Hi Sir, gratuity payment to the employees liable to the contractor or Principal employer.
From India, Hyderabad
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From India, Hyderabad
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Immediate liability vests on the Contractor: In case of failure by the Contractor, as per the ratio decidendi of the Madras High Court's judgment, the vicarious liability of the Principal Employer for payment of wages under Section 21(4) of the CLRA Act, 1970 can be extended to the payment of gratuity as well.
From India, Salem
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6185From India, Salem
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Sec 21(4) makes the principal employer liable if the contractor fails to pay wages. The definition of wages is the same as in the POW Act 1936, which, as per sec 2 (vi) (d) of the POW Act, includes a sum which is payable by reason of termination under any law on the termination of an employee, but for which no time limit for payment is provided. This definition was established in 1958 before the Gratuity Act was enacted. Any gratuity other than the above is excluded from wages by item 6 of the definition. Therefore, I believe the gratuity payable by the contractor under the POG Act is not binding on the principal employer.
Varghese Mathew
From India, Thiruvananthapuram
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Varghese Mathew
From India, Thiruvananthapuram
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Dear Mr. Varghese Mathew,
Thank you for your quick response. In fact, I was also of the same opinion with reference to the exclusion clause (6) of the definition of the term "wages" under section 2(vi) of the Payment of Wages Act, 1936. But after carefully going through the entire text of the judgment by the Honorable High Court of Madras in Madras Fertilizers Ltd., v The Controlling Authority under the PG Act and Others [2003 LLR 244], I realized the meticulous interpretation employed by our higher judiciary by paying minute attention to the contextual meaning of even an ordinary word of conjunction like "OR" and changed my opinion.
For the sake of ready reference, let me give an extract of paragraph 26 of the judgment delivered by Justice V.S. Sirpurkar as follows:
"The very language of sub-clause (6) suggests that any gratuity which is not covered by clause (d) is excluded from the term "wages." This would presuppose that clause (d) covers some gratuity. Which gratuity would that be is the moot question to be answered. The answer is to be found in the plain language of clause (d) which opens with the words "any sum which by reason of the termination of employment of the person employed is payable under any law." This clause is complete in itself, and therefore, it can be safely held that the gratuity which is payable under the Payment of Gratuity Act is well covered under clause (d).
Learned Senior Counsel, however, suggests that the subsequent clause starting from the words "contract or instrument" suggests that such law, contract, or instrument should not provide for the time within which the payment is to be made, and in fact, there is a time limit prescribed in the Payment of Gratuity Act. In my view, such cannot be the import of the last clause. The last clause qualifies only "the contract or instrument" because of the use of the word "provides."
Now, if the letter 's' is added to the word "provide," it would be only when there is the use of a singular subject as against the plural subject. The phrase "contract or instrument," because of the existence of the word "or," would become singular and therefore, the verb will have to be used with the addition of the letter "s." But such would not be the position if the word "law" is also to be added. It will then become "law and contract or instrument" in which case the verb will have to be used as if the subject is plural.
Therefore, it is clear that the clause starting from the word "contract" and ending with the word "is to be made" is an independent clause, and the qualification given in that clause is only for "contract or instrument" and not for "law." The plain meaning of the clause would be that where any sum is payable on the termination of employment of the person employed under any law (in this case the Payment of Gratuity Act), it would be covered under clause (d) and therefore, it is excluded from the operation of sub-clause (6) and will amount to wages.
Once this construction is accepted, it is clear that it will be the basic responsibility under section 21(4) of the CLRA of the petitioner to make the payment of gratuity, and the petitioner will have a right to recover that sum from the third respondent/contractor because, according to me, the initial responsibility to make the payment of gratuity lies with the third respondent/contractor."
It is to be noted that the ratio decidendi of the above judgment stands followed by the Madras High Court in a similar case between the Superintending Engineer, Mettur Thermal Power Station, and the Appellate Authority/Joint Commissioner of Labor, Coimbatore, and another in WP NO.6633/2008 decided on 18.07.2012.
From India, Salem
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Thank you for your quick response. In fact, I was also of the same opinion with reference to the exclusion clause (6) of the definition of the term "wages" under section 2(vi) of the Payment of Wages Act, 1936. But after carefully going through the entire text of the judgment by the Honorable High Court of Madras in Madras Fertilizers Ltd., v The Controlling Authority under the PG Act and Others [2003 LLR 244], I realized the meticulous interpretation employed by our higher judiciary by paying minute attention to the contextual meaning of even an ordinary word of conjunction like "OR" and changed my opinion.
For the sake of ready reference, let me give an extract of paragraph 26 of the judgment delivered by Justice V.S. Sirpurkar as follows:
"The very language of sub-clause (6) suggests that any gratuity which is not covered by clause (d) is excluded from the term "wages." This would presuppose that clause (d) covers some gratuity. Which gratuity would that be is the moot question to be answered. The answer is to be found in the plain language of clause (d) which opens with the words "any sum which by reason of the termination of employment of the person employed is payable under any law." This clause is complete in itself, and therefore, it can be safely held that the gratuity which is payable under the Payment of Gratuity Act is well covered under clause (d).
Learned Senior Counsel, however, suggests that the subsequent clause starting from the words "contract or instrument" suggests that such law, contract, or instrument should not provide for the time within which the payment is to be made, and in fact, there is a time limit prescribed in the Payment of Gratuity Act. In my view, such cannot be the import of the last clause. The last clause qualifies only "the contract or instrument" because of the use of the word "provides."
Now, if the letter 's' is added to the word "provide," it would be only when there is the use of a singular subject as against the plural subject. The phrase "contract or instrument," because of the existence of the word "or," would become singular and therefore, the verb will have to be used with the addition of the letter "s." But such would not be the position if the word "law" is also to be added. It will then become "law and contract or instrument" in which case the verb will have to be used as if the subject is plural.
Therefore, it is clear that the clause starting from the word "contract" and ending with the word "is to be made" is an independent clause, and the qualification given in that clause is only for "contract or instrument" and not for "law." The plain meaning of the clause would be that where any sum is payable on the termination of employment of the person employed under any law (in this case the Payment of Gratuity Act), it would be covered under clause (d) and therefore, it is excluded from the operation of sub-clause (6) and will amount to wages.
Once this construction is accepted, it is clear that it will be the basic responsibility under section 21(4) of the CLRA of the petitioner to make the payment of gratuity, and the petitioner will have a right to recover that sum from the third respondent/contractor because, according to me, the initial responsibility to make the payment of gratuity lies with the third respondent/contractor."
It is to be noted that the ratio decidendi of the above judgment stands followed by the Madras High Court in a similar case between the Superintending Engineer, Mettur Thermal Power Station, and the Appellate Authority/Joint Commissioner of Labor, Coimbatore, and another in WP NO.6633/2008 decided on 18.07.2012.
From India, Salem
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The contractor is liable for payment of gratuity not the Principal employer, provided contractor obtained a licence under CL(R&A).
From India, Mumbai
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From India, Mumbai
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Gratuity is a payment made to an employee for completing 5 years in an organization. So, if an employee has been with the organization for 5 years, gratuity should be provided by the employer. If the employer does not provide gratuity, one should approach the principal employer. I hope you found this information useful.
If you have any further queries, please contact me at 8356832404.
From India, Thane
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If you have any further queries, please contact me at 8356832404.
From India, Thane
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Payment of Gratuity Act, 1972 & The Rules.ppt
THE PAYMENT OF GRATUITY ACT 1972.doc