Introduction 

• This is a landmark judgment relating to the Payment of Bonus Act, 1965. 
• This judgment is also touted as one of the first judgments that discussed the concept of Public Interest Litigation. 
• This judgment was delivered by a 2-judge bench comprising of Justice VR Krishna Iyer and Justice NL Untwalia.     

Facts  

• Before 1965, small businesses in a city locality had been paying workers an additional bonus as a voluntary gesture, which they suddenly stopped that year. 
• The workers, dissatisfied with the discontinuation of bonus payments, first approached a Board of Arbitrators under the Industrial Disputes Act, who rejected their demand. 
• When the workers took their case to the Industrial Tribunal, the tribunal dismissed their claim, arguing that the previous bonus payments were merely a tradition and not a legal entitlement. 
• The tribunal also held that the case was legally barred from further consideration because it had already been decided by the Arbitration Board. 
• Upon appealing to a higher court, the workers' union faced challenges from the employers, who contested the union's legal right to appeal and argued that the Bonus Act only covers profit-based bonuses. 
• The higher court ultimately dismissed the workers' appeal, thereby supporting the earlier decisions that denied the workers their bonus claim. 

Issue Involved  

• Whether the workers are entitled to bonus in the present facts? 

Observations  

• This judgment is said to have sown the seeds of Public Interest Litigation in India. 
  • The Court held that procedural defects should not prevent genuine grievances from being heard emphasizing the importance of substantive justice over procedural requirements. 
  • The Court held that the legal system should allow collective representation. 
  • Bodies like unions can effectively represent the broader interests of workers, even when they are not technically direct parties to a dispute. 
  • The philosophy in this context is that procedure is the handmaid of justice and not it’s mistress. 
  • When a considerable number of people share a common remedy public interest litigation is recognized as a legitimate legal mechanism.  
  • The Court thus, rejected the rigid requirement of naming each individual worker in legal proceedings, preferring a more flexible approach that allows group representation. 
• The Court held the following points regarding bonus: 
  • The court emphasizes that the Bonus Act should not be interpreted as an exhaustive elimination of all bonus types not explicitly mentioned in its provisions. 
  • Legal understanding of bonus ranges from a voluntary gesture of goodwill to a contractually enforceable right that emerges from established workplace practices. 
  • The legal perspective advocates for a flexible and progressive interpretation of compensation mechanisms that respects both employer interests and worker rights. 
  • Recognizing labor as the backbone of national economic self-reliance, the court supports a nuanced understanding of bonus that goes beyond mere financial transactions. 
  • The court emphasizes that bonus claims must be evaluated not in isolation, but within the broader framework of industrial justice and developmental jurisprudence. 
• The Court then went out to discuss the following with respect to applicability of constructive res judicata in the present case: 
  • The Counsel in this case argued that since no case for customary or contract bonus was raised before the Arbitration Board for the year 1965, such a claim should be barred in later proceedings under the principles of res judicata. 
  • It was argued that industrial disputes were not exempt from the general principles of res judicata. 
  • The Court expressed doubts about extending the sophisticated doctrine of constructive res judicata to industrial disputes, recognizing the unique nature of industrial relations. 
  • The court emphasized that in industrial disputes, there should be flexibility in addressing workers' claims, suggesting that if workers are dissatisfied with a previous award, they should be able to raise a fresh industrial dispute. 
  • The judgment suggests a preference for non-litigative mechanisms in resolving industrial disputes, viewing negotiation and mediation as more effective approaches to maintaining industrial peace. 
  • Ultimately, the court held that the Bonus Act (as it stood in 1965) does not bar claims to customary bonus or those based on conditions of service,  and directed the Industrial Tribunal to decide the dispute on its merits. 
• The Court finally concluded that Bonus Act does not bar the claims to customary bonus or those based on conditions of service.

Conclusion

• The Court in this case discussed the jurisprudence behind the payment of bonus to the worker. 
• It is a very important judgment concerning the rights of the industrial workers.