1. Dispute regarding whether a water supply and drainage board is an institution established not for purposes of profit under Section 32(v)(c) of the Payment of Bonus Act, 1965. (Para 1 )
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1998 Supreme(SC) 379
1998(3) Supreme 267
Supreme Court of India
(From Madras High Court)
K. Venkataswami & A.P. Misra, JJ.
Tamil Nadu Water Supply & Drainage Board -Appellant
versus
Tamil Nadu Water Supply & Drainage Board Engineers’ Association & Ors. -Respondents
Civil Appeal Nos. 3506-3512 of 1991
Decided on 24-3-1998
Counsel for the Parties :
For the Appellant : V. Krishnamurthy, Advocate
For the Respondent No. 2 : Narayan B. Shetye, Sr. Advocate, Ambrish Kumar, Advocate.
For the Respondent No. 4 : (N.D.B. Raju) Advocate for N. Ganpathy, M.K. Michael, (K.K. Mani) Advocates (NP).
Important Points
Important Point
Where the Board is an institution designed for profit in the limited sense viz., in its commercial activities, it has got a capital structure of profit, liabilities and labour force to care for, such Board would be held to be an institution established for purposes of profit and would not be excluded from the purview of Section 32(v)(c) of the Payment of Bonus Act, 1965. Employees of the Board qualifying for bonus under the Act would be entitled to minimum amount of bonus and/or such amount computed in accordance with law upon the surplus in the accounting year.
Where the Board is an institution designed for profit in the limited sense viz., in its commercial activities, it has got a capital structure of profit, liabilities and labour force to care for, such Board would be held to be an institution established for purposes of profit and would not be excluded from the purview of Section 32(v)(c) of the Payment of Bonus Act, 1965. Employees of the Board qualifying for bonus under the Act would be entitled to minimum amount of bonus and/or such amount computed in accordance with law upon the surplus in the accounting year.
Subject
Labor and Employment - BONUS
Act Referred
Headnote
Payment of Bonus Act, 1965-Section 32(v)(c) - Applicability of Act-Board is an institution established for profit in limited sense-Board is, therefore, not excluded from purview of Section 32(v)(c)-Employees of Board entitled to bonus under Act. (Paras 2, 3 & 4)
Legal Category Hierarchy
Table of Contents
2. Whether the board qualifies as an exempted institution established not for purposes of profit under Section 32(v)(c) of the Payment of Bonus Act, 1965. (Para 1 , 4 )
3. The board maintains assets, liabilities, and a profit-and-loss scheme, functioning as an institution designed for profit to reduce pressure on state revenue. (Para 2 )
4. An institution maintaining a capital structure of profit and loss and recovering costs is designed for profit, regardless of its public service objective. (Para 2 )
5. Appeals dismissed; the board is held to be governed by the Payment of Bonus Act, 1965. (Para 4 )
6. Does a public service objective exempt an institution from the Payment of Bonus Act if it maintains a profit-and-loss scheme?
No. An institution that possesses its own assets and liabilities and employs a method of recovering costs, resulting in a scheme of profit and loss, is considered an institution designed for profit, even if its primary goal is to serve the public interest. (Para 2 )
7. How is the purpose of profit interpreted for statutory boards under the Payment of Bonus Act?
It is interpreted in a limited sense; if a board is created to ensure community service while avoiding pressure on state revenue through a commercial-like capital structure of profit, liabilities, and labour, it is an institution designed for profit. (Para 2 )
8. Are statutory boards, such as housing or water boards, generally exempt from the Payment of Bonus Act?
No, such boards are generally held to be governed by the Payment of Bonus Act and are not entitled to statutory exemptions under Section 32, as they are not considered institutions established not for purposes of profit. (Para 2 , 3 )
Judgment
K. Venkataswami, J.-The common question of law that arises for consideration in all these appeals filed against a common judgment of the Madras High Court in Writ Appeal Nos. 1205 to 1210 of 1984 and 250 of 1985, is whether the Tamil Nadu Water Supply and Drainage Board is an institution established not for purposes of profit and consequently excluded from the purview of Section 32(v)(c) of the Payment of Bonus Act, 1965.
2. We have heard learned counsel on both sides and perused the judgment of the Division Bench of the High Court carefully and we find that on the facts placed before the Division Bench, the conclusions reached thereon cannot be faulted. The learned Judges, after elaborately considering the matter concerning the establishment of the appellant-board and its functions, found as follows:-
“We have no manner of doubt that the respondent-Board has been established to serve the public interest by ensuring better amenities of life and raising the standard of living of the community as a whole. Learned Single Judge has referred to the functions of the Board and its powers and rightly held that the purpose behind the functions of the Board is to provide protected drinking water supply and drainage facilities, but this also cannot be disputed that the Board has got its own assets and liabilities, that it has got its method of recovery of the cost of the scheme, making investment and constituting its funds by “all moneys received by or on behalf of the Board........, all proceeds of land or any other kind of property sold by the Board, all charges, all interest, profits and other moneys accruing to the Board and all moneys and receipts”, deposited into the public accounts of the Government under such detailed head of accounts as may be prescribed or in the Reserve Bank of India, State Bank of India or any corresponding new bank as defined in the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970. It has thus a scheme of profit and loss. It shall earn profit in some year and lose in another year. Thus, in its commercial activities of sort, it has got a capital structure of profit, liabilities and labour force to care for. We see reason to hold in accordance with the rule indicated by the Supreme Court in the case of Workmen, T.T. Devasthanams v. Management1 that the Board is an institution designed for profit in the limited sense that when the Government’s department found it difficult to run such projects departmentally, they decided to create a Board and transferred the projects to ensure that there was proper service to the community at large on the one hand and on the other, there was no pressure on the meagre revenue and other resources of the State.
Applying the test as above, we have no hesitation in holding that the learned Single Judge has fallen in error in holding that the respondent-Board is an institution established not for purposes of profit. Employees of the Board qualifying for bonus under the Act, in our opinion, are entitled to minimum amount of bonus and/or such amount computed in accordance with law upon the surplus in the accounting year.”
3. While reaching the above conclusion, the Division Bench has noticed another judgment of the High Court in Tamil Nadu State Housing Board v. Sabanayagam and other cases. The said judgment of the High Court came up before this Court and this Court in State of Tamil Nadu represented by Secretary, Housing Deptt., Madras v. K. Sabanayagam & Anr.2, has upheld the judgment of the High Court holding that the Tamil Nadu Housing Board was governed by the provisions of the Payment of Bonus Act. In paragraph 16 of the said judgment of this Court, it was observed as follows:-
“We may mention that by a decision of a Bench of two learned Judges of this Court in the case of Housing Board of Haryana v. Haryana Housing Board Employees’ Union & Ors.3 Bonus Act is held applicable to Haryana Housing Board by holding that it is not entitled to statut
