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Section 27: Disqualification for bonus

The Code on Wages, 2019 (Act No. 29 of 2019) • Official Statutory Text & Plain English Practice Guide

Statutory Mandate
Chapter IV: Payment of Bonus
Competent Labour Forum
Act No. 29 of 2019
Section 26 All 67 Sections of Code on Wages, 2019 Section 28

Legal Commentary & Landmark Judgments: Section 27

Section 27 specifies the exhaustive statutory grounds under which an employee is disqualified from receiving bonus under the Code, barring bonus where an employee is dismissed from service for fraud, riotous or violent behavior on establishment premises, theft, misappropriation, or sabotage of employer property.

  • Exhaustive Statutory Grounds of Disqualification: Restricts disqualification strictly to dismissal from service on grounds of: (a) fraud, (b) riotous or violent behavior while on the premises of the establishment, or (c) theft, misappropriation, or sabotage of any property of the establishment.
  • Condition Precedent of Formal Dismissal: Disqualification requires an actual, finalized order of dismissal from service; mere suspension, charge-sheet, criminal FIR, or pending domestic inquiry cannot operate as a disqualification.
  • Temporal Limitation to Accounting Year of Misconduct: Statutory forfeiture applies only to the bonus payable in respect of the accounting year in which the misconduct and dismissal occurred, preserving accrued bonus from earlier years.
Key Landmark Precedents:
  • Pandian Roadways Corp. Ltd. v. Presiding Officer, Principal Labour Court (1997) 9 SCC 359: The Supreme Court held that disqualification for bonus under labor law requires a lawful, completed dismissal from service founded on specified statutory misconduct; an employer cannot withhold bonus during suspension or inquiry.
  • Hindustan Steel Ltd. v. Roy (A.K.) (1970) 1 SCR 343: The Supreme Court held that disciplinary termination depriving an employee of statutory labor benefits must be based on objective findings of serious misconduct established through a fair and proper domestic inquiry.
Courtroom Practice & Strategic Litigation Guidance:

In industrial disputes challenging bonus withholding, the employer must produce: (a) a valid charge-sheet detailing the specific acts under Section 27, (b) findings of a domestic inquiry conducted in accordance with natural justice, and (c) a formal order of dismissal citing Section 27 grounds. Withholding bonus without a final dismissal order is per se illegal and subjects the management to recovery with interest.

Section 26 All 67 Sections of Code on Wages, 2019 Section 28