrial disputes in force in a State and the provisions of that
Act or, as the case may be, such law, save as otherwise expressly provided, apply accordingly.
23. PRESUMPTION ABOUT ACCURACY OF BALANCE-SHEET AND PROFIT AND LOSS
ACCOUNT OF CORPORATIONS AND COMPANIES
(1) Where, during the course of proceedings before any arbitrator or tribunal under the
Industrial Disputes Act, 1947 (14 of 1947), or under any corresponding law relating to
investigation and settlement of industrial disputes in force in a State and to which any
dispute of he nature specified in Sec.22 has been referred, the balance-sheet and the profit
and loss account of an employer, being a corporation or a company (other than a banking
company), duly audited by the Comptroller and Auditor-General of India or by auditors
duly qualified to act as auditors of companies under sub-section (1) of Sec.226 of the
Companies Act,, 1956 (1 of 1956), are produced before it, then the said authority may
presume the statements and the particulars contained in such balance-sheet and profit
and loss account to be accurate and it shall not be necessary for the corporation or the
company to prove the accuracy of such statements and particulars by the filing of an
affidavit or by any other mode:
Provided that where the said Authority is satisfied that the statements and particulars
contained in the balance-sheet or the profit and loss account of the corporation or the
company are not accurate, it may take such steps as it thinks necessary to find out the
accuracy of such statements and particulars.
(2) When an application is made to the said Authority by any trade union being a party to the
dispute or where there is not trade union, by the employees being a party to the dispute,
requiring any clarification relating to any item in the balance-sheet or the profit and loss
account, it may, after satisfying itself that such clarification is necessary, by order, direct
the corporation or, as the case may be, the company, to furnish to the trade union or the
employees such clarification within such time as may be specified in the direction and the
corporation or, as the case may be, the company shall comply with such direction.
24. AUDITED ACCOUNTS OF BANKING COMPANIES NOT TO BE QUESTIONED
(1) Where any dispute of the nature specified in Sec.22 between an employer, being a banking
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company, and its employees has been referred to the said authority under that section and
during the course of proceedings the accounts of the banking company duly audited are
produced before it, the said authority shall not permit any trade union or employees to
question the correctness of such accounts, but the trade union or the employees may be
permitted to obtain from the banking company such information as is necessary for
verifying the amount of bounds due under this Act.
(2) Nothing contained in sub-section (1) shall enable the trade union or the employees to
obtain any information which the banking company is not compelled to furnish under the
provisions of Sec. 34-A of the Banking Regulation Act, 1949 (10 of 1949).
25. AUDIT OF ACCOUNTS OF EMPLOYERS, NOT BEING CORPORATIONS OR
COMPANIES
(1) Where any dispute of the nature specified in Section 22 between an employer, not being a
corporation or a company, and his employees has been referred to the said Authority
under that section and the accounts of such employer audited by any auditor duly qualified
to act as auditor of Companies under sub-section (1) of Section 226 of the Companies Act,
1956 (1 of 1956), are produced before the said authority, the provisions of Section 23, shall,
so far as may be, apply to the accounts so audited.
(2) When the said Authority finds that the accounts of such employer have not been audited
by any such auditor and it is of opinion that an audit of the accounts of such employer is
necessary for deciding the question referred to it, then it may, by order, direct the employer
to get his accounts audited within such time as may be specified in the direction or within
such further time as it thinks fit and thereupon the employer shall comply with such
direction.
(3) Where an employer fails to get the accounts audited under sub-section (2) the said authority
may, without prejudice to the provisions of Sec.28 get the accounts audited by such auditor
or auditors as it thinks fit.
(4) When, the accounts are audited under sub-section (2) or sub-section (3) the provisions of
Sec.23 shall, so far as may be, apply to the accounts so audited.
(5) The expenses of, and incidental to, any audit under sub-section (3) (including the
remuneration of the auditor or auditors) shall be determined by the said authority (which
determination shall be final) and paid by the employer and in default of such payment
shall be recoverable from the employer in the manner provided in Sec.21
26. MAINTENANCE OF REGISTER, RECORDS, ETC
Every employer shall prepare and maintain such registers, records and other documents in
such form and in such manner as may be prescribed.
27. INSPECTORS
(1) The appropriate Government may, by notification in the official Gazette, appoint such
COMMERCIAL & INDUSTRIAL LAWS A 283
persons as it thinks fit to be Inspectors for the purpose of this Act and may define the
limits within which they shall exercise jurisdiction.
(2) Require an employer to furnish such information as he may consider necessary :
(a) At any reasonable time and with such assistance, if any, as he thinks fit, enter any
establishment or any premises connected therewith and require any one found in
charge thereof to produce before him for examination any accounts, books, registers
and other documents relating to the employment of persons or the payment of salary
or wage or bonus in the establishment;
(b) Examine with respect to any matter relevant to any of the purposes aforesaid, the
employer, his agent or servant or any other person found in charge of establishment
or any premises connected therewith or any person whom the Inspector has reasonable
cause to believe to be or to have been an employee in the establishment ;
(c) Make copies of, or take extracts from, any book, register or other document maintained
in relation to the establishment ;
(d) Exercise such other powers as may be prescribed.
(3) Every Inspector shall be deemed to be a public servant within the meaning of the Indian
Penal Code (45 of 1860).
(4) An person required to produce any accounts, book, register or other document or to give
information by an Inspector under sub-section (1) shall be legally bound to do so.
(5) Nothing contained in this section shall enable an Inspector to require a banking company
to furnish or disclose any statement or information or to produce, or give inspection of,
any of its books of account or other documents, which a banking company cannot be
compelled to furnish, disclose, produce or give inspection of, under the provisions of Sec.
34-A of the Banking Regulation Act, 1949( 10 of 1949)].
29. OFFENCES BY COMPANIES
(1) If the person committing an offence under this Act is a company, every person who, at the
time the offence was committed, was in charge of, and was responsible to, the company
for the conduct of business of the company, as well as the company, shall be deemed to be
guilty of the offence and shall be liable to be proceeded against and punished accordingly:
provided that nothing contained in sub-section (1), where an offence under this Act has
been committed by a company and it is proved that the offence has been committed with
the consent or connivance of, or is attributable to any neglect on the part of, any director,
manager, secretary or other officer of the company, such director, manager, secretary or
other officer shall also be proceeded against and punished accordingly.
Explanation - For the purposes of this section—
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(a) “Company” means any body corporate and includes a firm or other association of
individuals; and
(b) “Director”, in relation to a firm, means a partner in the firm.
31. PROTECTION OF ACTION TAKEN UNDER THE ACT. - No suit, prosecution or other
legal proceeding shall lie against the Government or any officer of the Government for anything
which is in good faith done or intended to be done in pursuance of this Act or any rule made
thereunder.
31A. SPECIAL PROVISION WITH RESPECT TO PAYMENT OF BONUS LINKED WITH
PRODUCTION OR PRODUCTIVITY
Notwithstanding anything contained in this Act, -
(i) Where an agreement or a settlement has been entered into by the employees with
their employer before the commencement of the Payment of Bonus (Amendment)
Act, 1976 (23 of 1976), or
(ii) Where the employees enter into any agreement with their employer after such
commencement,
For payment of an annual bonus linked with production or productivity in lieu of bonus
based on profits payable under this Act, then, such employees shall be entitled to receive
bonus due to them under such agreement or settlement, as the case may be :
[(Note: Ins. by Act 66 of 1980, (w.e.f. 21st August, 1980)) Provided that any such agreement
or settlement whereby the employees relinquish their right to receive the minimum bonus
under Sec.10 shall be null and void in so far as it purports to deprive them of such right :]
[(Note: Subs. by ibid) Provided further that] such employees shall not be entitled to be
paid such bonus in excess of twenty per cent, of the salary or wage earned by them during
the relevant accounting year.]
32. ACT NOT TO APPLY TO CERTAIN CLASSES OF EMPLOYEES
Nothing in this Act shall apply to—
(i) Employees employed by any insurer carrying on general insurance business and the
employees employed by the Life Insurance Corporation of India ;
(ii) Seaman as defined in Cl. (42) of Sec.3 of the Merchant Shipping Act, 1958 (44 of 1958) ;
(iii) Employees registered or listed under any scheme made under the Dock Workers
(Regulation of Employment) Act, 1948 (9 of 1948), and employed by registered or listed
employers ;
(iv) Employees employed by an establishment engaged in any industry carried on by or under
COMMERCIAL & INDUSTRIAL LAWS A 285
the authority of any department of the Central Government or a State Government or a
local Authority ;
(v) Employees employed by -
(a) The Indian Red Cross Society or any other Institution of a like nature (including its
branches);
(b) Universities and other educational institutions ;
(c) Institutions (including hospitals, chambers of commerce and society welfare
institutions) established not for purposes of profit ;
(i) Employees employed through contractors on building operations ;
(ii) (Note: Clause (vii) omitted by Act 66 of 1980, (w.e.f. 21st August, 1980)
(iii) Employees employed by the Reserve Bank of India ;
(iv) Employees employed by -
(a) The Industrial Finance Corporation of India;
(b) By Financial Corporation established under Sec.3, or any Joint Financial Corporation
established under Sec. 3-A of the State Financial Corporations Act, 1951 (63 of 1951) ;
(c) The Deposit Insurance Corporation ;
(d) [(Note: Subs. by Act 61 of 1981) the National Bank for Agriculture and Rural
Development;]
(e) The Unit Trust of India ;
(f) The Industrial Development Bank of India ;
(Note: Omitted by Act 66 of 1980, (w.e.f. 21st August, 1980))
(g) Any other financial institution [(Note: Ins. by ibid) Other than a banking company],
being an establishment in public sector, which the Central Government may, by
notification in the official Gazette, specify having regard to -
(i) Its capital structure ;
(i) Its objectives and the nature of its activities;
(ii) The nature and extent of financial assistance or any concession given to
it by the Government; and
(iii) Any other relevant factor ;
(i) (Note: Clause (x) omitted by Act 23 of 1976, Sec.20, (w.e.f. 25th September,
1975)
(ii) Employees employed by inland water transport establishments
operating on routes passing through any other country.
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NOTES
Applicability of the provisions of the Bonus Act to employees the Defence ministry canteen
stores department. It was held that canteen stores department is an “establishment” engaged
in any industry carried on by or under the authority of any department of the Central
Government. (Radhu-k-Kallde of Bombay v. Union of India and other (1986) 1 S.C.J.5). 33. [Act
to apply of certain pending dispute regarding payment of bonus.] Rep. by the Payment of
Bonus (Amendment) Act, 1976 (23 of 1976), Section 21 (w.e.f. 25th September, 1975).
34. EMPLOYEES AND EMPLOYERS NOT TO BE PRECLUDED FROM ENTERING INTO
AGREEMENTS FOR GRANT OF BONUS UNDER A DIFFERENT FORMULA
Nothing contained in this Act shall be construed to preclude employees employed in any
establishment or class of establishments from entering into agreements with their employer
for granting them an account of bonus under a formula which is different for that under this
Act :
Provided that no such agreement shall have effect unless it is entered into with the previous
approval of the appropriate Government :
Provided further that any such agreement whereby the employees relinquish their right to
receive the minimum bonus under sub-section (2-A) of Section 10 shall be null and void in so
far as it purports to deprive them of such right :
Provided also that such employees shall not be entitled to be paid bonus in excess of—
(a) 8.33 per cent of the salary or wage earned by them during accounting year if the employer
has no allocable surplus in the accounting year or the amount of such allocable surplus is
only so much that, but for the provisions of sub-section (2-A)of Section 10, it would entitle
the employees only to receive an amount of bonus which is less than the aforesaid
percentage, or
(b) Twenty per cent, of the salary or wage earned by them during the accounting year.
NOTES
Employer and workmen enter into settlement before Conciliation Officer on 9th October, 1972
within the meaning of Sec.34 (3) of Payment of Bonus Act - On a reference before the tribunal
workmen claims three month Salary as customer’s bonus or 2% of salary as per the Act - Validity
of award directing payment of three months basic wages as on 31st March 1972 instead of 31st
March 1970 in term 1 of the Settlement. (Dishergarh Power Supply Co., Ltd. v. The Workmen
of Dishergarh Power Supply Co., Ltd., (1986) 3 SCJ 247).
34-A. - EFFECT OF LAWS AND AGREEMENTS INCONSISTENT WITH THE ACT
Subject to the provisions of Sections 31-A and 34, the provisions of this Act shall have effect
COMMERCIAL & INDUSTRIAL LAWS A 287
notwithstanding anything inconsistent therewith contained in any other law for the time being
in force or in the terms of any award, agreement, settlement or contract of service.
35. SAVING
Nothing contained in this Act shall be deemed to affect the provisions of the Coal Mines
Provident Fund and Bonus Schemes Act, 1948 (46 of 1948), or of any scheme made there under.
36. POWER OF EXEMPTION
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.
NOTES
The Court has jurisdiction to consider whether the powers under Section 36 has been properly
exercised by the Government.
Consideration of the profits for one previous year cannot amount to consideration of “the
financial position” of an establishment within the terms of Section 36 of the Bonus Act. (M/s,
Fashan Electric Dry Cleaners v. The Government of A.P. (1977) 1 An. A.W.R.27).
37. [Power to remove difficulties] Rep. by the Payment of Bonus (Amendment) Act, 1976 (23 of
1976), Section 23 (w.e.f. 25th September, 1975).
38. POWER OF MAKE RULES
(1) The Central Government may make rules for the purpose of carrying into effect the
provision of this Act.
(2) In particular, and without prejudice to the generality of the foregoing power, such rules
may provide for—
(a) The authority for granting permission under the proviso to sub-clause (iii) of Cl. (I) of
Sec.2;
(b) The preparation of registers, records and other document and the form and manner in
which such registers, records and documents may be maintained under Sec.26 ;
(c) The powers which may be exercised by an inspector under Cl. (e) of sub-section (2) of
Sec.27;
(d) Any other matter which is to be, or may be prescribed.
(3) Every rule made under this section shall be laid as soon as may be after it is made, before
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each House of Parliament while it is in session for a total period of thirty days, which may
be comprised in one session [(Note: Subs. by Act 23 of 1976, (w.e.f. 25th September, 1975)
or in two or more successive session], and if before the expiry of the session [(Note: Subs.
by Sec.21, ibid, (w.e.f. 25th September, 1975) immediately following the session or the
successive sessions aforesaid], both Houses agree in making any modification in the rule
or both Houses agree that the rule should not be made, the rule shall thereafter have effect
only in such modified form or be of no effect as the case may be; so however, that any such
modification or annulment shall be without prejudice to the validity of anything previously
done under that rule.
39. APPLICATION OF CERTAIN LAWS NOT BARRED
Save as otherwise expressly provided, the provisions of this Act shall be in addition to and not
in derogation of the industrial Disputes Act, 1947 (14 of 1947) or any corresponding law relating
The Orient Tavern investigation and settlement of industrial disputes in force in a State.