Change in Ownership: Does It Affect Bonus Payments Under New Management?

Dear Seniors,

Change in Ownership and Bonus Payment

Can an establishment be deemed newly set up in the case of a change in ownership for the payment of a bonus, especially if the company was taken through the National Company Law Tribunal?

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

Is the payment of a bonus applicable to the new owner/management for the payment of statutory bonus?

Dear Colleague,

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

To answer this, the Act is clear under Section 16, which states "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 the law. Unless otherwise, the NCLT has given any specific exemption clause in the order for a certain period, this "new establishment" clause cannot be exercised by the existing establishment. Relevant provision shared as under:

Special provisions with respect to certain establishments

(1) Where an establishment is newly set up, whether before or after the commencement of this Act, the employees of such establishment shall be entitled to be paid a bonus under this Act in accordance with the provisions of sub-sections (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 judgment of the Supreme Court in Central Inland Water Transport Corporation Ltd v. Their Workmen (1975 AIR 1639) in support of his answer. I would request the poster to go through the judgment for further clarification.

NCLT and Statutory Dues in Ownership Transfer

NCLT gives a clean slate for all statutory dues as well as commercial dues of the past when a company's ownership is transferred under the Insolvency and Bankruptcy Act. This 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 cannot be considered a new establishment.