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Case Title: MoolChand Kharaiti Ram Hospital & Ayurvedic Research institute v. Workers & Ors

Reserved on: 16th January, 2023

Date of decision: 26th May, 2023

+ LPA 576/2018 & CM No. 42341/2018

CORAM: HON’BLE MR. JUSTICE NAJMI WAZIRI HON’BLE MR. JUSTICE SUDHIR KUMAR JAIN

Introduction

The Delhi High Court recently upheld a single-judge bench’s decision to uphold the Industrial Tribunal Award to pay bonuses for the years 1997-1998 to the staff members of Moolchand Kharaiti Ram Hospital & Ayurvedic Research Institute. The single-judge bench said that a business that is run on a commercial basis can’t get out of paying bonuses under the Payment of Bonus Act. Justices Najmi Waziri and Sudhir Kumar Jain of the division bench said, “If a business is being run commercially and making money, it can’t get out of liability under the Act by saying it wasn’t set up to make money.”

Facts of the Case

The split bench said that the Single Judge was right when he said that a multi-bed super-specialty business like the Appellant Hospital cannot be said to be running on commercial lines or making money. The court said, “Even though the profit made by the Appellant Hospital might not be shared with the Trustees and might be put back into the Hospital’s funds to improve its facilities and the quality of its services, this does not mean that the Appellant Hospital is exempt from the provisions of the Act.”

The hospital had filed an appeal against the decision of a single judge, which supported the award of the Industrial Tribunal, which said that “the Hospital is liable to pay, to its workmen bonus for the year 1997–1998.”

The hospital said that the judge made a mistake by assuming that making money is the hospital’s main goal when there was no proof to support that. People said that if a business’s main goal is to help people rather than make money, then the fact that it makes some money from its activities wouldn’t take away from its charity nature. The court noticed that the Hospital gave its employees a bonus and had done so before 1997-1998.

“The Act was made so that people who worked in certain places could get bonuses based on profits or production or productivity,” the court said. “Section 1 of the Act says that the Act applies to all factories and other places where twenty or more people work on any given day during an accounting year.”

The court did not agree with the hospital’s claim that it was exempt from paying taxes under Section 80G of the Income Tax Act of 1961 because it was set up for charitable purposes. If the main goal of an organization is to help people instead of making money, then the fact that it makes some money from its activities does not change the fact that it is a charity. “This argument made by the learned counsel for the appellant hospital has no merit in light of the comments made by the learned single judge in Batra Hospital Employees Union,” it said.

Courts Analysis and Decision

The court said that it was up to the hospital to show that the Act does not require it to give bonuses to its workers for the years 1997-1998.

“The learned Single Judge rightly pointed out that it was up to the Appellant Hospital to show that the workers weren’t owed a bonus for 1997–98 and that they weren’t required to get one,” the court said. But the hospital could not do that. “The learned sole judge while adhering to the decision made by the Appeal Tribunal possesses appropriately determined that the terms of the Act are relevant to the applicant Healthcare and the appellant Hospital was not removed from being required to pay incentive to its workers for the year 1997-98,” the Court said as it stood down the appeal.

Judgment- click here to review the judgment

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Written by- Anushka Satwani