Retrospective amendment to Payment of Bonus Act is constitutionally valid and does not infringe vested rights.

The petitioner, an industrial unit in Agra, and several other companies challenged the constitutional validity of the Payment of Bonus (Amendment) Act, 2015, published on 01.01.2016.

The Amendment Act retrospectively increased the eligibility limit for bonus from a monthly salary of ₹10,000 to ₹21,000 and raised the calculation ceiling from ₹3,500 to ₹7,000, or the minimum wage for the scheduled employment, whichever is higher.

The petitioners contended that the retrospective effect (w.e.f. 01.04.2014) caused an unforeseen financial burden and accounting complexities, as books for the previous financial years were already closed.

They further alleged that the inclusion of the "minimum wage" component created an unreasonable classification between industries.

Whether the retrospective implementation of the Payment of Bonus (Amendment) Act, 2015, w.e.f. 01.04.2014, is ultra-vires the Constitution of India and violates Article 14.

Whether the amendment to Section 12, linking bonus calculation to minimum wages, creates an unreasonable and discriminatory classification between organized and unorganized industries.

Whether a pre-decisional hearing was mandatory for the employers before enacting a retrospective amendment that creates financial liability.

The court primarily applied the Payment of Bonus Act, 1965, specifically Section 15, which allows for the "set on" and "set off" of allocable surplus to handle financial shortfalls in bonus payments.

It relied on the principle from M/s. Jalan Trading Company Private Ltd. v. Mill Mazdoor Sabha, establishing that the Act is a social welfare legislation implementing Directive Principles under Articles 39 and 43 of the Constitution.

Regarding retrospectivity, it applied the test from R.C. Tobacco Pvt. Ltd. v. Union of India, which permits retrospective fiscal/social legislation unless it is "undully oppressive or confiscatory".

It further cited Transport & Dock Workers Union v. Mumbai Port Trust regarding the "intelligible differentia" test for reasonable classification under Article 14.

The Court noted that the Central Government had conducted tripartite consultations with various stakeholders, including employers’ associations, before the amendment, satisfying the principles of natural justice.

It rejected the plea of "infringement of vested rights," clarifying that "vested rights" do not include a mere expectancy of the continuance of existing laws in the face of public interest.

The Court found that the Amendment Act did not impose a "new" liability but merely adjusted a pre-existing statutory liability.

Crucially, the Court observed that Section 15(2) of the Act provides a safety valve for employers through the "set off" mechanism, allowing any deficiency in bonus funds to be carried forward for up to four years, thus mitigating immediate financial distress.

Regarding the classification in Section 12, the Court adopted the reasoning of the Madras High Court, holding that grouping workers governed by the Minimum Wages Act (the "poorest among the poor") separately from others is an intelligible differentia with a rational nexus to the object of ensuring adequate bonus.

The Court held that the retrospective operation w.e.f. 01.04.2014 is valid as it is a beneficial legislation and the financial burden is not "confiscatory" given the Section 15 "set off" provisions.

The Court held that the classification based on minimum wages is reasonable and not discriminatory.

The Court held that no penal consequences would arise for delayed payment of the retrospective bonus because the delay was caused by the timing of the amendment itself.

No order was made as to costs.