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PAYMENT OF

GRATUITY ACT , 1972

KUNAL DAYANI 10PGHR21
PURNIMA DHAR 10PGHR39
RAHUL ROY
10PGHR40
SANDEEP RATH
10PGHR44
SHIKHA GOYAL 1OPGHR45
URVASHI AGARWAL
10PGHR57

Background

Paid for faithful continuous service in the
organization

Payable on completing 5 years of
continuous service with the organization

Includes probation period

The above rule is waived of in the
eventuality of

Death
Permanent disablement

Historical Background
Govt. of
Kerala’s
legislation
for
payment of
gratuity

3rd June
1971,
introduced
a ordinance
where
payment of
gratuity
was
enacted

Ordinance
replaced by
West
Bengal’s
employee’s
payment of
compulsory
gratuity act

Central
legislation
on gratuity
discussed
and bill
introduced
in
parliament

Objective of the
Act
The Payment of Gratuity Act, 1972 envisages to provide a

retirement benefit to the workmen who have rendered
long and unblemished service to the employer, and have thus
contributed to the prosperity of the employer.

1972. gratuity has become a statutory right of workers. efficient and faithful service rendered by the employee for a considerable period Originally a legitimate claim which workers could demand on rendering meritorious service to employer for a certain period Dynamic Concept After the Gratuity Act.so the concept of meritorious service no longer holds In view of the trend of decisions of the Supreme Court.Concept of Gratuity Considered as an award for good. service which earns gratuity need not be meritorious and is available to employees for long and continuous service .

Applicability Extends to whole of India Applicable to those organizations where employee strength is more than 10 Shop or establishment in which act has become applicable shall continue to be governed by act even though employee strengths falls below 10 .

Establishmen t Belonging to Central Govt. Having branches in more than one state Factory Major mine. oilfield or railway Other case In any other case state government . port.Appropriate Government Appropriate Govt.

concerned/chief executive office of local authority . head of Ministry of Dept.Definitions  Employees  Regular employees of the Institute + Director  Exclude persons appointed on a contract basis unless the terms of the contract provide for payment of any gratuity  Member  Employee who has been admitted to the membership of the Scheme  Employer Person appointed by appropriate govt. or local authority to supervise and control establishment or where no person appointed.

HRA. Termination of employment other than superannuation Wages    Earned while on duty or on leave.)  Qualifying Service   Superannuation   Attainment of age for vacating employment Retirement   Continuous service of not less than five years including periods of authorised leave. commission etc.Definitions (Contd. . Includes DA Does not include bonus. overtime.

v.. (2001) 1 CUR LR 507(GUJ) A director of company not having ultimate control over the management of company will be employee of company . (1996) 1 CUR LR 149: 1996 lab IC 262 Cases Definitions Services rendered prior to re-employment cannot be treated as continuous service for claiming Monitron gratuity Securities (P) Ltd.Dungerbhai Meghabhai v. Shri Arbuda Mills Ltd. Mukundlal Khushalchand Dhavan.

Madhav. Shri Shri Jagganath Temple Puri V. (1994) (Bombay) Cases Definitions A college run by a societies registered under the societies registration act is an establishment. Jagannath Padhi. 1992 .Gurudeo Ayurved Mahavidyalay a v. Orrisa. A temple is an establishment .

1947 . Retrenchment Compensation Compensation for premature termination of employment.Gratuity v. Pension Both are efficiency devices and are considered necessary for ‘ orderly and human elimination’ from the industry Gratuity v.Section 25-F(b) of the Industrial Disputes Act. Provident Fund Gratuity is a retiral benefit but Provident Fund is intended to induce thrift so that employees may lay from his present earning a portion for his old age Gratuity v.

Salem. Sri Ahilandeshwari Mills Ltd. Salem v.Continuous Service  Salient features of the Section 2-A  Sundays. 1999 LLR 576 (Mad. Assistant Commissioner of Labour( Controlling Authority). National holidays and Weekly offs are to be included in computing period of 240 days.) ..

Payment Of Gratuity  Gratuity when payable:  on termination of employment after he has rendered continuous service for not less than 5 yrs:     On his superannuation On his retirement or resignation On his death or disablement due to accident or disease However in case of death or disablement of the .

gratuity has to be paid at a rate of 15days’ wages (last drawn salary)  In case of piece rated employee. employer shall pay gratuity at the rate of 7 days’ for each season .Computation of Gratuity  For every completed year of service or part thereof in excess of 6 months. daily wages will be computed on the average of the total wages received by him for a period of 3 months preceding his termination of employment: for this purpose overtime work is not taken into account  In case of a seasonal establishment.

5 lacs  In computing the gratuity payable to an employee who is employed after his disablement on reduced wages. his wages before his disablement would be taken into account for that period and for the subsequent period his reduced wages would be taken into account.Computation of Gratuity.  The amount of gratuity payable shall not exceed Rs 3. for his liability to pay towards the gratuity . Compulsory Insurance Every employer must.Contd. obtain an insurance from the LIC .

Cases related to Computation of Gratuity .

) .Cases related to Computation of Gratuity ( Contd.

Exemption from Provisions of the Act  May be given by appropriate government only.  In case of receipt of gratuity or pensionary benefits not less favorable than the benefits conferred under this act  Can be given only by way of a notification in the Official Gazette  Notification to be issued retrospectively a date not earlier than the date of commencement of this Act  No Notification shall be issued to prejudicially affect the interests of any person .

Nomination  Every employee. is compulsorily required to make a nomination. who has completed 1 year of service. (Form F)  The nomination must be made within 30 days of completion of one year of service  The nomination must be made in favour of one or more members of the family (nomination shall be void if it is made in favour of a person who is not a member of his family)  If at the time of making nomination the employee does not have family. the nomination may be made in favour of any .

employer has to determine the amount of gratuity & give notice  It is irrespective of the fact whether an application for payment of gratuity has been made or not .Determination of the amount of gratuity Application can be made by:   An employee who is eligible for payment of gratuity  Any person authorised in writing by such employee  Nominee of the employee (if the deceased employee had made a nomination)  Legal heir of the employee (if the deceased employee had not made any nomination  Application shall be made to the employer in writing within 30 days from the date gratuity becomes payable  As soon as the gratuity becomes payable.

the amount must be deposited with controlling authority  Controlling Authority shall make due inquiries and if claim is found admissible.  Limitation – 60 days from the date of receipt of order which is further extended to 60 days more on sufficient cause.  If claim is admissible. direct payment is made to person entitled  Appeal  The appeal is made by the person aggrieved by order to Controlling Authority. employer shall. send notice on form ‘M’  To be paid within 30 days from the date it becomes payable  If not paid within 30 days.Determination of the amount of gratuity   Within 15 days of receipt of application. send notice within 30 days  If claim is inadmissible. . In case of any dispute wrt gratuity. simple interest from the payable date to paid date.

Inspectors Purpose of Appointment : To ascertain whether or not the provisions of the Act have been complied with by an employer. Duties of Owners etc. books. registers or other documents required by the inspector.  To give information Inspector required by the . : To produce accounts.

Where two or more inspectors are appointed for the same area. AG may define the limits within which the inspector shall exercise jurisdiction).. Such number of inspectors may be appointed as AG may deem fit. AG may distribute or allocate work to be performed by them (i.  AG may define the area to which the authority of an inspector shall  extend.Inspectors The inspectors shall be appointed by AG by Notification in the Official  Gazette  Every Inspector shall be deemed to be a ‘public servant’ within the meaning of section 21 of IPC. .e.

notices and other documents . records. plantation port or railway company or shop to which this Act applies. records. any books. mine oilfield. registers.Power of Inspectors  To call such information from the employer as he considers necessary  To enter into or inspect. notices and other documents  To examine the employer and his servants  To make copies and take extracts of any books. at all reasonable times. registers. factory. any premises of any establishment.

together with compound interest by notification from the date of expiry of the prescribed time .Recovery of gratuity    The controlling authority shall issue a certificate for the amount to the Collector and pay the same to the person entitled under the following conditionsIf the amount of gratuity payable under this Act is not paid by the employer within the prescribed time to the person entitled If an application made to it in this behalf by the aggrieved person Collector shall recover the same.

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 ten thousand rupees  or with both.Penalties (1) Whoever.  or with fine which shall not be less than ten thousand rupees but which may extend to twenty thousand rupees  or with both . 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. any of the provisions of this Act or any rule or order made there under shall be punishable  with imprisonment for a term which shall not be less than three months but which may extend to one year. or makes default in complying with. (2) An employer who contravenes.

consent or connivance.Exemption of employer from liability in certain cases Where an employer upon complaint duly made by him and on giving to the complainant not less than three clear days notice in writing of the following 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 If after the commission of the offence has been proved the employer proves to the satisfaction of the court the following  that he has used due diligence to enforce the execution of this Act  that the said other person committed the offence in question without his knowledge. that other person shall be convicted of the offence as if he were the employer and the employer shall be discharged from any liability under this Act in respect of such offence  .

Cognizance Of Offences    No cognizance of an offence save a complaint by or under the appropriate Government Under non-payment of gratuity within 6 months of prescribed date appropriate Government authorizes and within 16 days of authorization complaint shall be lodged against the Magistrate No court inferior to Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any offence under this .

revenue or criminal court Act to override other enactments • The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than this Act .Protection of action taken in good faith  No suit or any legal proceeding against any controlling authority which is in good faith done or intended to be done under this Act Protection of gratuity • No gratuity shall be liable to attachment in execution of any decree or order of any civil.

may.Power to make rules   The appropriate Govt. by notification. and both Houses should either agree or disagree in order to have effect or no effect and that any such modification or annulment shall be without the prejudice to the validity of anything previously done under that rule . make rules for the purpose of carrying out the provisions of this Act Every rule made by the Central Govt. shall be laid before each House of Parliament.

Asokan (2009) employer within the16 period specified in subSCC 758 If the amount of gratuity payable under subCase section(3). N.Interest on this Delayed of While interpreting the Payment aforesaid provisions Answering question the SC referred to Gratuity the court observed: the provisions in section 7(3-A) of the PGA Kerala State Cashew Development [I]t is absolutely clear that if any amount of gratuity . employer has obtained its term would be in squarely applicable the controlling facts of this permission writing from in the case. not term deposits. where exceeding the rate notified by the Central the employer has obtained permission in writing from Government from time to time for repayment of the controlling authority for delayed payment. simple interest at such rate. . but on those delayed payments. ground. which reads as under: which is payable under section 7 is not paid by the Corporation Limited v. in that long-term deposits. Applying the above principle in this case held Provided that no such interest shallthe becourt payable that ifasthe no delay such permission was obtained the employer in the payment is due by to the fault of in writing from the controlling section 7(3-A) and the employee and the authority. the the date on which it is paid. as that Government may. simple interest at such employer shall pay. the employer is liable to pay interest from section (3) is not paid by the employer within the date on which the gratuity becomes payable to Facts: the period specified in sub-section (3). not exceeding the rate notified by the Central gratuity becomes payable to the date on which Government from time to time for repayment of longit is paid. The courtfor accordingly upheld payment the decision the authority the delayed on ofthis court below. from the date on which the rate. case. no such interest shall be payable to the by notification specify: employee.

1972 (PGA) the AP Shop Act found that they were almost identical and the payment of gratuity was replaced by the introduction of the concept of service compensation.Constitutional Validity of the Gratuity (service compensation under the Andhra Pradesh Shops and Establishments Act. It also observed that the service compensation was nothing. It accordingly held that limiting this period only to one year was unreasonable and discriminatory. but a gratuity which was payable to the employee as a gift or reward for rendering long and continuous service. . Srinivasa Resorts Limited (2009) 5 SCC 342 This case decided the question relating to the validity of section 47(3) & (4) of Andhra Pradesh Shops and Establishments Act. The only change was to the extent of the minimum requirement period of six months to one year. 1988 of (AP Shop Act) which said toand be in the provision of theisPG Act The HC on comparison direct conflict with the Payment of Gratuity Act. 1988) Grand Kakatiya Sheraton Hotel and Towers Employees and Workers Union v.

Joint Commissioner of Labour. Chennai and Another .A. Teynampet. Labour welfare Buildings.Padmanabhan Vs. (Appellate Authority under the Payment or Gratuity Act).

Anwari Begum and Another Important: Gratuity. along with by 8%the interest. has Gratuity.State of U. mechanical division. Gorakhpur has worked Department. and Public Works Department. Smt. v. has been rightly directed Controlling been rightly directed Controlling Authority to be paid toby thethe legal heirs of Authority to be paid to the legal of the deceased employee whoheirs was the deceased employee who was employed as electrician in work-charge employed as electrician work-charge establishment of the in electrical and establishment of the Public electrical Works and mechanical division.P. has worked for more than Gorakhpur 11 years tilland his death for more than 11 years till his death . alongImportant: with 8% interest.

Thank You .