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[u:ec2e0321e9]THE PAYMENT OF GRATUITY ACT, 1972
INTRODUCTION
The Working Journalists (Conditions of Service) and Miscellaneous Provisions Act, 1955 (45 of 1955) under section 5 provided for the payment of gratuity to the journalist. But there was no other Central Act which provided for the payment of gratuity to industrial workers. The Government of Kerala enacted legislation for payment of gratuity to workers employed in factories, plantations, shops and establishments. The Governor of West Bengal promulgated an Ordinance on 3rd June, 1971 wherein a scheme for payment of gratuity was enacted. The Ordinance was later replaced by the West Bengal Employees' Payment of Compulsory Gratuity Act, 1971 enacted by the President on 28th August, 1971. Gratuity was also being paid by some employers to their workers under Awards and Agreements. Since the enactment of the Kerala and West Bengal Acts, some other State Governments also wanted to enact similar measures. Taking into account the intention of the State Governments it was felt necessary to have a Central law on the subject so as to ensure a uniform pattern of payment of gratuity to the employees throughout the country. The proposal for Central legislation on gratuity was discussed in the Labour Ministers' Conference held at New Delhi on 24th and 25th August, 1971 and also in the Indian Labour Conference at its session held on 22nd and 23rd October, 1971. There was general agreement at the Labour Ministers' Conference and the Indian Labour Conference that Central legislation on payment of gratuity might be undertaken at the earliest. Accordingly the Payment of Gratuity Bill was introduced in the Parliament.
STATEMENT OF OBJECTS AND REASONS
There is at present no Central Act to regulate the payment of gratuity to industrial workers, except the Working Journalists (Conditions of Service) and Miscellaneous Provisions Act, 1955. The Government of Kerala enacted legislation last year for payment of gratuity to workers employed in factories, plantations, shops and establishments. The West Bengal Governor Promulgated an Ordinance on the 3rd June, 1971 prescribing a similar scheme of gratuity. This Ordinance has since been replaced by the West Bengal Employees' Payment of Compulsory Gratuity Act, 1971, enacted by the President on 28th August, 1971. Gratuity is also being paid by some employers to their workers under Awards and Agreements.
Since the enactment of the Kerala and the West Bengal Acts, some other State Governments have also voiced their intention of enacting similar measures in their respective States. It has become necessary, therefore, to have a Central law on the subject so as to ensure a uniform pattern of payment of gratuity to the employees throughout the country. The enactment of a Central law would also avoid different treatment to the employees of establishments having branches in more than one State when, under the conditions of their service, the employees are liable to transfer from one State to another.
The proposal for Central legislation on gratuity was discussed in the Labour Ministers' Conference held at New Delhi on 24th and 25th August, 1971 and also in the Indian Labour Conference at its session held on the 22nd and 23rd October, 1971. There was general agreement at the Labour Minister' Conference and the Indian Labour Conference that Central legislation on payment of gratuity might be undertaken as early as possible. It is accordingly proposed to undertake such legislation.
In enacting the President's Act for West Bengal in August 1971, care has been taken to so design its provisions that they could serve as far as possible as norms for the Central law. The Bill has, therefore, been drafted on the lines of the West Bengal Employees' Payment of Compulsory Gratuity Act, 1971 with some modifications which have been made in the light of the views expressed at the Indian Labour Conference relating to forfeiture of gratuity in cases of dismissal for gross misconduct.
The Bill provides for gratuity to employees drawing wages up to Rs. 270 per month in factories, plantations, shops, establishments and mines, in the event of superannuation, retirement, resignation and death or total disablement due to accident or disease, The quantum of gratuity payable will be 15 days' wages based on the rate of wages last drawn by the employees concerned for every completed year of service or part thereof in excess of six months subject to a maximum of 15 months' wages. The term "wages" will mean "basic wage plus dearness allowance".
It is proposed that the appropriate Government for administering the Act in relation to establishment belonging to or under the control of the Central Government or a railway company, or mine, a major port and oil field or in relation to establishments having departments or branches in more than one State, will be the Central Government, and, in relation to other establishments, the State Government. The Bill seeks to give effect to the above proposals.
ACT 39 OF 1972
The Payment of Gratuity Bill having been passed by both the Houses of Parliament received the assent of the President on 21st August, 1972. It came into force on 16th September, 1972 as THE PAYMENT OF GRATUITY ACT, 1972 (39 of 1972).
LIST OF AMENDING ACTS
1. The Payment of Gratuity (Amendment) Act, 1984 (25 of 1984).
2. The Payment of Gratuity (Second Amendment) Act, 1984 (26 of 1984).
3. The Payment of Gratuity (Amendment) Act, 1987 (22 of 1987).
4. The Payment of Gratuity (Amendment) Act, 1994 (34 of 1994).
5. The Payment of Gratuity (Amendment) Act, 1998 (11 of 1998).
THE PAYMENT OF GRATUITY ACT, 1972
(39 of 1972)
[21st August, 1972]
An Act to provide for a scheme for the payment of gratuity to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments and for matters connected therewith or incidental thereto.
BE it enacted by Parliament in the Twenty-third Year of the Republic of India as follows:-
1. Short title, extent, application and commencement.-(1) This Act may be called the Payment of Gratuity Act, 1972.
(2) It extends to the whole of India:
Provided that in so far as it relates to plantations or ports, it shall not extend to the State of Jammu and Kashmir.
(3) It shall apply to-
(a) every factory, mine. oilfield, plantation, port and railway company;
(b) every shop or establishment within the meaning of any law for the time being in force in relation to shops and establishments in a State, in which ten or more persons are employed, or were employed, on any day of the preceding twelve months;
(c) such other establishments or class of establishments, in which ten or more employees are employed, or were employed, on any day of the preceding twelve months, as the Central Government may, by notification, specify in this behalf.
1[(3A) A shop or establishment to which this Act has become applicable shall continue to be governed by this Act notwithstanding that the number of persons employed therein at any time after it has become so applicable falls below ten.]
(4) It shall come into force on such date2 as the Central Government may, notification, appoint.
COMMENTS
(i) The expression "law" used in section 1(3)(b) means any law in respect of shops, establishments commercial or non-commercial; K. Gangadhar v. The Appellate Authority under The Payment of Gratuity Act, (1993) 66 FLR 648 (AP).
(ii) The provisions of section 1(3)(b) of the Act are comprehensive. Municipal Board is covered under the Act; Municipal Board v. Union of India, (1993) 67 FLR, 973 (All).
1. Ins. by Act 26 of 1984, sec. 2 (w.e.f. 18-5-1984).
2. Came into force on 16-9-1972, vide S.O. 601(E), dated 16th September, Gazette of India, Extra., Pt. II, Sec. 3(ii), p. 1641.
2. Definitions-In this Act, unless the context otherwise requires,-
(a) "appropriate Government" means,-
(i) in relation to an establishment-
(a) belonging to, or under the control of, the Central Government,
(b) having branches in more than one State,
(c) of a factory belonging to, or under the control of, the Central Government;
(d) of a major port, mine, oil field or railway company, the Central Government;
(ii) in any other case, the State Government;
(b) "completed year of service" means continuous service for one year;
1[(C)"continuous service" means continuous service as defined in section 2A;]
(d)"controlling authority" means an authority appointed by the appropriate Government under section 3;
(e) "employee" means any person (other than an apprentice) employed on wages, 2[***] in any establishment, factory, mine, oilfield, plantation, port, railway company or shop to do any skilled, semi-skilled, or unskilled, manual, supervisory, technical or clerical work, whether the terms of such employment are express or implied, 3[and whether or not such person is employed in a managerial or administrative capacity, but does not include any such person who holds a post under the Central Government or a State Government and is governed by any other Act or by any rules providing for payment of gratuity].
4[***]
(f) "employer" means, in relation to any establishment, factory, mine, oilfield, plantation, port, railway company or shop-
(i) belonging to, or under the control of, the Central Government or a State Government a person or authority appointed by the appropriate Government for the supervision and control of employees, or where no person or authority has been so appointed, the head of the Ministry or Department concerned,
(ii) belonging to, or under the control of, any local authority, the person appointed by such authority for the supervision and control of employees or where no person has been so appointed, the chief executive officer of the local authority,
(iii) in any other case, the person, who, or the authority which, has the ultimate control over the affairs of the establishment, factory, mine, oilfield, plantation, port, railway company or shop, and where the said affairs are entrusted to any person, whether called a manager, managing director or by any other name, such person;
1. Subs. by Act 26 of 1984, sec. 3, for clause (c) (w.e.f. 11-12-1981).
2. Certain words omitted by Act 34 of 1994, sec. 2 (w.e.f. 24-5-1994).
3. Subs. by Act 25 of 1984, sec. 2, for certain words (w.e.f. 1-7-1984).
4. Explanation omitted by Act 34 of 1994, sec. 2 (w.e.f. 24-5-1994).
(g) "factory", has the meaning assigned to it in clause (m) of section 2 of the Factories Act, 1948 (63 of 1948);
(h) "family" in relation to an employee, shall be deemed to consist of-
(i) in the case of a male employee, himself, his wife, his children, whether married or unmarried, his dependent parents 1[and the dependent parents of his wife and the widow] and children of his predeceased son, if any,
(ii) in the case of a female employee, herself, her husband, her children, whether married or unmarried, her dependent parents and the dependent parents of her husband and the widow and children of her predeceased son, if any;
2[***]
Explanation.- Where the personal law of an employee permits the adoption by him of a child, any child lawfully adopted by him shall be deemed to be included in his family, and where a child of an employee has been adopted by another person and such adoption is, under the personal law of the person making such adoption, lawful, such child shall be deemed to be excluded from the family of the employee;
(i) "major port" has the meaning assigned to it in clause (8) of section 3 of the Indian Ports Act, 1908 (15 of 1908);
(j) "mine" has the meaning assigned to it in clause (j) of sub-section (1) of section 2 of the Mines Act, 1952 (35 of 1952);
(k) "notification" means a notification published in the Official Gazette;
(l) "oilfield" has the meaning assigned to it in clause (e) of section 3 of the Oilfields (Regulation and Development) Act, 1948 (53 of 1948);
(m) "plantation" has the meaning assigned to it in clause (f) of section 2 of the Plantations Labour Act, 1951 (69 of 1951);
(n) "port" has the meaning assigned to it in clause (4) of section 3 of the Indian Ports Act, 1908 (15 of 1908);
(o) "prescribed" means prescribed by rules made under this Act;
(p) "railway company" has the meaning assigned to it in clause section 3 of the Indian Railways Act, 1890 (9 of 1890);
(q) "retirement" means termination of the service of an employee otherwise than on superannuation;
3[(r) "superannuation", in relation to an employee, means the attainment by the employee of such age as is fixed in the contract or conditions of service as the age on the attainment of which the employer shall vacate the employment;]
1. Subs. by Act 22 of 1987, sec. 2, for "and the widow" (w.e.f. 1-10-1987).
2. The proviso omitted by Act 22 of 1987, sec. 2 (w.e.f. 1-10-1987).
3. Subs. by Act 25 of 1984, sec. 2, for clause (r) (w.e.f. 1-7-1984).
(s) "wages" means all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employment and which are paid or are payable to him in cash and includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance.
COMMENTS
(i) The teacher cannot be said to be an employee within the meaning of the Act and conferring the benefits of the Act to a teacher is illegal; Seth Soorajmal Jalan Balika Vidyalaya (Secondary School) v. The Controlling Authority, 2001 LLR 567 (Cal). But in case of General Educational Academy, Chembur, Mumbai v. Sudha Vasudeo Desai, 2001 LLR 627 the Bombay High Court held and declared that the definition of employee in section 2(e) includes and covers in its compass the class of teacher employed in a school.
(ii) If the main duties of an employee are only supervisory in nature, then certainly he cannot be excluded from the category of "employee" nor can he be deprived of the benefits of this Act, even though for a short period he is required to discharge additional or incidental functions; Vishwanath v. M.P.S.R.T. Corporation, (1987) 55 FLR 1 (Summary) (MP).
(iii) Any workman engaged for work on temporary basis according to the availability of work is not an "employee" within the meaning of section 2(e); K. Velukutty Achary v. Harrisons Malayalam Ltd., (1993) 66 FLR 423 (Ker) (DB).
(iv) A workman who rolls beedis for his employer but at his own house is an "employee" within the meaning of section 2(e) of the Act; P.H. Ramlal & Co. v. Smt. Chand Bibi, (1981) 1 LIC 790 (Guj).
(v) Home worker is very much a person working in the establishment within the meaning of section 2(e). Since, the place where he rolled the beedis, though situated away from the Beedi factory, was nevertheless apart of the establishment within the meaning of section 2(h) of the Beedi and Cigar Workers (Conditions of Employment) Act, 1966. Hence, Home maker is an employee of the establishment; M/s. Bagi Beedi Factory v. Appellate Authority, 1998 LLR 23.
(vi) After attaining the age of superannuation no employee is entitled, as a matter of right, to be in the employment in any establishment; Sir J.P. Srivastava Group of Industries v. State of U.P., (1993) 66 FLR 248 (All).
(vii) An educational, institution as per notification issued by Government of India is covered within the purview of the Act; Nitin A. Mehta v. Mehta Prafullaben Dalpatral, 2001 LLR 414 (Guj).
1[2A. Continuous service.- For the purposes of this Act,-
(1) an employee shall be said to be in continuous service for a period if he has, for that period, been in uninterrupted service, including service which may be interrupted on account of sickness, accident, leave, absence from duty without leave (not being absence in respect of which an order 2[***] treating the absence as break in service has been passed in accordance with the standing orders, rules or regulations governing the employees of the establishment), lay-off, strike or a lock-out or cessation of work not due to any fault of the employee, whether such uninterrupted or interrupted service was rendered before or after the commencement of this Act;
(2) where an employee (not being an employee employed in a seasonal establishment) is not in continuous service within the meaning of clause (1), for any period of one year or six months, he shall be deemed to be in continuous service under the employer-
1. Ins. by Act 26 of 1984, sec. 4 (w.e.f. 11-2-1981).
2. The words "imposing a punishment or penalty or" omitted by Act 22 of 1987, sec. 3 (w.e.f. 1-10-1987).
(a) for the sail period of one year, if employee during the period of twelve calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than-
(i) one hundred and ninety days, in the case of any employee employed below the ground in a mine or in an establishment which works for less than six days in a week; and
(ii) two hundred and forty days, in any other case;
(b) for the said period of six months, if the employee during the period of six calendar months preceding the date with reference to which the calculation is to be made, has actually worked under the employer for not less than-
(i) ninety-five days, in the case of an employees employed below the ground in a mine or in an establishment which works for less than six days in a week; and
(ii) one hundred and twenty days, in any other case.
1[Explanation.- For the purpose of clause (2) the number of days on which an employee has actually worked under an employer shall include the days on which.-
(i) he has been laid-off under an agreement or as permitted by standing orders made under the Industrial Employment (Standing Orders) Act, 1946 (20 of 1946), or under the Industrial Disputes Act, 1947 (14 of 1947), or under any other law applicable to the establishment;
(ii) he has been on leave with full wages, earned in the previous year;
(iii) he has been absent due to temporary disablement caused by accident arising out of and in the course of his employment; and
(iv) in the case of a female, she has been on maternity leave; so, however, that the total period of such maternity leave dose not exceed twelve weeks.]
(3) where an employee, employed in a seasonal establishment, is not in continuous service within the meaning of clause (1), for any period of an year or six, months, he shall be deemed to be in continuous service under the employer for such period if he has actually worked for not less than seventy-five per cent. Of the number of days on which the establishment was in operation during such period.]
COMMENTS
Mere absence cannot be said to result in breach of continuity of service for the purpose of the Act; Kothari Industrial Corporation v. Appellate Authority (Deputy Commissioner of Labour), Karnool, 1998 LLR 223.
3. Controlling authority.- The Appropriate Government may, by notification, appoint any officer to be a controlling authority, who shall be responsible for the administration of this Act and different authorities may be appointed for different areas.
4. Payment of gratuity.- (1) Gratuity shall be payable to an employee on the termination of his employment of his employment after he has rendered continuous service for not than five years,-
(a) on his superannuation, or
(b) on his retirement of resignation, or
(c) on his death or disablement due to accident or disease:
1. Added by Act 22 of 1987, sec. 3 (w.e.f. 1-10-1987).
Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement:
1[Provided further that in the case of death of the employee, gratuity payable to him shall be paid to his nominee or, if no nomination has been made, to his heirs, and where any such nominees or heirs is a minor, the share of such minor, shall be deposited with the controlling authority who shall invest the same for the benefit of such minor in such bank or other financial institution, as may be prescribed, until such minor attains majority.]
Explanation.- For the purposes of this section, disablement means such disablement as incapacitates an employee for the work which he was capable of performing before the accident or disease resulting in such disablement.
(2) For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days' wages based on the rate of wages last drawn by the employee concerned:
Provided that in the case of a piece-rated employee, daily wages shall be computed on the average of the total wages received by him for a period of three months immediately preceding the termination of his employment, and, for this purpose, the wages paid for any overtime work shall not be taken into account:
Provided further that in the case of 2[an employee who is employed in a seasonal establishment and who is not so employed throughout the year], the employer shall pay the gratuity at the rate of seven days' wages for each season.
3[Explanation.-In the case of a monthly rated employee, the fifteen days' wages shall be calculated by dividing the monthly rate of wages last drawn by him by twenty-six and multiplying the quotient by fifteen.]
(3) The amount of gratuity payable to an employee shall not exceed 4[three lakhs and fifty thousand] rupees.
(4) For the purpose of computing the gratuity payable to an employee who is employed, after his disablement, on reduced wages, his wages for the period preceding his disablement shall be taken to be the wages received by him during that period, and his wages for the period subsequent to his disablement shall be taken to be the wages as so reduced.
(5) Nothing in this section shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer.
(6) Notwithstanding anything contained in sub-section (1).-
(a) the gratuity of an employee, whose services have been terminated for any act, willful omission or negligence causing any damage or loss to, or destruction of, property belonging to the employer' shall be forfeited to the extent of damage or loss so caused;
1. Subs. by Act 22 of 1987, sec. 4, for the second proviso (w.e.f. 1-2-1991).
2. Subs. by Act, 25 of 1984, sec. 3, for "an employee employed in a seasonal establishment" (w.e.f. 1-7-1984).
3. Ins. by Act, 22 of 1987, sec. 4 (w.e.f. 1-2-1991).
4. Subs. by Act 11 of 1998 sec. 2, for "one lakh" (w. e.f. 24-9-1997).
(b) the gratuity payable to an employee 1[may be wholly or partially forfeited]-
(i) if the services of such employee have been terminated for his riotous or disorderly conduct or any other act of violence on his part, or
(ii) if the services of such employee have been terminated for any act which constitutes an offence involving moral turpitude, provided that such offence is committed by him in the course of his employment.
2[***]
COMMENTS
(i) If for the purposes of computation of quantum of the amount of gratuity the terms of agreement or settlement are better than the Act, the employee is entitled for that benefit but the maximum statutory ceiling limit as provided under sub-section (3) of section 4 of the Act cannot be reduced by mutual settlement or agreement; Bharat Commerce & Industries v. Ramprasad; 2001 LLR 918 (MP).
(ii) The Fifth Pay Commission recommendations are applicable to Central Government employees only and not applicable to employees of respondent Bank. Hence the claim of these employees for total amount of Rs. 3.50 lakh dismissed; Shitla Sharan Srivastava v. Government of India, 2001 LLR 898 (SC).
(iii) The appellant even after superannuation continued to occupy the quarter and the Government in accordance with the rules charged the penal rent from him and after adjusting other dues, the gratuity amount offered to be paid. The court held that there is no illegality in this amount of gratuity; Wazir Chand v. Union of India, 2001 LLR 172 (SC).
(iv) Refusal of employees to surrender land belonging to the employer is not a ground to withhold gratuity; Travancore Plywood Industries Ltd. v. Regional Joint Labour Commissioner, (1996) II LLJ 85 (Ker).
(v) The right of the employer to forfeit the amount of earned gratuity of an employee whose services were terminated for any act, willful omission or negligence causing any damage to the employer is limited to the extent of the damage, and the proof of such damage; Pennali Wallance Ltd. v. State of M.P. (1996) II LLJ 515 (MP).
(vi) By change of ownership, the relationship of employer and employees subsists and the new employer cannot escape from the liability of payment of gratuity to the employees; Pattathurila K. Damodaran v. M.Kassim Kanju, (1993) I LLJ 1211 (Ker).
(vii) An employee resigning from service is entitled to gratuity; Texmaco Ltd. v. Shri Ram Dhan, 1992 LLR 369 (Del).
(viii) Non-acceptance of the resignation is no hurdle in the way of an employee to claim gratuity; Mettur Spinning Mills v. Deputy Commissioner of Labour, (1983) II LU 188.
(ix) A retrenched employee is entitled to gratuity; State of Punjab v. Labour Court, (1980) 1 SCR 953.
(x) Employees employed in a temple are entitled to gratuity; In re: Administrator, Shree Jagannath Temple, (1992) 65 FLR 946 (Ori).
(xi) In order to arrive at the figure of daily wage for the purpose of section 4(2) of the Act, monthly wages is to be divided by 26; Hindustan Lever Ltd. v. Kasargod Devidas Rao & Ors., (1990) 61 FLR 6 231 (Bom).
(xii) When an offence of theft under law involves moral turpitude, gratuity stands wholly forfeited in view of section 4(6) of the Act; Bharat Gold Mines Ltd. v. Regional Labour Commissioner (Central), (1987) 70 FJR 11 (Karn).
(xiii) An employee who is given the benefit of probation under section 3 of the Probation of Offenders Act, 1958, cannot be disqualified to receive the amount of his gratuity; S.N. Sunderson (Minerals) Ltd. v. Appellate Authority-own-Deputy Labour Commissioner, (1990) 60 FLR 6 (Summary) (MP).
(xiv) An employee who is re-employed without any break in service will be eligible for gratuity; Jeevanlal (1929) Ltd. v. Controlling Authority, (1982) 1 LLN 217.
(xv) Withholding of gratuity is not permissible under any circumstance other than those enumerated in section 4(6) of the Act and right to gratuity is a statutory right; K.C. Mathew v. Plantation Corporation of Kerala Ltd., 2001 LLR 123 (Ker).
(xvi) The Coffee curing work running and employing workmen throughout the year cannot be termed as the "Seasonal establishment"; Coorg and Mysore Coffee Co. v. Deputy Labour Commissioner and Appellate Authority, Hassan, 2001 LLR 214 (Karn).
1. Sub. by Act 25 of 1984, sec. 3, for "shall be wholly forefeited (w.e.f. 1-7-1984).
2. Sub-section (7) ins. by Act 25 of 1984, sec. 3 (w.e.f. 1-7-1984) and omitted by Act 34 of 1994 (w.e.f. 24-5-1994).
1[4A. Compulsory insurance.- (1) With effect from such date as may be notified by the appropriate Government in this behalf, every employer, other than an employer or an establishment belonging to, or under the control of, the Central Government or a State Government, shall, subject to the provisions of sub-section (2), obtain an insurance in the manner prescribed, for his liability for payment towards the gratuity under this Act, from the Life Insurance Corporation of India established under the Life Insurance Corporation of India Act, 1956 (31 of 1956) or any other prescribed insurer:
Provided that different dates may be appointed for different establishments or class of establishments or for different areas.
(2) The appropriate Government may, subject to such conditions as may be prescribed, exempt every employer who had already established an approved gratuity fund in respect of his employees and who desires to continue such arrangement, and every employer employing five hundred or more persons who establishes an approved gratuity fund in the manner prescribed from the provisions of sub-section (1).
(3) For the purpose of effectively implementing the provisions of this section, every employer shall within such time as may be prescribed get his establishment registered with the controlling authority in the prescribed manner and no employer shall be registered under the provisions of this section unless he has taken an insurance referred to in sub-section (1) or has established an approved gratuity fund referred to in sub-section (2).
(4) The appropriate Government may, by notification, make rules to give effect to the provisions of this section and such rules may provide for the composition of the Board of Trustees of the approved gratuity fund and for the recovery by the controlling authority of the amount of the gratuity payable to an employee from the Life Insurance Corporation of India or any other insurer with whom an insurance has been taken under sub-section (1), or as the case may be, the Board of Trustees of the approved gratuity fund.
(5) Where an employer fails to make any payment by way of premium to the insurance referred to in sub-section (1) or by way of contribution to an approved gratuity fund referred to in sub-section (2), he shall be liable to pay the amount of gratuity due under this Act (including interest, if any, for delayed payments) forthwith to the controlling authority.
(6) Whoever contravenes the provisions of sub-section (5) shall be punishable with fine which may extend to ten thousand rupees and in the case of a continuing offence with a further fine which may extend to one thousand rupees for each day during which the offence continues.
Explanation.- In this section, “approved gratuity fund” shall have the same meaning as in clause (5) of section 2 of the Income-tax Act, 1961 (43 of 1961).]
1. Ins. by Act 22 of 1987, sec. 5 (w.e.f. 1-10-1987).
5. Power to exempt.- 1[(1)] The appropriate Government may, by notification, and subject to such conditions as may be specified in the notification, exempt any establishment, factory, mine, oilfield, plantation, port, railway company or shop to which this Act applies from the operation of the provisions of this Act if, in the opinion of the appropriate Government, the employees in such establishment, factory, mine, oilfield, plantation, port, railway company or shop are in receipt of gratuity or pensionary benefits not less favorable than the .benefits conferred under this Act.
2[(2)] The appropriate Government may, by notification and subject to such conditions as may be specified in the notification, exempt any employee or class of employees employed in any establishment, factory, mine, oilfield, plantation, port, railway company or shop to which this Act applies from the operation of the provisions of this Act, if, in the opinion of the appropriate Government, such employee or class of employees are in receipt of gratuity or pensionary benefits not less favorable than the benefits conferred under this Act.]
3[(3) A notification issued under sub-section (1) or sub-section (2) may be issued retrospectively a date not earlier than the date of commencement of this Act, but no such notification shall be issued so as to prejudicially, affect the interests of any person.]
6. Nomination.- (1) Each employee, who has completed one year of service, shall make, within such time, in such form and in such manner, as may be prescribed, nomination for the purpose of the second proviso to sub-section (1) of section 4.
(2) An employee may, in his nomination, distribute the amount of gratuity payable to him under this Act amongst more than one nominee.
(3) If an employee has a family at the time of making a nomination, the nomination shall be made in favour of one or more members of his family, and any nomination made by such employee in favour of a person who is not a member of his family shall be void.
(4) If at the time of making a nomination the employee has no family, the nomination may be made in favour of any person or person but if the employee subsequently acquires a family, such nomination shall forthwith become invalid and the employee shall make within such time as may be prescribed, a fresh nomination in favour of one or more members of his family.
(5) A nomination may, subject to the provisions of sub-sections (3) and (4), be modified by an employee at any time, after giving to his employer a written notice in such form and in such manner as may be prescribed, of his intention to do so.
(6) If a nominee predeceases the employee, the interest of the nominee shall revert to the employee who shall make a fresh nomination, in the prescribed form, in respect of such interest.
(7) Every nomination, fresh nomination or alteration of nomination, as the case may be, shall be sent by the employee to his employer, who shall keep the same in his safe custody.
7. Determination of the amount of gratuity.- (1) A person who is eligible for payment of gratuity under this Act or any person authorised, in writing to act on his behalf shall send a written application to the employer, within such time and in such form, as may be prescribed, for payment of such gratuity.
1. Section 5 renumbered as sub-section (1) thereof by Act 26 of 1984, sec. 5 (w.e.f. 18-5-1984)
2. Ins. by Act 26 of 1984, sec. 5 (w.e.f. 18-5-1984).
3. Ins. by Act 22 of 1987, sec. 6 (w.e.f. 1-10-1987).
(2) As soon as gratuity becomes payable, the employer shall, whether an application referred to in sub-section (1) has been made or not, determine the amount of gratuity and give notice in writing to the person to whom the gratuity is payable and also to the controlling authority specifying the amount of gratuity so determined.
1[(3) The employer shall arrange to pay the amount of gratuity within thirty days from the date it becomes payable to the person to whom the gratuity is payable.
(3A) If the amount of gratuity payable under sub-section (3) is not paid by the employer within the period specified in sub-section (3), the employer shall pay, from the date on which the gratuity becomes payable to the date on which it is paid, simple interest at such rate, not exceeding the rate notified by the Central Government from time to time for repayment of long-term deposits, as that Government may, by notification specify:
Provided that no such interest shall be payable if the delay in the payment is due to the fault of the employee and the employer has obtained permission in writing from the controlling authority for the delayed payment on this ground.]
(4)(a) If there is any dispute to the amount of gratuity payable to an employee under this Act or as to the admissibility of any claim of, or in relation to, an employee for payment of gratuity, or as to the person entitled to receive the gratuity, the employer shall deposit with the controlling authority such amount as he admits to be payable by him as gratuity.
2[***]
3[(b) Where there is a dispute with regard to any matter or matters specified in clause (a), the employer or employee or any other person raising the dispute may make an application to the controlling authority for deciding the dispute.]
4[(C) The controlling authority shall, after due inquiry and after giving the parties to the dispute a reasonable opportunity of being heard, determine the matter or matters in dispute and if, as a result of such inquiry any amount is found to be payable to the employee, the controlling authority shall direct the employer to pay such amount or, as the case may be, such amount as reduced by the amount already deposited by the employer.]
5[(d)] The controlling authority shall pay the amount deposited, including the excess amount, if any, deposited by the employer, to the person entitled thereto.
5[(e)] As soon as may be after a deposit is made under clause (a), the controlling authority shall pay the amount of the deposit-
(i) to the applicant where he is the employee; or
(ii) where the applicant is not the employee, to the 6[nominee or, as the case may be, the guardian of such nominee or] heir of the employee if the controlling authority is satisfied that there is no dispute as to the right of the application to receive the amount of gratuity.
1. Subs. by Act 22 of 1987, sec 7, for sub-section (3) (w.e.f. 1-10-1987).
2. Explanation omitted by Act 25 of 1984, sec. 4. (w.e.f. 1-7-1984).
3. Ins. by Act 25 of 1984, sec. 4 (w.e.f. 1-7-1984).
4. Clause (b) re-lettered as clause (c) by Act 25 of 1984, sec. 4, and clause (c) as so lettered subs. by that section (w.e.f. 1-7-1984).
5. Clauses (c) and (d) re-lettered as clauses (d) and (e) by Act 25 of 1984, sec. 4 (w.e.f. 1-7- 1984).
6. Subs. by Act 25 of 1984, sec. 4, for "nominee or" (w.e.f. 1-7-1984).
(5) For the purpose of conducting an inquiry under sub-section (4), the controlling authority shall have the same powers as are vested in a court, while trying a suit, under the Code of Civil Procedure, 1908 (5 of 1908), in respect of the following matters, namely:-
(a) enforcing the attendance of any person or examining him on oath;
(b) requiring the discovery and production of documents;
(c) receiving evidence on affidavits;
(d) issuing commissions for the examination of witnesses.
(6) Any inquiry under this section shall be a judicial proceeding within the meaning of sections 193 and 228, and for the purpose of section 196, of the Indian Penal Code (45 of 1860).
(7) Any person aggrieved by an order under sub-section (4) may, within sixty days from the date of the receipt of the order, prefer an appeal to the appropriate Government or such other authority as may be specified by the appropriate Government in this behalf:
Provided that the appropriate Government or the appellate authority, as the case may be, may, if it is satisfied that the appellant was prevented by sufficient cause from preferring the appeal within the said period of sixty days, extend the said period by a further period of sixty days:
1[Provided further that no appeal by an employer shall be admitted unless at the time of preferring the appeal, the appellant either produces a certificate of the controlling authority to the effect that the appellant has deposited with him an amount equal to the amount of gratuity required to be deposited under sub-section (4), or deposits with the, appellate authority such amount.]
(8) The appropriate Government or the appellate authority, as the case may be, may, after giving the parties to the appeal a reasonable opportunity of being heard, confirm, modify, or reverse the decision of the controlling authority.
COMMENTS
(i) In either case, if the deposit of the amount ordered by the controlling authority is made as provided under the second proviso to sub-section, these would be no scope for to entertain the appeal; Special Officer, the Kanyakumari District Co-operative Printing Works Ltd. v. Appellate Authority Under Payment of Gratuity Act, Thirunelveli, 2001 LLR 613 (Mad).
(ii) An application for condonation of delay in filing application under section 7(7) is not mandatory; Nataraja Pillai v. Regional it. Labour Commissioner, (1993) 66 FLR 413 (Ker).
(iii) Under section 7(7) of the Act an appeal is maintainable only against the final order of the Controlling Authority; Malabar Spg. & Wvg. Mills v. N. N. Nair, (1989) 74 FJR 1989 (Ker).
(iv) The employee's right to interest on delayed payment is statutory; Champaran Sugar Co. Ltd. v. Joint Labour Commissioner and Appellate Authority, (1987) 54 FLR 60 (Pat) (FB).
1[7A. Inspectors.- (1) The appropriate Government may, by notification, appoint as many Inspectors, as it deems fit, for the purposes of this Act.
1. Ins. by Act 25 of 1984, sec. 4 (w.e.f. 1-7-1984).
(2) The appropriate Government may, by general or special order, define the area to which the authority of an Inspector so appointed shall extend and where two or more Inspectors are appointed for the same area, also provide, by such order, for the distribution or allocation of work to be performed by them under this Act.
(3) Every Inspector shall be deemed to be a public servant within the meaning of section 21 of the Indian Penal Code (45 of 1860).
7B. Powers of Inspectors.- (1) Subject to any rules made by the appropriate Government in this behalf, an Inspector may, for the purpose of ascertaining whether any of the provisions of this Act or the conditions, if any, of any exemption granted thereunder, have been complied with, exercise all or any of the following powers, namely:-
(a) require an employer to furnish such information as he may consider necessary;
(b) enter and inspect, at all reasonable hours, with such assistants (if any), being persons in the service of the Government or local or any public authority, as he thinks fit, any premises of or place in any factory, mine, oilfield, plantation, port, railway company, shop or other establishment to which this Act, applies, for the purpose of examining any register, record or notice or other document required to be kept or exhibited under this Act or the rules made thereunder, or otherwise kept or exhibited in relation to the employment ,of any person or the payment of gratuity to the employees, and require the production thereof for inspection;
(c) examine with respect to any matter relevant to any of the purposes aforesaid, the employer or any person whom he finds in such premises or place and who, he has reasonable cause to believe, is an employee employed therein;
(d) make copies of, or take extracts from, any register, record, notice or other document, as he may consider relevant, and where he has reason to believe that any offence under this Act has been committed by an employer search and seize with such assistance as he may think fit, such register, record, notice or other document as he may consider relevant in respect of that offence;
(e) exercise such other powers as may be prescribed.
(2) Any person required to produce any register, record, notice or other document or to give any information by an Inspector under sub-section (1) shall be deemed to be legally bound to do so within the meaning of sections 175 and 176 of the Indian Panel Code (45 of 1860).
(3) The provisions of the Code of Criminal Procedure, 1973; (2 of 1974), shall so far as may be, apply to any search or seizure under this section as they apply to any search or seizure made under the authority of a warrant issued under section 94 of the Code.]
8. Recovery of gratuity.- If the amount of gratuity payable under this Act is not paid by the employer, within the prescribed time, to the person entitled thereto, the controlling authority shall, on an application made to it in this behalf by the aggrieved person, issue a certificate for that amount to the Collector who shall recover the same, together with compound interest thereon 1[at such rate as the Central Government may, by notification, specify], from the date of expiry of the prescribed time as arrears of land revenue and pay the same to the person entitled thereto:
1. Subs. by Act 22 of 1987, sec. 8, for "at the rate of nine per cent. per annum" (w.e.f. 1-10-1987).
1[Provided that the controlling authority shall, before issuing a certificate under this section, give the employer a reasonable opportunity of showing cause against the issue of such certificate:
Provided further that the amount of interest payable under this section shall, in no case exceed the amount of gratuity payable under this Act.]
COMMENTS
(i) If gratuity is not paid, it must be paid with compound interest at the rate prescribed under section 8 of the Act, calculating till the date of payment; Nagar Palika v. Controlling
Authority, (1988) 57 FLR 425 (All).
(ii) Interest is admissible only if a certificate for recovery of dues as a public demand has been issued; Charan Singh v. Birla Textiles, (1988) 57 FLR 534 (SC).
(iii)The Act itself envisages grant of interest on delayed payment of gratuity; Champaran Sugar Co. Ltd. v. Joint Labour Commissioner-cum-Appellate Authority, AIR 1987 Pat 96.
9. Penalties.-(1) Whoever, for the purpose of avoiding any payment to be made by himself under this Act or of enabling any other person to avoid such payment, knowingly makes or causes to be made any false statement or false representation shall be punishable with imprisonment for a term which may extend to six months or with fine which may extend to 2[ten thousand rupees] or with both.
(2) An employer who contravenes, or make default in complying with, any of the provisions of this Act or any rule or order made thereunder shall be punishable with imprisonment for a term 3[which shall not be less than three months but which may extend to one year, or with fine which shall not be less than ten thousand rupees but which may extend to twenty thousand rupees, or with both]:
Provided that where the offence ralates to non-payment of any gratuity payable under this Act, the employer shall be punishable with imprisonment for a term which shall not be less than 4[six months but which may extend to two years] unless the court trying the offence, for reasons to be recorded by it in writing, is of opinion that a lesser term of imprisonment or the imposition of a fine would meet the ends of justice.
10. Exemption of employer from liability in certain cases.-Where an employer is charged with an offence punishable under this Act, he shall be entitled, upon complaint duly made by him and on giving to the complainant not less than three clear day's notice in writing of his intention to do so, to have any other person whom he charges as the actual offender brought before the court at the time appointed for hearing the charge; and if, after the commission of the offence has been proved, the employer proves to the satisfaction of the court-
(a) that he has used due diligence to enforce the execution of this Act, and
(b) that the said other person committed the offence in question without his knowledge, consent or connivance, that other person shall be convicted of the offence and shall be liable to the like punishment as if he were the employer and the employer shall be discharged from any liability under this Act in respect of such offence:
1. Added by Act 22 of 1987, sec. 8 (w.e.f. 1-10-1987).
2. Subs. by Act 22 of 1987, sec. 9, for "one thousand rupees" (w.e.f. 1-10-1987).
3. Subs. by Act 22 of 1987, sec. 9, for certain words (w.e.f. 1-10-1987).
4. Subs. by Act 22 of 1987, sec. 9, for "three months" (w.e.f. 1-10-'1987).
Provided that in seeking to prove as aforesaid, the employer may be examined on oath and his evidence and that of any witness whom he calls in his support shall be subject to cross-examination on behalf of the person he charges as the actual offender and by the prosecutor:
Provided further that, if the person charged as the actual offender by the employer cannot be brought before the court at the time appointed for hearing the charge, the court shall adjourn the hearing from time to time for a period not exceeding three months and if by the end of the said period the person charged as the actual offender cannot still be brought before the court, the court shall proceed to hear the charge against the employer and shall, if the offence be proved, convict the employer.
11. Cognizance of offences.-(1) No court shall take cognizance of any offence punishable under this Act save on a complaint made by or under the authority of the appropriate Government:
Provided that where the amount of gratuity has not been paid, or recovered, with-in six months from the expiry of the prescribed time, the appropriate Government shall authorise the controlling authority to make a complaint against the employer, where-upon the controlling authority shall within fifteen days from the date of such authorisation, make such complaint to a magistrate having jurisdiction to try the offence.
(2) No court inferior to that of a 1[Metropolitan Magistrate or a Judicial Magistrate of the first class] shall try any offence punishable under this Act.
12. Protection of action taken in good faith.-No suit or other legal proceeding shall lie against the controlling authority or any other person in respect of anything which is in good faith done or intended to be done under this Act or any rule or order made thereunder.
13. Protection of gratuity.-No gratuity payable under this Act 2[and no gratuity payable to an employee employed in any establishment, factory , mine, oilfield, plantation, port, railway company or shop exempted under section 5] shall be liable to attachment in execution of any decree or order of any civil, revenue or criminal court.
COMMENTS
(i) In the view of number of direct and to categoric judgments of the Appex Court the Payment of Gratuity Act is a welfare legislation and the amount of payment of gratuity cannot be withheld of an employee for non-vacation of the quarter; Taxmaco Limited v. Roshan Singh, 2001 LLR 890 (Del).
(ii) Gratuity cannot be attached; Chrisostom v. Federal Bank Ltd., (1993) 1 LLJ 422 (Ker).
(iii) This section gives total immunity to gratuity from attachment; Calcutta Dock Labour v. Smt. Sandhya Mitra, (1985) Lab IC 114 (SC).
1. Subs. by Act 34 of 1994, sec. 4, for Presidency Magistrate or a Magistrate of the first class" (w.e.f. 24-5-1994).
2. Ins. by Act 25 of 1984, sec. 6 (w.e.f. 1-7-1984).
14. Act to override other enactments, etc.-The provisions of this Act or any rule made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than this Act or in any instrument or contract having effect by virtue of any enactment other than this Act.
COMMENTS
Pension scheme cannot defeat the benefit of gratuity; C. Kuppuswami v. E.I.D. Parny (India) Ltd., (1.989) 1. LLN 85 (Mad).
15. Power to make rules.-(1) The appropriate Government may, by notification, make rules for the purpose of carrying out the provisions of this Act.
(2) Every rule made by the Central Government under this Act shall be laid, as soon as may be after it is made, before each House of Parliament while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or both Houses agree that the rule should not be made, the rule shall, thereafter, have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.
THE PAYMENT OF GRATUITY (CENTRAL)
RULES, 19721
In exercise of the powers conferred by sub-section (1) of section 15 of the Payment of Gratuity Act, 1972 (39 of 1972), the Central Government hereby makes the following rules, namely:-
1. Short title and commencement.-(1) These rules may be called the Payment of Gratuity (Central) Rules, 1972.
(2) These rules shall come into force on the 16th September, 1972;
2. Definitions.-In these rules, unless there is anything repugnant in the subject or context,-
(a) "Act" means the Payment of Gratuity Act, 1972 (39 of 1972);
(b) "Appellate authority" means the Central Government or the authority specified by the Central Government under sub-section (7) of section 7;
(c) "Form" means a form appended to these rules;
(d) "nomination" means nomination made under section 6;
(e) "section" means a section of the Act.
3. Notice of opening, change or closure of the establishment.- (1) Within thirty days of the rules becoming applicable to an establishment, a notice in Form A shall be submitted by the employer to the controlling authority of the area.
(2) A notice in Form B shall be submitted by the employer to the controlling authority of the area within thirty days of any change in the name, address, employer or nature of business.
(3) Where an employer intends to close down the business he shall submit a notice in Form C to the controlling authority of the area at least sixty days before the intended closure.
4. Display of notice.-(1) The employer shall display conspicuously a notice at or near the main entrance of the establishment in bold letters in English and in a language understood by the majority of the employees specifying the name of officer with designation authorised by the employer to receive on his behalf notices under the Act or the rules.
(2) A fresh notice shall be displayed immediately after the notice referred to in sub-rule (1) becomes illegible or requires a change.
*5. Form of notice under proviso to section (2) (h) (ii).-(1) A notice under the proviso to sub-clause (ii) of clause (h) of section 2 shall be in Form D and sent in triplicate by the employee to the employer, who shall, after recording its receipt on one copy thereof, return the copy to the employee and send the second copy to the controlling authority of the area.
1. Vide G,S.R. 412 (E). dated 16th September, 1972, published in the Gazette of India; Extra., Pt. II, Sec. 3(i), dated 16th September, 1972.
* By section 2 of the Payment of Gratuity (Amendment) Act, 1987 (22 of 1987) proviso to sub- clause (ii) of clause (h) of section 2 of the Payment of Gratuity Act, 1972 (39 of 1972) has been omitted (w.e.f. 1-10-1987) and accordingly rule 5 along with Forms D and E have become redundant, Ed.
(2) An employee may withdraw the notice referred to in sub-rule (1) by giving another notice in triplicate in Form 'E' to the employer, who shall follow the same procedure as in sub-rule (1).
6. Nominations.-(1) A nomination shall be in Form 'F' and submitted in duplicate by personal service by the employee, after taking proper receipt or by sending through registered post acknowledgement due to the employer,
(i) in the case of an employee who is already in employment for a year or more on the date of commencement of these rules, ordinarily, within ninety days from such date, and
(ii) in the case of an employee who completes one year of service after the date of commencement of these rules, ordinarily within thirty days of the completion of one year of service:
Provided that nomination in Form 'F' shall be accepted by the employer after the specified period, if filed with reasonable grounds for delay, and no nomination so accepted shall be invalid merely because it was filed after the specified period.
(2) Within thirty days of the receipt of nomination in Form 'F' under sub-rule (1), the employer shall get the service particulars of the employee, as mentioned in the form of nomination, verified with reference to the records of the establishment and return to the employee, after obtaining a receipt thereof, the duplicate copy of the nomination in form 'F' duly attested either by the employer or an officer authorised in this behalf by him, as a token of recording of the nomination by the employer and the other copy of the nomination shall be recorded.
(3) An employee who has no family at the time of making a nomination shall, within ninety days of acquiring a family submit in the manner specified in sub-rule (1), a fresh nomination, as required under sub-section (4) of section 6, duplicate in Form 'G' to the employer and thereafter the provisions of sub-rule (2) shall apply mutatis mutandis as if it was made under sub-rule (1).
(4) A notice of modification of a nomination, including cases where a nominee predeceases an employee, shall be submitted in duplicate in Form 'H' to the employer in the manner specified in sub-rule (1), and thereafter the provisions of sub-rule (2) shall apply mutatis mutandis.
(5) A nomination or a fresh nomination or a notice of modification of nomination shall be signed by the employee or, if illiterate, shall bear his thumb impression, in the presence of two witnesses, who shall also sign a declaration to that effect in the nomination, fresh nomination or notice of modification of nomination, as the case may be.
(6) A nomination, fresh nomination or notice of modification of nomination shall take effect from the date of receipt thereof by the employer.
7. Application for gratuity.-(1) An employee who is eligible for payment of gratuity under the Act, or any person authorised, in writing, to act on his behalf, shall apply, ordinarily within thirty days from the date the gratuity became payable, in Form 'I' to the employer:
Provided that where the date of superannuation or retirement of an employee is known, the employee may apply to the employer before thirty days of the date of superannuation or retirement.
(2) A nominee of an employee who is eligible for payment of gratuity under the second proviso to sub-section (1) of section 4 shall apply, ordinarily within thirty days from the date of gratuity became payable to him, in Form ‘J’ to the employer:
Provided that an application in plain paper with relevant particulars shall also be accepted. The employer may obtain such other particulars as may be deemed necessary by him.
(3) A legal heir of an employee who is eligible for payment of gratuity under the second proviso to sub-section (1) of section 4 shall apply, ordinarily within one year from the date of gratuity became payable to him, in Form 'K' to the employer.
(4) Where gratuity becomes payable under the Act before the commencement of these rules, the periods of limitation specified in sub-rules (1), (2) and (3) shall be deemed to be operative from the date of such commencement.
(5) An application for payment of gratuity filed after the expiry of the periods specified in this rule shall also be entertained by the employer, if the applicant adduces sufficient cause for the delay in preferring his claim, and no claim for gratuity under the Act shall be invalid merely because the claimant failed to present his application within the specified period. Any dispute in this regard shall be referred to the controlling authority for his decision.
(6) An application under this rule shall be presented to the employer either by personal service or by registered post acknowledgement due.
8. Notice for payment of gratuity.-(1) Within fifteen days of the receipt of an application under rule 7 for payment of gratuity, the employer shall-
(i) if the claim is found admissible on verification, issue a notice in Form 'L’ to the applicant employee, nominee or legal heir, as the case may be, specifying the amount of gratuity payable and fixing a date, not being later than the thirtieth day after the date of receipt of the application, for payment thereof, or
(ii) if the claim for gratuity is not found admissible, issue a notice in Form 'M' to the applicant employee, nominee or legal heir, as the case may be, specifying the reasons why the claim for gratuity is not considered admissible. In either case a copy of the notice shall be endorsed to the controlling authority.
(2) In case payment of gratuity is due to be made in the employer's office, the date fixed for the purpose in the notice in Form 'L' under clause (1) of sub-rule (1) shall be refiexed by the employer, if a written application in this behalf is made by the payee explaining why it is not possible for him to be present in person on the date specified.
(3) If the claimant for gratuity is a nominee or a legal heir, the employer may ask for such witness or evidence as may be deemed relevant for establishing his identity or maintainability of his claim, as the case may be. In that 'case, the time limit specified for issuance of notices under sub-rule (1) shall be operative with effect from the date such witness or evidence, as the case may be, called for by the employer is furnished to the employer.
(4) A notice in Form 'L' or Form 'M' shall be served on the applicant either by personal service after taking receipt or by registered post with acknowledgement due.
(5) A notice under sub-section (2) of section 7 shall in Form ‘L’.
9. Mode of payment of gratuity.- The gratuity payable under the Act shall be paid in cash or, if so desired by the payee, in Demand Draft or bank Cheque to the eligible employee, nominee or legal heir, as the case may be:
Provided that in case the eligible employee, nominee or legal heir, as the case may be, so desires and the amount of gratuity payable is less than one thousand rupees, payment may be made by postal money order after deducting the postal money order commission therefor from the amount payable:
Provided further that intimation about the details of payment shall also be given by the employer to the controlling authority of the area:
1[Provided further that in the case of nominee, or an heir, who is minor, the controlling authority shall invest the gratuity amount deposited with him for the benefit of such minor in term deposit with the State Bank of India or any of its subsidiaries or any Nationalised Bank.
Explanation.-"Nationalised Bank" means a corresponding new bank specified in the First Schedule to the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970) or a corresponding new bank specified in the First Schedule of the Banking Companies (Acquisition and Transfer of Undertakings) Act,. 1980 (40 of 1980).]
10. Application to controlling authority for direction.-(1) If an employer-
(i) refuses to accept a nomination or to entertain an application sought to be filed under rule 7, or
(ii) issues a notice under sub-rule (1) of rule 8 either specifying an amount of gratuity which is considered by the applicant less than what is payable or rejecting eligibility to payment of gratuity, or
(iii) having received an application under rule 7 fails to issue any notice as required under rule 8 within the time specified therein,
the claimant employee, nominee or legal heir, as the case may be, may, within ninety days of the occurrence of the cause for the application, apply in Form 'N' to the controlling authority for issuing a direction under sub-section (4) of section 7 with as many extra copies as are the opposite party:
Provided that the controlling authority may accept any application under this sub-rule, on sufficient cause being shown by the applicant, after the expiry of the specified period.
(2) Application under sub-rule (1) and other documents relevant to such an application shall be presented in person to the controlling authority or shall be sent by registered post acknowledgement due.
11. Procedure for dealing with application for direction.-(1) On receipt of an application under rule 10 the controlling authority shall, by issuing a notice in Form 'O', call upon the applicant as well as the employer to appear before him on a specified date, time and place, either by himself or through his authorised representative together with all relevant documents and witnesses, if any.
1. Ins. by G.S.R. 77, dated 2nd February, 1991 (w.e.f. 1-2-1991).
1. Ins. by G.S.R. 2868, dated 22nd November, 1975.
(2) Any person desiring to act on behalf of an employer or employee, nominee or legal heir, as the cases may be, shall present to the controlling authority a letter of authority from the employer or the person concerned, as the case may be, on whose behalf he seeks to act together with a written statement explaining his interest in the matter and praying for permission so to act. The controlling authority shall record thereon an order either according his approval or specifying, in the case of refusal to grant the permission prayed for, the reasons for the refusal.
(3) A party appearing by an
From India, Gurgaon
Please see below for THE PAYMENT OF GRATUITY ACT, 1972. Hope this will work as ready reference for you.
[u:ec2e0321e9]THE PAYMENT OF GRATUITY ACT, 1972
INTRODUCTION
The Working Journalists (Conditions of Service) and Miscellaneous Provisions Act, 1955 (45 of 1955) under section 5 provided for the payment of gratuity to the journalist. But there was no other Central Act which provided for the payment of gratuity to industrial workers. The Government of Kerala enacted legislation for payment of gratuity to workers employed in factories, plantations, shops and establishments. The Governor of West Bengal promulgated an Ordinance on 3rd June, 1971 wherein a scheme for payment of gratuity was enacted. The Ordinance was later replaced by the West Bengal Employees' Payment of Compulsory Gratuity Act, 1971 enacted by the President on 28th August, 1971. Gratuity was also being paid by some employers to their workers under Awards and Agreements. Since the enactment of the Kerala and West Bengal Acts, some other State Governments also wanted to enact similar measures. Taking into account the intention of the State Governments it was felt necessary to have a Central law on the subject so as to ensure a uniform pattern of payment of gratuity to the employees throughout the country. The proposal for Central legislation on gratuity was discussed in the Labour Ministers' Conference held at New Delhi on 24th and 25th August, 1971 and also in the Indian Labour Conference at its session held on 22nd and 23rd October, 1971. There was general agreement at the Labour Ministers' Conference and the Indian Labour Conference that Central legislation on payment of gratuity might be undertaken at the earliest. Accordingly the Payment of Gratuity Bill was introduced in the Parliament.
STATEMENT OF OBJECTS AND REASONS
There is at present no Central Act to regulate the payment of gratuity to industrial workers, except the Working Journalists (Conditions of Service) and Miscellaneous Provisions Act, 1955. The Government of Kerala enacted legislation last year for payment of gratuity to workers employed in factories, plantations, shops and establishments. The West Bengal Governor Promulgated an Ordinance on the 3rd June, 1971 prescribing a similar scheme of gratuity. This Ordinance has since been replaced by the West Bengal Employees' Payment of Compulsory Gratuity Act, 1971, enacted by the President on 28th August, 1971. Gratuity is also being paid by some employers to their workers under Awards and Agreements.
Since the enactment of the Kerala and the West Bengal Acts, some other State Governments have also voiced their intention of enacting similar measures in their respective States. It has become necessary, therefore, to have a Central law on the subject so as to ensure a uniform pattern of payment of gratuity to the employees throughout the country. The enactment of a Central law would also avoid different treatment to the employees of establishments having branches in more than one State when, under the conditions of their service, the employees are liable to transfer from one State to another.
The proposal for Central legislation on gratuity was discussed in the Labour Ministers' Conference held at New Delhi on 24th and 25th August, 1971 and also in the Indian Labour Conference at its session held on the 22nd and 23rd October, 1971. There was general agreement at the Labour Minister' Conference and the Indian Labour Conference that Central legislation on payment of gratuity might be undertaken as early as possible. It is accordingly proposed to undertake such legislation.
In enacting the President's Act for West Bengal in August 1971, care has been taken to so design its provisions that they could serve as far as possible as norms for the Central law. The Bill has, therefore, been drafted on the lines of the West Bengal Employees' Payment of Compulsory Gratuity Act, 1971 with some modifications which have been made in the light of the views expressed at the Indian Labour Conference relating to forfeiture of gratuity in cases of dismissal for gross misconduct.
The Bill provides for gratuity to employees drawing wages up to Rs. 270 per month in factories, plantations, shops, establishments and mines, in the event of superannuation, retirement, resignation and death or total disablement due to accident or disease, The quantum of gratuity payable will be 15 days' wages based on the rate of wages last drawn by the employees concerned for every completed year of service or part thereof in excess of six months subject to a maximum of 15 months' wages. The term "wages" will mean "basic wage plus dearness allowance".
It is proposed that the appropriate Government for administering the Act in relation to establishment belonging to or under the control of the Central Government or a railway company, or mine, a major port and oil field or in relation to establishments having departments or branches in more than one State, will be the Central Government, and, in relation to other establishments, the State Government. The Bill seeks to give effect to the above proposals.
ACT 39 OF 1972
The Payment of Gratuity Bill having been passed by both the Houses of Parliament received the assent of the President on 21st August, 1972. It came into force on 16th September, 1972 as THE PAYMENT OF GRATUITY ACT, 1972 (39 of 1972).
LIST OF AMENDING ACTS
1. The Payment of Gratuity (Amendment) Act, 1984 (25 of 1984).
2. The Payment of Gratuity (Second Amendment) Act, 1984 (26 of 1984).
3. The Payment of Gratuity (Amendment) Act, 1987 (22 of 1987).
4. The Payment of Gratuity (Amendment) Act, 1994 (34 of 1994).
5. The Payment of Gratuity (Amendment) Act, 1998 (11 of 1998).
THE PAYMENT OF GRATUITY ACT, 1972
(39 of 1972)
[21st August, 1972]
An Act to provide for a scheme for the payment of gratuity to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments and for matters connected therewith or incidental thereto.
BE it enacted by Parliament in the Twenty-third Year of the Republic of India as follows:-
1. Short title, extent, application and commencement.-(1) This Act may be called the Payment of Gratuity Act, 1972.
(2) It extends to the whole of India:
Provided that in so far as it relates to plantations or ports, it shall not extend to the State of Jammu and Kashmir.
(3) It shall apply to-
(a) every factory, mine. oilfield, plantation, port and railway company;
(b) every shop or establishment within the meaning of any law for the time being in force in relation to shops and establishments in a State, in which ten or more persons are employed, or were employed, on any day of the preceding twelve months;
(c) such other establishments or class of establishments, in which ten or more employees are employed, or were employed, on any day of the preceding twelve months, as the Central Government may, by notification, specify in this behalf.
1[(3A) A shop or establishment to which this Act has become applicable shall continue to be governed by this Act notwithstanding that the number of persons employed therein at any time after it has become so applicable falls below ten.]
(4) It shall come into force on such date2 as the Central Government may, notification, appoint.
COMMENTS
(i) The expression "law" used in section 1(3)(b) means any law in respect of shops, establishments commercial or non-commercial; K. Gangadhar v. The Appellate Authority under The Payment of Gratuity Act, (1993) 66 FLR 648 (AP).
(ii) The provisions of section 1(3)(b) of the Act are comprehensive. Municipal Board is covered under the Act; Municipal Board v. Union of India, (1993) 67 FLR, 973 (All).
1. Ins. by Act 26 of 1984, sec. 2 (w.e.f. 18-5-1984).
2. Came into force on 16-9-1972, vide S.O. 601(E), dated 16th September, Gazette of India, Extra., Pt. II, Sec. 3(ii), p. 1641.
2. Definitions-In this Act, unless the context otherwise requires,-
(a) "appropriate Government" means,-
(i) in relation to an establishment-
(a) belonging to, or under the control of, the Central Government,
(b) having branches in more than one State,
(c) of a factory belonging to, or under the control of, the Central Government;
(d) of a major port, mine, oil field or railway company, the Central Government;
(ii) in any other case, the State Government;
(b) "completed year of service" means continuous service for one year;
1[(C)"continuous service" means continuous service as defined in section 2A;]
(d)"controlling authority" means an authority appointed by the appropriate Government under section 3;
(e) "employee" means any person (other than an apprentice) employed on wages, 2[***] in any establishment, factory, mine, oilfield, plantation, port, railway company or shop to do any skilled, semi-skilled, or unskilled, manual, supervisory, technical or clerical work, whether the terms of such employment are express or implied, 3[and whether or not such person is employed in a managerial or administrative capacity, but does not include any such person who holds a post under the Central Government or a State Government and is governed by any other Act or by any rules providing for payment of gratuity].
4[***]
(f) "employer" means, in relation to any establishment, factory, mine, oilfield, plantation, port, railway company or shop-
(i) belonging to, or under the control of, the Central Government or a State Government a person or authority appointed by the appropriate Government for the supervision and control of employees, or where no person or authority has been so appointed, the head of the Ministry or Department concerned,
(ii) belonging to, or under the control of, any local authority, the person appointed by such authority for the supervision and control of employees or where no person has been so appointed, the chief executive officer of the local authority,
(iii) in any other case, the person, who, or the authority which, has the ultimate control over the affairs of the establishment, factory, mine, oilfield, plantation, port, railway company or shop, and where the said affairs are entrusted to any person, whether called a manager, managing director or by any other name, such person;
1. Subs. by Act 26 of 1984, sec. 3, for clause (c) (w.e.f. 11-12-1981).
2. Certain words omitted by Act 34 of 1994, sec. 2 (w.e.f. 24-5-1994).
3. Subs. by Act 25 of 1984, sec. 2, for certain words (w.e.f. 1-7-1984).
4. Explanation omitted by Act 34 of 1994, sec. 2 (w.e.f. 24-5-1994).
(g) "factory", has the meaning assigned to it in clause (m) of section 2 of the Factories Act, 1948 (63 of 1948);
(h) "family" in relation to an employee, shall be deemed to consist of-
(i) in the case of a male employee, himself, his wife, his children, whether married or unmarried, his dependent parents 1[and the dependent parents of his wife and the widow] and children of his predeceased son, if any,
(ii) in the case of a female employee, herself, her husband, her children, whether married or unmarried, her dependent parents and the dependent parents of her husband and the widow and children of her predeceased son, if any;
2[***]
Explanation.- Where the personal law of an employee permits the adoption by him of a child, any child lawfully adopted by him shall be deemed to be included in his family, and where a child of an employee has been adopted by another person and such adoption is, under the personal law of the person making such adoption, lawful, such child shall be deemed to be excluded from the family of the employee;
(i) "major port" has the meaning assigned to it in clause (8) of section 3 of the Indian Ports Act, 1908 (15 of 1908);
(j) "mine" has the meaning assigned to it in clause (j) of sub-section (1) of section 2 of the Mines Act, 1952 (35 of 1952);
(k) "notification" means a notification published in the Official Gazette;
(l) "oilfield" has the meaning assigned to it in clause (e) of section 3 of the Oilfields (Regulation and Development) Act, 1948 (53 of 1948);
(m) "plantation" has the meaning assigned to it in clause (f) of section 2 of the Plantations Labour Act, 1951 (69 of 1951);
(n) "port" has the meaning assigned to it in clause (4) of section 3 of the Indian Ports Act, 1908 (15 of 1908);
(o) "prescribed" means prescribed by rules made under this Act;
(p) "railway company" has the meaning assigned to it in clause section 3 of the Indian Railways Act, 1890 (9 of 1890);
(q) "retirement" means termination of the service of an employee otherwise than on superannuation;
3[(r) "superannuation", in relation to an employee, means the attainment by the employee of such age as is fixed in the contract or conditions of service as the age on the attainment of which the employer shall vacate the employment;]
1. Subs. by Act 22 of 1987, sec. 2, for "and the widow" (w.e.f. 1-10-1987).
2. The proviso omitted by Act 22 of 1987, sec. 2 (w.e.f. 1-10-1987).
3. Subs. by Act 25 of 1984, sec. 2, for clause (r) (w.e.f. 1-7-1984).
(s) "wages" means all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employment and which are paid or are payable to him in cash and includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance.
COMMENTS
(i) The teacher cannot be said to be an employee within the meaning of the Act and conferring the benefits of the Act to a teacher is illegal; Seth Soorajmal Jalan Balika Vidyalaya (Secondary School) v. The Controlling Authority, 2001 LLR 567 (Cal). But in case of General Educational Academy, Chembur, Mumbai v. Sudha Vasudeo Desai, 2001 LLR 627 the Bombay High Court held and declared that the definition of employee in section 2(e) includes and covers in its compass the class of teacher employed in a school.
(ii) If the main duties of an employee are only supervisory in nature, then certainly he cannot be excluded from the category of "employee" nor can he be deprived of the benefits of this Act, even though for a short period he is required to discharge additional or incidental functions; Vishwanath v. M.P.S.R.T. Corporation, (1987) 55 FLR 1 (Summary) (MP).
(iii) Any workman engaged for work on temporary basis according to the availability of work is not an "employee" within the meaning of section 2(e); K. Velukutty Achary v. Harrisons Malayalam Ltd., (1993) 66 FLR 423 (Ker) (DB).
(iv) A workman who rolls beedis for his employer but at his own house is an "employee" within the meaning of section 2(e) of the Act; P.H. Ramlal & Co. v. Smt. Chand Bibi, (1981) 1 LIC 790 (Guj).
(v) Home worker is very much a person working in the establishment within the meaning of section 2(e). Since, the place where he rolled the beedis, though situated away from the Beedi factory, was nevertheless apart of the establishment within the meaning of section 2(h) of the Beedi and Cigar Workers (Conditions of Employment) Act, 1966. Hence, Home maker is an employee of the establishment; M/s. Bagi Beedi Factory v. Appellate Authority, 1998 LLR 23.
(vi) After attaining the age of superannuation no employee is entitled, as a matter of right, to be in the employment in any establishment; Sir J.P. Srivastava Group of Industries v. State of U.P., (1993) 66 FLR 248 (All).
(vii) An educational, institution as per notification issued by Government of India is covered within the purview of the Act; Nitin A. Mehta v. Mehta Prafullaben Dalpatral, 2001 LLR 414 (Guj).
1[2A. Continuous service.- For the purposes of this Act,-
(1) an employee shall be said to be in continuous service for a period if he has, for that period, been in uninterrupted service, including service which may be interrupted on account of sickness, accident, leave, absence from duty without leave (not being absence in respect of which an order 2[***] treating the absence as break in service has been passed in accordance with the standing orders, rules or regulations governing the employees of the establishment), lay-off, strike or a lock-out or cessation of work not due to any fault of the employee, whether such uninterrupted or interrupted service was rendered before or after the commencement of this Act;
(2) where an employee (not being an employee employed in a seasonal establishment) is not in continuous service within the meaning of clause (1), for any period of one year or six months, he shall be deemed to be in continuous service under the employer-
1. Ins. by Act 26 of 1984, sec. 4 (w.e.f. 11-2-1981).
2. The words "imposing a punishment or penalty or" omitted by Act 22 of 1987, sec. 3 (w.e.f. 1-10-1987).
(a) for the sail period of one year, if employee during the period of twelve calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than-
(i) one hundred and ninety days, in the case of any employee employed below the ground in a mine or in an establishment which works for less than six days in a week; and
(ii) two hundred and forty days, in any other case;
(b) for the said period of six months, if the employee during the period of six calendar months preceding the date with reference to which the calculation is to be made, has actually worked under the employer for not less than-
(i) ninety-five days, in the case of an employees employed below the ground in a mine or in an establishment which works for less than six days in a week; and
(ii) one hundred and twenty days, in any other case.
1[Explanation.- For the purpose of clause (2) the number of days on which an employee has actually worked under an employer shall include the days on which.-
(i) he has been laid-off under an agreement or as permitted by standing orders made under the Industrial Employment (Standing Orders) Act, 1946 (20 of 1946), or under the Industrial Disputes Act, 1947 (14 of 1947), or under any other law applicable to the establishment;
(ii) he has been on leave with full wages, earned in the previous year;
(iii) he has been absent due to temporary disablement caused by accident arising out of and in the course of his employment; and
(iv) in the case of a female, she has been on maternity leave; so, however, that the total period of such maternity leave dose not exceed twelve weeks.]
(3) where an employee, employed in a seasonal establishment, is not in continuous service within the meaning of clause (1), for any period of an year or six, months, he shall be deemed to be in continuous service under the employer for such period if he has actually worked for not less than seventy-five per cent. Of the number of days on which the establishment was in operation during such period.]
COMMENTS
Mere absence cannot be said to result in breach of continuity of service for the purpose of the Act; Kothari Industrial Corporation v. Appellate Authority (Deputy Commissioner of Labour), Karnool, 1998 LLR 223.
3. Controlling authority.- The Appropriate Government may, by notification, appoint any officer to be a controlling authority, who shall be responsible for the administration of this Act and different authorities may be appointed for different areas.
4. Payment of gratuity.- (1) Gratuity shall be payable to an employee on the termination of his employment of his employment after he has rendered continuous service for not than five years,-
(a) on his superannuation, or
(b) on his retirement of resignation, or
(c) on his death or disablement due to accident or disease:
1. Added by Act 22 of 1987, sec. 3 (w.e.f. 1-10-1987).
Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement:
1[Provided further that in the case of death of the employee, gratuity payable to him shall be paid to his nominee or, if no nomination has been made, to his heirs, and where any such nominees or heirs is a minor, the share of such minor, shall be deposited with the controlling authority who shall invest the same for the benefit of such minor in such bank or other financial institution, as may be prescribed, until such minor attains majority.]
Explanation.- For the purposes of this section, disablement means such disablement as incapacitates an employee for the work which he was capable of performing before the accident or disease resulting in such disablement.
(2) For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days' wages based on the rate of wages last drawn by the employee concerned:
Provided that in the case of a piece-rated employee, daily wages shall be computed on the average of the total wages received by him for a period of three months immediately preceding the termination of his employment, and, for this purpose, the wages paid for any overtime work shall not be taken into account:
Provided further that in the case of 2[an employee who is employed in a seasonal establishment and who is not so employed throughout the year], the employer shall pay the gratuity at the rate of seven days' wages for each season.
3[Explanation.-In the case of a monthly rated employee, the fifteen days' wages shall be calculated by dividing the monthly rate of wages last drawn by him by twenty-six and multiplying the quotient by fifteen.]
(3) The amount of gratuity payable to an employee shall not exceed 4[three lakhs and fifty thousand] rupees.
(4) For the purpose of computing the gratuity payable to an employee who is employed, after his disablement, on reduced wages, his wages for the period preceding his disablement shall be taken to be the wages received by him during that period, and his wages for the period subsequent to his disablement shall be taken to be the wages as so reduced.
(5) Nothing in this section shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer.
(6) Notwithstanding anything contained in sub-section (1).-
(a) the gratuity of an employee, whose services have been terminated for any act, willful omission or negligence causing any damage or loss to, or destruction of, property belonging to the employer' shall be forfeited to the extent of damage or loss so caused;
1. Subs. by Act 22 of 1987, sec. 4, for the second proviso (w.e.f. 1-2-1991).
2. Subs. by Act, 25 of 1984, sec. 3, for "an employee employed in a seasonal establishment" (w.e.f. 1-7-1984).
3. Ins. by Act, 22 of 1987, sec. 4 (w.e.f. 1-2-1991).
4. Subs. by Act 11 of 1998 sec. 2, for "one lakh" (w. e.f. 24-9-1997).
(b) the gratuity payable to an employee 1[may be wholly or partially forfeited]-
(i) if the services of such employee have been terminated for his riotous or disorderly conduct or any other act of violence on his part, or
(ii) if the services of such employee have been terminated for any act which constitutes an offence involving moral turpitude, provided that such offence is committed by him in the course of his employment.
2[***]
COMMENTS
(i) If for the purposes of computation of quantum of the amount of gratuity the terms of agreement or settlement are better than the Act, the employee is entitled for that benefit but the maximum statutory ceiling limit as provided under sub-section (3) of section 4 of the Act cannot be reduced by mutual settlement or agreement; Bharat Commerce & Industries v. Ramprasad; 2001 LLR 918 (MP).
(ii) The Fifth Pay Commission recommendations are applicable to Central Government employees only and not applicable to employees of respondent Bank. Hence the claim of these employees for total amount of Rs. 3.50 lakh dismissed; Shitla Sharan Srivastava v. Government of India, 2001 LLR 898 (SC).
(iii) The appellant even after superannuation continued to occupy the quarter and the Government in accordance with the rules charged the penal rent from him and after adjusting other dues, the gratuity amount offered to be paid. The court held that there is no illegality in this amount of gratuity; Wazir Chand v. Union of India, 2001 LLR 172 (SC).
(iv) Refusal of employees to surrender land belonging to the employer is not a ground to withhold gratuity; Travancore Plywood Industries Ltd. v. Regional Joint Labour Commissioner, (1996) II LLJ 85 (Ker).
(v) The right of the employer to forfeit the amount of earned gratuity of an employee whose services were terminated for any act, willful omission or negligence causing any damage to the employer is limited to the extent of the damage, and the proof of such damage; Pennali Wallance Ltd. v. State of M.P. (1996) II LLJ 515 (MP).
(vi) By change of ownership, the relationship of employer and employees subsists and the new employer cannot escape from the liability of payment of gratuity to the employees; Pattathurila K. Damodaran v. M.Kassim Kanju, (1993) I LLJ 1211 (Ker).
(vii) An employee resigning from service is entitled to gratuity; Texmaco Ltd. v. Shri Ram Dhan, 1992 LLR 369 (Del).
(viii) Non-acceptance of the resignation is no hurdle in the way of an employee to claim gratuity; Mettur Spinning Mills v. Deputy Commissioner of Labour, (1983) II LU 188.
(ix) A retrenched employee is entitled to gratuity; State of Punjab v. Labour Court, (1980) 1 SCR 953.
(x) Employees employed in a temple are entitled to gratuity; In re: Administrator, Shree Jagannath Temple, (1992) 65 FLR 946 (Ori).
(xi) In order to arrive at the figure of daily wage for the purpose of section 4(2) of the Act, monthly wages is to be divided by 26; Hindustan Lever Ltd. v. Kasargod Devidas Rao & Ors., (1990) 61 FLR 6 231 (Bom).
(xii) When an offence of theft under law involves moral turpitude, gratuity stands wholly forfeited in view of section 4(6) of the Act; Bharat Gold Mines Ltd. v. Regional Labour Commissioner (Central), (1987) 70 FJR 11 (Karn).
(xiii) An employee who is given the benefit of probation under section 3 of the Probation of Offenders Act, 1958, cannot be disqualified to receive the amount of his gratuity; S.N. Sunderson (Minerals) Ltd. v. Appellate Authority-own-Deputy Labour Commissioner, (1990) 60 FLR 6 (Summary) (MP).
(xiv) An employee who is re-employed without any break in service will be eligible for gratuity; Jeevanlal (1929) Ltd. v. Controlling Authority, (1982) 1 LLN 217.
(xv) Withholding of gratuity is not permissible under any circumstance other than those enumerated in section 4(6) of the Act and right to gratuity is a statutory right; K.C. Mathew v. Plantation Corporation of Kerala Ltd., 2001 LLR 123 (Ker).
(xvi) The Coffee curing work running and employing workmen throughout the year cannot be termed as the "Seasonal establishment"; Coorg and Mysore Coffee Co. v. Deputy Labour Commissioner and Appellate Authority, Hassan, 2001 LLR 214 (Karn).
1. Sub. by Act 25 of 1984, sec. 3, for "shall be wholly forefeited (w.e.f. 1-7-1984).
2. Sub-section (7) ins. by Act 25 of 1984, sec. 3 (w.e.f. 1-7-1984) and omitted by Act 34 of 1994 (w.e.f. 24-5-1994).
1[4A. Compulsory insurance.- (1) With effect from such date as may be notified by the appropriate Government in this behalf, every employer, other than an employer or an establishment belonging to, or under the control of, the Central Government or a State Government, shall, subject to the provisions of sub-section (2), obtain an insurance in the manner prescribed, for his liability for payment towards the gratuity under this Act, from the Life Insurance Corporation of India established under the Life Insurance Corporation of India Act, 1956 (31 of 1956) or any other prescribed insurer:
Provided that different dates may be appointed for different establishments or class of establishments or for different areas.
(2) The appropriate Government may, subject to such conditions as may be prescribed, exempt every employer who had already established an approved gratuity fund in respect of his employees and who desires to continue such arrangement, and every employer employing five hundred or more persons who establishes an approved gratuity fund in the manner prescribed from the provisions of sub-section (1).
(3) For the purpose of effectively implementing the provisions of this section, every employer shall within such time as may be prescribed get his establishment registered with the controlling authority in the prescribed manner and no employer shall be registered under the provisions of this section unless he has taken an insurance referred to in sub-section (1) or has established an approved gratuity fund referred to in sub-section (2).
(4) The appropriate Government may, by notification, make rules to give effect to the provisions of this section and such rules may provide for the composition of the Board of Trustees of the approved gratuity fund and for the recovery by the controlling authority of the amount of the gratuity payable to an employee from the Life Insurance Corporation of India or any other insurer with whom an insurance has been taken under sub-section (1), or as the case may be, the Board of Trustees of the approved gratuity fund.
(5) Where an employer fails to make any payment by way of premium to the insurance referred to in sub-section (1) or by way of contribution to an approved gratuity fund referred to in sub-section (2), he shall be liable to pay the amount of gratuity due under this Act (including interest, if any, for delayed payments) forthwith to the controlling authority.
(6) Whoever contravenes the provisions of sub-section (5) shall be punishable with fine which may extend to ten thousand rupees and in the case of a continuing offence with a further fine which may extend to one thousand rupees for each day during which the offence continues.
Explanation.- In this section, “approved gratuity fund” shall have the same meaning as in clause (5) of section 2 of the Income-tax Act, 1961 (43 of 1961).]
1. Ins. by Act 22 of 1987, sec. 5 (w.e.f. 1-10-1987).
5. Power to exempt.- 1[(1)] The appropriate Government may, by notification, and subject to such conditions as may be specified in the notification, exempt any establishment, factory, mine, oilfield, plantation, port, railway company or shop to which this Act applies from the operation of the provisions of this Act if, in the opinion of the appropriate Government, the employees in such establishment, factory, mine, oilfield, plantation, port, railway company or shop are in receipt of gratuity or pensionary benefits not less favorable than the .benefits conferred under this Act.
2[(2)] The appropriate Government may, by notification and subject to such conditions as may be specified in the notification, exempt any employee or class of employees employed in any establishment, factory, mine, oilfield, plantation, port, railway company or shop to which this Act applies from the operation of the provisions of this Act, if, in the opinion of the appropriate Government, such employee or class of employees are in receipt of gratuity or pensionary benefits not less favorable than the benefits conferred under this Act.]
3[(3) A notification issued under sub-section (1) or sub-section (2) may be issued retrospectively a date not earlier than the date of commencement of this Act, but no such notification shall be issued so as to prejudicially, affect the interests of any person.]
6. Nomination.- (1) Each employee, who has completed one year of service, shall make, within such time, in such form and in such manner, as may be prescribed, nomination for the purpose of the second proviso to sub-section (1) of section 4.
(2) An employee may, in his nomination, distribute the amount of gratuity payable to him under this Act amongst more than one nominee.
(3) If an employee has a family at the time of making a nomination, the nomination shall be made in favour of one or more members of his family, and any nomination made by such employee in favour of a person who is not a member of his family shall be void.
(4) If at the time of making a nomination the employee has no family, the nomination may be made in favour of any person or person but if the employee subsequently acquires a family, such nomination shall forthwith become invalid and the employee shall make within such time as may be prescribed, a fresh nomination in favour of one or more members of his family.
(5) A nomination may, subject to the provisions of sub-sections (3) and (4), be modified by an employee at any time, after giving to his employer a written notice in such form and in such manner as may be prescribed, of his intention to do so.
(6) If a nominee predeceases the employee, the interest of the nominee shall revert to the employee who shall make a fresh nomination, in the prescribed form, in respect of such interest.
(7) Every nomination, fresh nomination or alteration of nomination, as the case may be, shall be sent by the employee to his employer, who shall keep the same in his safe custody.
7. Determination of the amount of gratuity.- (1) A person who is eligible for payment of gratuity under this Act or any person authorised, in writing to act on his behalf shall send a written application to the employer, within such time and in such form, as may be prescribed, for payment of such gratuity.
1. Section 5 renumbered as sub-section (1) thereof by Act 26 of 1984, sec. 5 (w.e.f. 18-5-1984)
2. Ins. by Act 26 of 1984, sec. 5 (w.e.f. 18-5-1984).
3. Ins. by Act 22 of 1987, sec. 6 (w.e.f. 1-10-1987).
(2) As soon as gratuity becomes payable, the employer shall, whether an application referred to in sub-section (1) has been made or not, determine the amount of gratuity and give notice in writing to the person to whom the gratuity is payable and also to the controlling authority specifying the amount of gratuity so determined.
1[(3) The employer shall arrange to pay the amount of gratuity within thirty days from the date it becomes payable to the person to whom the gratuity is payable.
(3A) If the amount of gratuity payable under sub-section (3) is not paid by the employer within the period specified in sub-section (3), the employer shall pay, from the date on which the gratuity becomes payable to the date on which it is paid, simple interest at such rate, not exceeding the rate notified by the Central Government from time to time for repayment of long-term deposits, as that Government may, by notification specify:
Provided that no such interest shall be payable if the delay in the payment is due to the fault of the employee and the employer has obtained permission in writing from the controlling authority for the delayed payment on this ground.]
(4)(a) If there is any dispute to the amount of gratuity payable to an employee under this Act or as to the admissibility of any claim of, or in relation to, an employee for payment of gratuity, or as to the person entitled to receive the gratuity, the employer shall deposit with the controlling authority such amount as he admits to be payable by him as gratuity.
2[***]
3[(b) Where there is a dispute with regard to any matter or matters specified in clause (a), the employer or employee or any other person raising the dispute may make an application to the controlling authority for deciding the dispute.]
4[(C) The controlling authority shall, after due inquiry and after giving the parties to the dispute a reasonable opportunity of being heard, determine the matter or matters in dispute and if, as a result of such inquiry any amount is found to be payable to the employee, the controlling authority shall direct the employer to pay such amount or, as the case may be, such amount as reduced by the amount already deposited by the employer.]
5[(d)] The controlling authority shall pay the amount deposited, including the excess amount, if any, deposited by the employer, to the person entitled thereto.
5[(e)] As soon as may be after a deposit is made under clause (a), the controlling authority shall pay the amount of the deposit-
(i) to the applicant where he is the employee; or
(ii) where the applicant is not the employee, to the 6[nominee or, as the case may be, the guardian of such nominee or] heir of the employee if the controlling authority is satisfied that there is no dispute as to the right of the application to receive the amount of gratuity.
1. Subs. by Act 22 of 1987, sec 7, for sub-section (3) (w.e.f. 1-10-1987).
2. Explanation omitted by Act 25 of 1984, sec. 4. (w.e.f. 1-7-1984).
3. Ins. by Act 25 of 1984, sec. 4 (w.e.f. 1-7-1984).
4. Clause (b) re-lettered as clause (c) by Act 25 of 1984, sec. 4, and clause (c) as so lettered subs. by that section (w.e.f. 1-7-1984).
5. Clauses (c) and (d) re-lettered as clauses (d) and (e) by Act 25 of 1984, sec. 4 (w.e.f. 1-7- 1984).
6. Subs. by Act 25 of 1984, sec. 4, for "nominee or" (w.e.f. 1-7-1984).
(5) For the purpose of conducting an inquiry under sub-section (4), the controlling authority shall have the same powers as are vested in a court, while trying a suit, under the Code of Civil Procedure, 1908 (5 of 1908), in respect of the following matters, namely:-
(a) enforcing the attendance of any person or examining him on oath;
(b) requiring the discovery and production of documents;
(c) receiving evidence on affidavits;
(d) issuing commissions for the examination of witnesses.
(6) Any inquiry under this section shall be a judicial proceeding within the meaning of sections 193 and 228, and for the purpose of section 196, of the Indian Penal Code (45 of 1860).
(7) Any person aggrieved by an order under sub-section (4) may, within sixty days from the date of the receipt of the order, prefer an appeal to the appropriate Government or such other authority as may be specified by the appropriate Government in this behalf:
Provided that the appropriate Government or the appellate authority, as the case may be, may, if it is satisfied that the appellant was prevented by sufficient cause from preferring the appeal within the said period of sixty days, extend the said period by a further period of sixty days:
1[Provided further that no appeal by an employer shall be admitted unless at the time of preferring the appeal, the appellant either produces a certificate of the controlling authority to the effect that the appellant has deposited with him an amount equal to the amount of gratuity required to be deposited under sub-section (4), or deposits with the, appellate authority such amount.]
(8) The appropriate Government or the appellate authority, as the case may be, may, after giving the parties to the appeal a reasonable opportunity of being heard, confirm, modify, or reverse the decision of the controlling authority.
COMMENTS
(i) In either case, if the deposit of the amount ordered by the controlling authority is made as provided under the second proviso to sub-section, these would be no scope for to entertain the appeal; Special Officer, the Kanyakumari District Co-operative Printing Works Ltd. v. Appellate Authority Under Payment of Gratuity Act, Thirunelveli, 2001 LLR 613 (Mad).
(ii) An application for condonation of delay in filing application under section 7(7) is not mandatory; Nataraja Pillai v. Regional it. Labour Commissioner, (1993) 66 FLR 413 (Ker).
(iii) Under section 7(7) of the Act an appeal is maintainable only against the final order of the Controlling Authority; Malabar Spg. & Wvg. Mills v. N. N. Nair, (1989) 74 FJR 1989 (Ker).
(iv) The employee's right to interest on delayed payment is statutory; Champaran Sugar Co. Ltd. v. Joint Labour Commissioner and Appellate Authority, (1987) 54 FLR 60 (Pat) (FB).
1[7A. Inspectors.- (1) The appropriate Government may, by notification, appoint as many Inspectors, as it deems fit, for the purposes of this Act.
1. Ins. by Act 25 of 1984, sec. 4 (w.e.f. 1-7-1984).
(2) The appropriate Government may, by general or special order, define the area to which the authority of an Inspector so appointed shall extend and where two or more Inspectors are appointed for the same area, also provide, by such order, for the distribution or allocation of work to be performed by them under this Act.
(3) Every Inspector shall be deemed to be a public servant within the meaning of section 21 of the Indian Penal Code (45 of 1860).
7B. Powers of Inspectors.- (1) Subject to any rules made by the appropriate Government in this behalf, an Inspector may, for the purpose of ascertaining whether any of the provisions of this Act or the conditions, if any, of any exemption granted thereunder, have been complied with, exercise all or any of the following powers, namely:-
(a) require an employer to furnish such information as he may consider necessary;
(b) enter and inspect, at all reasonable hours, with such assistants (if any), being persons in the service of the Government or local or any public authority, as he thinks fit, any premises of or place in any factory, mine, oilfield, plantation, port, railway company, shop or other establishment to which this Act, applies, for the purpose of examining any register, record or notice or other document required to be kept or exhibited under this Act or the rules made thereunder, or otherwise kept or exhibited in relation to the employment ,of any person or the payment of gratuity to the employees, and require the production thereof for inspection;
(c) examine with respect to any matter relevant to any of the purposes aforesaid, the employer or any person whom he finds in such premises or place and who, he has reasonable cause to believe, is an employee employed therein;
(d) make copies of, or take extracts from, any register, record, notice or other document, as he may consider relevant, and where he has reason to believe that any offence under this Act has been committed by an employer search and seize with such assistance as he may think fit, such register, record, notice or other document as he may consider relevant in respect of that offence;
(e) exercise such other powers as may be prescribed.
(2) Any person required to produce any register, record, notice or other document or to give any information by an Inspector under sub-section (1) shall be deemed to be legally bound to do so within the meaning of sections 175 and 176 of the Indian Panel Code (45 of 1860).
(3) The provisions of the Code of Criminal Procedure, 1973; (2 of 1974), shall so far as may be, apply to any search or seizure under this section as they apply to any search or seizure made under the authority of a warrant issued under section 94 of the Code.]
8. Recovery of gratuity.- If the amount of gratuity payable under this Act is not paid by the employer, within the prescribed time, to the person entitled thereto, the controlling authority shall, on an application made to it in this behalf by the aggrieved person, issue a certificate for that amount to the Collector who shall recover the same, together with compound interest thereon 1[at such rate as the Central Government may, by notification, specify], from the date of expiry of the prescribed time as arrears of land revenue and pay the same to the person entitled thereto:
1. Subs. by Act 22 of 1987, sec. 8, for "at the rate of nine per cent. per annum" (w.e.f. 1-10-1987).
1[Provided that the controlling authority shall, before issuing a certificate under this section, give the employer a reasonable opportunity of showing cause against the issue of such certificate:
Provided further that the amount of interest payable under this section shall, in no case exceed the amount of gratuity payable under this Act.]
COMMENTS
(i) If gratuity is not paid, it must be paid with compound interest at the rate prescribed under section 8 of the Act, calculating till the date of payment; Nagar Palika v. Controlling
Authority, (1988) 57 FLR 425 (All).
(ii) Interest is admissible only if a certificate for recovery of dues as a public demand has been issued; Charan Singh v. Birla Textiles, (1988) 57 FLR 534 (SC).
(iii)The Act itself envisages grant of interest on delayed payment of gratuity; Champaran Sugar Co. Ltd. v. Joint Labour Commissioner-cum-Appellate Authority, AIR 1987 Pat 96.
9. Penalties.-(1) Whoever, for the purpose of avoiding any payment to be made by himself under this Act or of enabling any other person to avoid such payment, knowingly makes or causes to be made any false statement or false representation shall be punishable with imprisonment for a term which may extend to six months or with fine which may extend to 2[ten thousand rupees] or with both.
(2) An employer who contravenes, or make default in complying with, any of the provisions of this Act or any rule or order made thereunder shall be punishable with imprisonment for a term 3[which shall not be less than three months but which may extend to one year, or with fine which shall not be less than ten thousand rupees but which may extend to twenty thousand rupees, or with both]:
Provided that where the offence ralates to non-payment of any gratuity payable under this Act, the employer shall be punishable with imprisonment for a term which shall not be less than 4[six months but which may extend to two years] unless the court trying the offence, for reasons to be recorded by it in writing, is of opinion that a lesser term of imprisonment or the imposition of a fine would meet the ends of justice.
10. Exemption of employer from liability in certain cases.-Where an employer is charged with an offence punishable under this Act, he shall be entitled, upon complaint duly made by him and on giving to the complainant not less than three clear day's notice in writing of his intention to do so, to have any other person whom he charges as the actual offender brought before the court at the time appointed for hearing the charge; and if, after the commission of the offence has been proved, the employer proves to the satisfaction of the court-
(a) that he has used due diligence to enforce the execution of this Act, and
(b) that the said other person committed the offence in question without his knowledge, consent or connivance, that other person shall be convicted of the offence and shall be liable to the like punishment as if he were the employer and the employer shall be discharged from any liability under this Act in respect of such offence:
1. Added by Act 22 of 1987, sec. 8 (w.e.f. 1-10-1987).
2. Subs. by Act 22 of 1987, sec. 9, for "one thousand rupees" (w.e.f. 1-10-1987).
3. Subs. by Act 22 of 1987, sec. 9, for certain words (w.e.f. 1-10-1987).
4. Subs. by Act 22 of 1987, sec. 9, for "three months" (w.e.f. 1-10-'1987).
Provided that in seeking to prove as aforesaid, the employer may be examined on oath and his evidence and that of any witness whom he calls in his support shall be subject to cross-examination on behalf of the person he charges as the actual offender and by the prosecutor:
Provided further that, if the person charged as the actual offender by the employer cannot be brought before the court at the time appointed for hearing the charge, the court shall adjourn the hearing from time to time for a period not exceeding three months and if by the end of the said period the person charged as the actual offender cannot still be brought before the court, the court shall proceed to hear the charge against the employer and shall, if the offence be proved, convict the employer.
11. Cognizance of offences.-(1) No court shall take cognizance of any offence punishable under this Act save on a complaint made by or under the authority of the appropriate Government:
Provided that where the amount of gratuity has not been paid, or recovered, with-in six months from the expiry of the prescribed time, the appropriate Government shall authorise the controlling authority to make a complaint against the employer, where-upon the controlling authority shall within fifteen days from the date of such authorisation, make such complaint to a magistrate having jurisdiction to try the offence.
(2) No court inferior to that of a 1[Metropolitan Magistrate or a Judicial Magistrate of the first class] shall try any offence punishable under this Act.
12. Protection of action taken in good faith.-No suit or other legal proceeding shall lie against the controlling authority or any other person in respect of anything which is in good faith done or intended to be done under this Act or any rule or order made thereunder.
13. Protection of gratuity.-No gratuity payable under this Act 2[and no gratuity payable to an employee employed in any establishment, factory , mine, oilfield, plantation, port, railway company or shop exempted under section 5] shall be liable to attachment in execution of any decree or order of any civil, revenue or criminal court.
COMMENTS
(i) In the view of number of direct and to categoric judgments of the Appex Court the Payment of Gratuity Act is a welfare legislation and the amount of payment of gratuity cannot be withheld of an employee for non-vacation of the quarter; Taxmaco Limited v. Roshan Singh, 2001 LLR 890 (Del).
(ii) Gratuity cannot be attached; Chrisostom v. Federal Bank Ltd., (1993) 1 LLJ 422 (Ker).
(iii) This section gives total immunity to gratuity from attachment; Calcutta Dock Labour v. Smt. Sandhya Mitra, (1985) Lab IC 114 (SC).
1. Subs. by Act 34 of 1994, sec. 4, for Presidency Magistrate or a Magistrate of the first class" (w.e.f. 24-5-1994).
2. Ins. by Act 25 of 1984, sec. 6 (w.e.f. 1-7-1984).
14. Act to override other enactments, etc.-The provisions of this Act or any rule made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than this Act or in any instrument or contract having effect by virtue of any enactment other than this Act.
COMMENTS
Pension scheme cannot defeat the benefit of gratuity; C. Kuppuswami v. E.I.D. Parny (India) Ltd., (1.989) 1. LLN 85 (Mad).
15. Power to make rules.-(1) The appropriate Government may, by notification, make rules for the purpose of carrying out the provisions of this Act.
(2) Every rule made by the Central Government under this Act shall be laid, as soon as may be after it is made, before each House of Parliament while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or both Houses agree that the rule should not be made, the rule shall, thereafter, have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.
THE PAYMENT OF GRATUITY (CENTRAL)
RULES, 19721
In exercise of the powers conferred by sub-section (1) of section 15 of the Payment of Gratuity Act, 1972 (39 of 1972), the Central Government hereby makes the following rules, namely:-
1. Short title and commencement.-(1) These rules may be called the Payment of Gratuity (Central) Rules, 1972.
(2) These rules shall come into force on the 16th September, 1972;
2. Definitions.-In these rules, unless there is anything repugnant in the subject or context,-
(a) "Act" means the Payment of Gratuity Act, 1972 (39 of 1972);
(b) "Appellate authority" means the Central Government or the authority specified by the Central Government under sub-section (7) of section 7;
(c) "Form" means a form appended to these rules;
(d) "nomination" means nomination made under section 6;
(e) "section" means a section of the Act.
3. Notice of opening, change or closure of the establishment.- (1) Within thirty days of the rules becoming applicable to an establishment, a notice in Form A shall be submitted by the employer to the controlling authority of the area.
(2) A notice in Form B shall be submitted by the employer to the controlling authority of the area within thirty days of any change in the name, address, employer or nature of business.
(3) Where an employer intends to close down the business he shall submit a notice in Form C to the controlling authority of the area at least sixty days before the intended closure.
4. Display of notice.-(1) The employer shall display conspicuously a notice at or near the main entrance of the establishment in bold letters in English and in a language understood by the majority of the employees specifying the name of officer with designation authorised by the employer to receive on his behalf notices under the Act or the rules.
(2) A fresh notice shall be displayed immediately after the notice referred to in sub-rule (1) becomes illegible or requires a change.
*5. Form of notice under proviso to section (2) (h) (ii).-(1) A notice under the proviso to sub-clause (ii) of clause (h) of section 2 shall be in Form D and sent in triplicate by the employee to the employer, who shall, after recording its receipt on one copy thereof, return the copy to the employee and send the second copy to the controlling authority of the area.
1. Vide G,S.R. 412 (E). dated 16th September, 1972, published in the Gazette of India; Extra., Pt. II, Sec. 3(i), dated 16th September, 1972.
* By section 2 of the Payment of Gratuity (Amendment) Act, 1987 (22 of 1987) proviso to sub- clause (ii) of clause (h) of section 2 of the Payment of Gratuity Act, 1972 (39 of 1972) has been omitted (w.e.f. 1-10-1987) and accordingly rule 5 along with Forms D and E have become redundant, Ed.
(2) An employee may withdraw the notice referred to in sub-rule (1) by giving another notice in triplicate in Form 'E' to the employer, who shall follow the same procedure as in sub-rule (1).
6. Nominations.-(1) A nomination shall be in Form 'F' and submitted in duplicate by personal service by the employee, after taking proper receipt or by sending through registered post acknowledgement due to the employer,
(i) in the case of an employee who is already in employment for a year or more on the date of commencement of these rules, ordinarily, within ninety days from such date, and
(ii) in the case of an employee who completes one year of service after the date of commencement of these rules, ordinarily within thirty days of the completion of one year of service:
Provided that nomination in Form 'F' shall be accepted by the employer after the specified period, if filed with reasonable grounds for delay, and no nomination so accepted shall be invalid merely because it was filed after the specified period.
(2) Within thirty days of the receipt of nomination in Form 'F' under sub-rule (1), the employer shall get the service particulars of the employee, as mentioned in the form of nomination, verified with reference to the records of the establishment and return to the employee, after obtaining a receipt thereof, the duplicate copy of the nomination in form 'F' duly attested either by the employer or an officer authorised in this behalf by him, as a token of recording of the nomination by the employer and the other copy of the nomination shall be recorded.
(3) An employee who has no family at the time of making a nomination shall, within ninety days of acquiring a family submit in the manner specified in sub-rule (1), a fresh nomination, as required under sub-section (4) of section 6, duplicate in Form 'G' to the employer and thereafter the provisions of sub-rule (2) shall apply mutatis mutandis as if it was made under sub-rule (1).
(4) A notice of modification of a nomination, including cases where a nominee predeceases an employee, shall be submitted in duplicate in Form 'H' to the employer in the manner specified in sub-rule (1), and thereafter the provisions of sub-rule (2) shall apply mutatis mutandis.
(5) A nomination or a fresh nomination or a notice of modification of nomination shall be signed by the employee or, if illiterate, shall bear his thumb impression, in the presence of two witnesses, who shall also sign a declaration to that effect in the nomination, fresh nomination or notice of modification of nomination, as the case may be.
(6) A nomination, fresh nomination or notice of modification of nomination shall take effect from the date of receipt thereof by the employer.
7. Application for gratuity.-(1) An employee who is eligible for payment of gratuity under the Act, or any person authorised, in writing, to act on his behalf, shall apply, ordinarily within thirty days from the date the gratuity became payable, in Form 'I' to the employer:
Provided that where the date of superannuation or retirement of an employee is known, the employee may apply to the employer before thirty days of the date of superannuation or retirement.
(2) A nominee of an employee who is eligible for payment of gratuity under the second proviso to sub-section (1) of section 4 shall apply, ordinarily within thirty days from the date of gratuity became payable to him, in Form ‘J’ to the employer:
Provided that an application in plain paper with relevant particulars shall also be accepted. The employer may obtain such other particulars as may be deemed necessary by him.
(3) A legal heir of an employee who is eligible for payment of gratuity under the second proviso to sub-section (1) of section 4 shall apply, ordinarily within one year from the date of gratuity became payable to him, in Form 'K' to the employer.
(4) Where gratuity becomes payable under the Act before the commencement of these rules, the periods of limitation specified in sub-rules (1), (2) and (3) shall be deemed to be operative from the date of such commencement.
(5) An application for payment of gratuity filed after the expiry of the periods specified in this rule shall also be entertained by the employer, if the applicant adduces sufficient cause for the delay in preferring his claim, and no claim for gratuity under the Act shall be invalid merely because the claimant failed to present his application within the specified period. Any dispute in this regard shall be referred to the controlling authority for his decision.
(6) An application under this rule shall be presented to the employer either by personal service or by registered post acknowledgement due.
8. Notice for payment of gratuity.-(1) Within fifteen days of the receipt of an application under rule 7 for payment of gratuity, the employer shall-
(i) if the claim is found admissible on verification, issue a notice in Form 'L’ to the applicant employee, nominee or legal heir, as the case may be, specifying the amount of gratuity payable and fixing a date, not being later than the thirtieth day after the date of receipt of the application, for payment thereof, or
(ii) if the claim for gratuity is not found admissible, issue a notice in Form 'M' to the applicant employee, nominee or legal heir, as the case may be, specifying the reasons why the claim for gratuity is not considered admissible. In either case a copy of the notice shall be endorsed to the controlling authority.
(2) In case payment of gratuity is due to be made in the employer's office, the date fixed for the purpose in the notice in Form 'L' under clause (1) of sub-rule (1) shall be refiexed by the employer, if a written application in this behalf is made by the payee explaining why it is not possible for him to be present in person on the date specified.
(3) If the claimant for gratuity is a nominee or a legal heir, the employer may ask for such witness or evidence as may be deemed relevant for establishing his identity or maintainability of his claim, as the case may be. In that 'case, the time limit specified for issuance of notices under sub-rule (1) shall be operative with effect from the date such witness or evidence, as the case may be, called for by the employer is furnished to the employer.
(4) A notice in Form 'L' or Form 'M' shall be served on the applicant either by personal service after taking receipt or by registered post with acknowledgement due.
(5) A notice under sub-section (2) of section 7 shall in Form ‘L’.
9. Mode of payment of gratuity.- The gratuity payable under the Act shall be paid in cash or, if so desired by the payee, in Demand Draft or bank Cheque to the eligible employee, nominee or legal heir, as the case may be:
Provided that in case the eligible employee, nominee or legal heir, as the case may be, so desires and the amount of gratuity payable is less than one thousand rupees, payment may be made by postal money order after deducting the postal money order commission therefor from the amount payable:
Provided further that intimation about the details of payment shall also be given by the employer to the controlling authority of the area:
1[Provided further that in the case of nominee, or an heir, who is minor, the controlling authority shall invest the gratuity amount deposited with him for the benefit of such minor in term deposit with the State Bank of India or any of its subsidiaries or any Nationalised Bank.
Explanation.-"Nationalised Bank" means a corresponding new bank specified in the First Schedule to the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970) or a corresponding new bank specified in the First Schedule of the Banking Companies (Acquisition and Transfer of Undertakings) Act,. 1980 (40 of 1980).]
10. Application to controlling authority for direction.-(1) If an employer-
(i) refuses to accept a nomination or to entertain an application sought to be filed under rule 7, or
(ii) issues a notice under sub-rule (1) of rule 8 either specifying an amount of gratuity which is considered by the applicant less than what is payable or rejecting eligibility to payment of gratuity, or
(iii) having received an application under rule 7 fails to issue any notice as required under rule 8 within the time specified therein,
the claimant employee, nominee or legal heir, as the case may be, may, within ninety days of the occurrence of the cause for the application, apply in Form 'N' to the controlling authority for issuing a direction under sub-section (4) of section 7 with as many extra copies as are the opposite party:
Provided that the controlling authority may accept any application under this sub-rule, on sufficient cause being shown by the applicant, after the expiry of the specified period.
(2) Application under sub-rule (1) and other documents relevant to such an application shall be presented in person to the controlling authority or shall be sent by registered post acknowledgement due.
11. Procedure for dealing with application for direction.-(1) On receipt of an application under rule 10 the controlling authority shall, by issuing a notice in Form 'O', call upon the applicant as well as the employer to appear before him on a specified date, time and place, either by himself or through his authorised representative together with all relevant documents and witnesses, if any.
1. Ins. by G.S.R. 77, dated 2nd February, 1991 (w.e.f. 1-2-1991).
1. Ins. by G.S.R. 2868, dated 22nd November, 1975.
(2) Any person desiring to act on behalf of an employer or employee, nominee or legal heir, as the cases may be, shall present to the controlling authority a letter of authority from the employer or the person concerned, as the case may be, on whose behalf he seeks to act together with a written statement explaining his interest in the matter and praying for permission so to act. The controlling authority shall record thereon an order either according his approval or specifying, in the case of refusal to grant the permission prayed for, the reasons for the refusal.
(3) A party appearing by an
From India, Gurgaon
Hi Veerendra
Please see below for one case study. This was in reply to case
JEEWANLAL [1984] INSC 165; (1929) LTD.ETC. ETC v. APPELLATE AUTHORITY UNDER THE PAYMENT OF GRATUITY ACT &O ;[1985] 1 SCR 664; [1984] 4 SCC 356; AIR 1984 SC 1842 (29 August 1984)
Payment of Gratuity Act 1972, Sections 4(2) and 4(3)
Monthly-rated employee-Computation of gratuity-Scope of expression "fifteen days' wages"- Explained. Interpretation of statutes Social Welfare legislation-
Beneficient rule of construction-Adoption of. Social security measures-Application of provisions-
Doubt or difficulty arising-Necessity for Government to introduce legislation to cure the defect without waiting for interpretation by highest Court-Suggestion for setting up of National Labour Commission for Periodical review.
Words & Phrases: appropriate Government'-Meaning of
Section 2(a)(1) Payment of Gratuity Act 1972.
HEADNOTE:
The respondent-a monthly-rated employee of the
appellant-a public limited company, ceased to be an employee on attaining the age of superannuation after completing 35 years of service. Since he was entitled to payment of Gratuity under the Payment of Gratuity Act, 1972, the appellant calculated the amount of gratuity payable under sub-s.(2) of s.4 on the basis that 'fifteen days' wages" meant half of the monthly wages last drawn i.e., for 13 working days. there being 26 working days in a month, The respondent being dissatisfied with this payment, made a claim under sub-s(1) of s.7, before the Controlling Authority, for payment of an additional sum of gratuity on the ground that the daily wages should be ascertained on the basis of what he actually got for 26 days and the amount of "fifteen days' wages" should be calculated accordingly, not by just taking half of his wages for a month of 30 days or fixing his daily wages by dividing his monthly wages by 30.
The Controlling Authority held; that for the purpose of calculating "fifteen days' wages" it was necessary to ascertain one day's wage and since a
665 month consists of 26 working days, the amount of gratuity should be calculated by dividing the monthly wages last drawn by 26 and multiplying by 'fifteen'; and not by just taking half of the monthly wages or by dividing such monthly wages by 30.
On appeal, the Appellate Authority, held that there was
an error in the mode of computation of the amount of gratuity that was payable, and held that the gratuity payable would have to be calculated at half of the monthly rate of wages, i.e. wages earned in a consecutive period of 15 days and the daily wages had to be multiplied by "thirteen" and not by "fifteen" for every completed year of service or part thereof not exceeding six months. The amount of gratuity payable was accordingly reduced.
The High Court under Article 226, held following the
decision of this Court in Shri Digvijay Woollen Mills Ltd. etc. v. Mahendra Prataprai Buch etc. 1981 1 SCR 64 that in order to determine "fifteen days' wages" of a monthly-rated employee under sub-s.(2) of s.4 of the Act, it was necessary to determine one day's wages last drawn by him, and them multiply the same "fifteen' times. and the resultant sum has to be multiplied by twenty to arrive at the maximum amount of gratuity payable under sub-s.(3) of s.4 of the Act. The orders of the Controlling Authority were restored.
In the Appeals and Special Leave Petitions it was
contended on behalf of the Management: that the words "fifteen days' wages" occurring in sub-s.(2) of s.4 of the Act are clear and unambiguous and must mean half a month's wages and therefore there was no scope for an artificial calculation being made by dividing the wages for a month by the number of working days
From India, Gurgaon
Please see below for one case study. This was in reply to case
JEEWANLAL [1984] INSC 165; (1929) LTD.ETC. ETC v. APPELLATE AUTHORITY UNDER THE PAYMENT OF GRATUITY ACT &O ;[1985] 1 SCR 664; [1984] 4 SCC 356; AIR 1984 SC 1842 (29 August 1984)
Payment of Gratuity Act 1972, Sections 4(2) and 4(3)
Monthly-rated employee-Computation of gratuity-Scope of expression "fifteen days' wages"- Explained. Interpretation of statutes Social Welfare legislation-
Beneficient rule of construction-Adoption of. Social security measures-Application of provisions-
Doubt or difficulty arising-Necessity for Government to introduce legislation to cure the defect without waiting for interpretation by highest Court-Suggestion for setting up of National Labour Commission for Periodical review.
Words & Phrases: appropriate Government'-Meaning of
Section 2(a)(1) Payment of Gratuity Act 1972.
HEADNOTE:
The respondent-a monthly-rated employee of the
appellant-a public limited company, ceased to be an employee on attaining the age of superannuation after completing 35 years of service. Since he was entitled to payment of Gratuity under the Payment of Gratuity Act, 1972, the appellant calculated the amount of gratuity payable under sub-s.(2) of s.4 on the basis that 'fifteen days' wages" meant half of the monthly wages last drawn i.e., for 13 working days. there being 26 working days in a month, The respondent being dissatisfied with this payment, made a claim under sub-s(1) of s.7, before the Controlling Authority, for payment of an additional sum of gratuity on the ground that the daily wages should be ascertained on the basis of what he actually got for 26 days and the amount of "fifteen days' wages" should be calculated accordingly, not by just taking half of his wages for a month of 30 days or fixing his daily wages by dividing his monthly wages by 30.
The Controlling Authority held; that for the purpose of calculating "fifteen days' wages" it was necessary to ascertain one day's wage and since a
665 month consists of 26 working days, the amount of gratuity should be calculated by dividing the monthly wages last drawn by 26 and multiplying by 'fifteen'; and not by just taking half of the monthly wages or by dividing such monthly wages by 30.
On appeal, the Appellate Authority, held that there was
an error in the mode of computation of the amount of gratuity that was payable, and held that the gratuity payable would have to be calculated at half of the monthly rate of wages, i.e. wages earned in a consecutive period of 15 days and the daily wages had to be multiplied by "thirteen" and not by "fifteen" for every completed year of service or part thereof not exceeding six months. The amount of gratuity payable was accordingly reduced.
The High Court under Article 226, held following the
decision of this Court in Shri Digvijay Woollen Mills Ltd. etc. v. Mahendra Prataprai Buch etc. 1981 1 SCR 64 that in order to determine "fifteen days' wages" of a monthly-rated employee under sub-s.(2) of s.4 of the Act, it was necessary to determine one day's wages last drawn by him, and them multiply the same "fifteen' times. and the resultant sum has to be multiplied by twenty to arrive at the maximum amount of gratuity payable under sub-s.(3) of s.4 of the Act. The orders of the Controlling Authority were restored.
In the Appeals and Special Leave Petitions it was
contended on behalf of the Management: that the words "fifteen days' wages" occurring in sub-s.(2) of s.4 of the Act are clear and unambiguous and must mean half a month's wages and therefore there was no scope for an artificial calculation being made by dividing the wages for a month by the number of working days
From India, Gurgaon
Hi Veerendra, No problem at all. I will try to post more case studies relating to this post. Kind Regards Debajyoti
From India, Gurgaon
From India, Gurgaon
The interest Rate to be applied on delayed payment of gratuity is 10%.
Refer the below content for more details
Employees who do not receive their gratuity within 30 days (from the date on which it becomes payable) are entitled to get the money along with simple interest from the due date to the date of actual payment, the Madras High Court Bench here has said.
Dismissing a writ petition filed by Arumuganeri Salt Workers' Cooperative Production and Sale Society in Tuticorin district, Justice K. Chandru said that the 30-day time frame would begin from the due date and not from the date of a positive order passed by the controlling authority under the Payment of Gratuity Act. The judge directed the petitioner society to pay interest at the rate of 10 per cent to one of its former employees who had resigned his job in June, 2003, without driving him further to any other forum. He held that that the appellate authority under the Act had rightly ordered payment of interest from 2003. Initially, A. Rajan, who was employed in the society on a daily-wage basis for six years, had filed an application before the controlling authority.
It was allowed with a direction to the society to pay the gratuity amount of Rs.9,692 within 30 days failing which it must be paid along with interest. Subsequently, the employee filed an appeal claiming that he was paid only the gratuity amount.
Allowing his appeal, the Appellate authority ordered to pay interest at the rate of 10 per cent from the date on which the gratuity became due till the date on which it was paid. The society had filed the present writ petition contending that it paid the amount within 30 days of the order passed by the controlling authority and hence it was not obliged to pay interest. “
Source: 17th Sep 2010 – The Hindu
2Refer the below content for more details
Employees who do not receive their gratuity within 30 days (from the date on which it becomes payable) are entitled to get the money along with simple interest from the due date to the date of actual payment, the Madras High Court Bench here has said.
Dismissing a writ petition filed by Arumuganeri Salt Workers' Cooperative Production and Sale Society in Tuticorin district, Justice K. Chandru said that the 30-day time frame would begin from the due date and not from the date of a positive order passed by the controlling authority under the Payment of Gratuity Act. The judge directed the petitioner society to pay interest at the rate of 10 per cent to one of its former employees who had resigned his job in June, 2003, without driving him further to any other forum. He held that that the appellate authority under the Act had rightly ordered payment of interest from 2003. Initially, A. Rajan, who was employed in the society on a daily-wage basis for six years, had filed an application before the controlling authority.
It was allowed with a direction to the society to pay the gratuity amount of Rs.9,692 within 30 days failing which it must be paid along with interest. Subsequently, the employee filed an appeal claiming that he was paid only the gratuity amount.
Allowing his appeal, the Appellate authority ordered to pay interest at the rate of 10 per cent from the date on which the gratuity became due till the date on which it was paid. The society had filed the present writ petition contending that it paid the amount within 30 days of the order passed by the controlling authority and hence it was not obliged to pay interest. “
Source: 17th Sep 2010 – The Hindu
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Payment of Gratuity Act, 1972 & The Rules.ppt
THE PAYMENT OF GRATUITY ACT 1972.doc