Can an establishment be deemed to be newly set in case of a change in ownership for payment of bonus and the company was taken through National company Law Tribunal ?

Dear Seniors,

Can an establishment be deemed to be newly set in case of a change in ownership for payment of bonus and the company was taken through National company Law Tribunal ?

"Even the ownership of an establishment is transferred, the establishment remains the same and it cannot be said to be new establishment for the purpose of Bonus applicability"


Is payment of Bonus applicable to new owner/Management for payment of Statutory Bonus?

Dear Colleague,

Your question is "Can an establishment be deemed to be newly setup in case of a change in ownership for payment of bonus and the company was taken through National company Law Tribunal ?

To answer this the Act is clear under Section 16 says "an establishment shall not be newly set up merely by reason of a change in its location, management, name or ownership". This is the stand of Law. Unless otherwise NCLT has given any specific exemption clause in the order for certain period, this " new establishment" clause can not be exercised by existing establishment. Relevant provision shared as under:

16. Special provisions with respect to certain establishment—

[(1) Wherean establishment newly set up, whether before or after the commencement of
this Act, the employees of such establishment shall be entitled to be paid bonus under this Act in accordance with the provisions of sub-section (1A), (1B) and (1C)

Explanation I. – For the purpose of sub-section (1), an establishment shall not be newly set up merely by reason of a change in its location, management, name or ownership.

In addition to what Dr.Sivakumar has stated, I would cite the judgement of the Supreme Court in Central Inland Water Transport Corporation Ltd v. Their Workmen ( 1975 AIR 1639 ) in support of his answer and would request the poster to go through the judgment for further clarification.

NCLT gives a clean slate for all statutory dues as well as commercial dues of the past when a company ownership is transferred under Insolvency and bankruptcy act, which is what I am assuming is the case.

Other than that, the company continues to exist and a new entity has not been created. So you can not be considered a new establishment.