Retrospective Applicability of the Payment of Bonus (Amendment) Act, 2015: Tech Mahindra v. Union of India

 The retrospective applicability of the Payment of Bonus (Amendment) Act, 2005 (“Amendment Act”) has already been stayed by various high courts and has been dealt in detail in our previous blog. This post seeks to highlight a Bombay High Court decision on the matter.

Tech Mahindra v. Union of India                                                                

The Hon’ble High Court of Bombay has also stayed the retrospective effect of the Payment of Bonus Amendment Act in the landmark case of Tech Mahindra v. Union of India[1]. Petitioner (“Tech Mahindra”) had filed a writ petition under Article 226 of the Constitution of India and challenged the retrospective applicability as stated in Section 1(2)[2] of the Amendment Act in the Hon’ble High Court of Bombay. Additionally, the Amendment Act increased the threshold limit for calculation of bonus and has altered the provisions i.e. Section 2(13) and Section 12 of the Payment of Bonus Act, 1956 dealing with the calculation of bonus accordingly.

Tech Mahindra contended that the increase in the threshold limit for calculation of bonus for certain employees has put a heavy financial burden on them. Additionally, the calculation of bonus for employees has been completed for the financial year 2014-15 and the books of account has also been closed to that effect. Tech Mahindra submitted that retrospective effect of the Amendment Act is not viable for business and a revision of bonus pay will be a tedious and lengthy process.

The Hon’ble High Court of Bombay on the basis of the abovementioned arguments, precedents cited and order passed by various other high courts after the effective date of the Amendment Act, have decreed through interim order in favour of Tech Mahindra and has stayed the retrospective effect of the amendment in the Amendment Act. The matter is yet to be finally heard and disposed off by the Hon’ble Bombay High Court.

[1] Tech Mahindra v. Union of India, 2016 SCC OnLine Bom 4380, order dated 13-06-2015

[2] Section 1 (2) of the Amendment Act – It shall be deemed to have come into force on the 1st day of April, 2014