Khaitan & Co gets stay on retrospective operation of Payment of Bonus Act

Yesterday, the Bombay High Court’s VM Kanade and MS Sonak JJ passed an ad interim order staying the retrospective operation of The Payment of Bonus (Amendment) Act, 2015 (Amendment Act)..The court was hearing a writ petition (WPL/1548/2016) filed by Tech Mahindra..The Amendment Act, which was notified on 1 January 2016, with retrospective effect from 1 April 2014, inter alia, makes changes to Section 2(13) and 12 of the Payment of Bonus Act..The Amendment Act sought to make more employees eligible for bonus by raising the ceiling limit on monthly wages from Rs 10,000 to Rs 21,000. Further, prior to the amendment, any employee eligible for bonus drawing more than Rs 3,500 would be treated as having a salary of Rs 3,500 for the purpose of calculation of bonus..As per the firm’s press note,.“This was amended to state that where the salary or wage of an employee exceeds Rs. 7,000 per month or the minimum wage for the scheduled employment, the bonus payable to such employee shall be calculated as if his salary or wage were Rs. 7,000 per month or the minimum wage for the scheduled employment, whichever is higher.”.Thus, the Amendment Act not only increased the number of employees eligible for bonus, but the amount of bonus as well. While the amendment received the President’s assent on 31 December 2015, it was to come into force retrospectively beginning 1 April 2014..The retrospective operation of the Amendment Act imposed a harsh financial burden on Tech Mahindra, more so since the accounts for the Financial Year 2014-15 had been finalised and closed much prior to the impugned amendment..Tech Mahindra argued that the Amendment Act violated Articles 14 and 19 of the Constitution of India..Senior counsel Darius Khambata, briefed by Khaitan & Co, represented Tech Mahindra. The Khaitan & Co team comprised Raj Panchmatia (Partner), Peshwan Jehangir (Associate Partner), Madhav Kanoria (Senior Associate) and C Nageshwaran (Associate).