Payment Of Gratuity Act 1872 (Cma Inter Law Notes)

                                                           

                                                       Payment of Gratuity, 1972

Effect & Scope:- 

This Act comes into effect from 16th September 1972. And is applicable to all over India but in Jammu & Kashmir it is not applicable on the work of Plantation & port. 

 Object:-

 The act provides for payment of gratuity to employees as respect of the services rendered by him.

  Provide financial assistance to the employees and their family member. 

 It serves as an instrument of social security. 

 Meaning of gratuity:- 

It is a Lum-Sum payment made by an employer to an employee at the time of termination of employment in consideration on his past services.

  Application of the Act:- 

This act is applies to 

 Every factory, mines, oilfields, plantation & port and railway companies. 

 Every shop or establishment in which ten or more person are employed or were employed on any day preceeding 12 months. 

 Such other establishment as central Govt. may specified by notification.

 Note:- A shop or establishment on which the act has become applicable shall continue to be applicable even if the No of workers falls below 10. 

 Appropriate Govt. sec. 2 ( a ) :- 

Same as minimum wages ACT 

Sec 2(e) Employee:-

It means any person other than apprentice, who is employed for wages whether he terms of such employment are express or implied, in any kind of work, manual or otherwise , in or in connection with the work of factory, mine , oil field, plantation, port, railway company, shop or other establishment to which this act applies, but does not include any person who holds a post under the central Govt. or state Govt. and is governed by any other Act. Employee including teachers in educational institution by payment of gratuity (Amendment,) Act 2009. 

Sec. 2(f) Employer:- 

Same as minimum wages Act. 

Sec. 2 (h) Family:- 

Family in relation to an employee shall be deemed to be consist of :- 

I. In case of male employee:- 

 Himself 

 His wife 

 His children (whether married or unmarried) 

 His dependent parents. 

 The widow and children of his predeceased son. (If any) 

II. In case of female employee:-

  Herself

  Her husband 

 Her children (Whether married or unmarried)

  Her Dependent parents. 

 Dependent parents of Her Husband. 

 The widow and the children of her predeceased son. (If any)

Explanation to Sec. 2(h) :- 

It includes a lawfully adopted child. For the Ex. To sec. 2(h) employee has to give Notice to employer in Form D (Triplicate copy) one of them should be sent to controlling author by the employer. Sec. 2(q),

 Retirement:- Termination of services of an employee otherwise than on superannuation. 

Sec. 2(r), Superannuation:-

The attainment by the employee of such age as is fixed in the contract or condition of service as the age on the attainment of which the employee shall vacate the employment. 

Wages ,Sec. 2 (s):- 

All money which are payable to an employee in cash and includes Dearness allowance but does Not include.

 a. Bonus 

b. Commission 

c. HRA 

d. Overtime wages

e. Any other allowance. 

Sec. 2A, Continuous Service:-

An employee is said to be continuous service if

1) He has been in un-interrupted services including service interrupted by sickness, accident leave, absence from duty without Leave, Lay off, strike or Lock out or cessation of work not due to fault of employee. 

2) In case of mine or Non seasonal establishment working for Less than 6 days in a week- he has actually worked for at Least – 190 days during the preceeding 12 month or 95 days during the preceding 6 months. 

3) In case of any other Non seasonal establishment:- (where working 6 days in week) At Least – 240 Days during the preceding 12 month or 120 days during the preceding 6 months. 

4) In case of seasonal establishment he has actually worked for at Least 75% of the days on which the establishment was in operation. 

Note-1:- In case of Legal termination of services and subsequent reemployment services is not consider as continue services. 

Note 2:- For the purpose of point (2) & (3) following days are included in his working days:-

  Laid off period 

 Earned Leave previous year 

 Absent due to temporary disablement arising out of and in the course of employment. 

 In case of female employee maternity Leave Note exceed 26 weeks.

Sec. 4(1), Payment of gratuity:-

 Payable to an employee on termination of his employment after he has rendered a continuous service for Not Less than Five years.

  On his superannuation 

or 

 On his retirement ,

 or

  On his resignation, 

or 

 On his death or total disablement due to accident arising out of or in the courses of employment.

 Note:1)

 The completion of continuous service of five years is Not Necessary where the termination of employment is due to death or disablement 

Note:- 2) 

Mere absence from duty without Leave can‟t be treated as breach of continuity of service for the purpose of the act.

 Note:-3) 

The period of continuous service is to be calculated from the date of employment Not from the date commencement of the ACT. 

 Sec. 4(2), Amount of gratuity:- 

A. In case of Non seasonal establishment:- 

Gratuity payable = 15 days wages x No of completed years of service 15 days wages means:- In case of monthly rated employees:- Last month drawn wages x 15/26 In case of piece Rated worker:- Wages of Last 3 month / No. of days working in 3 months x 15

 B. In Case of seasonal establishment:-

 Gratuity payable = 7 days wages x No of seasons employed 7 days wages = Last month seasonal wages x 7/26

 Note:- For both seasonal & Non-seasonal:- The amount of gratuity payable should not exceed of Rs. 20 lakh in any case. 

Obligation of the employer for opening or changing or closing the establishment:-

 On opening an establishment the employer should give Form A to the controlling authority of the area in containing name and address of the establishment, particulars of employees, Natures of business within 30 days of such opening.

  In case of change in the name of establishment or change in the address of establishment, then employer should give information to the controlling authority in Form B within 30 days of such change.  On case of close down of an establishment the employer should give information in Form C to the controlling authority before 60 days of such closing.

 Sec. 4(6) Forfeiture of gratuity: 

Where the services of an employee have been terminated for any act of willful, omission or negligence causing any damage or loss or destruction to the property of employer:- 

 Gratuity shall be forfeited to extent of such damage or loss caused. 

 Where services of an employee have been terminated:-

 a. For riotous or disorderly conduct or any other act of violence, 

                                                                                    or

 b. For any offence involving moral turpitude committed in the course of employment.

(a) &(b) Gratuity payable to the employee may be wholly or partly/partially forfeited.

Case:-

Bharat Gold mines VS Regional Labour commissioner 

Decision:- 

Court held that offence of theft is come under the moral turpitude so gratuity can wholly be forfeited according to section 4(6) of the act. 

Case:- 

Air India V/S Authority under gratuity act Decision :-Gratuity of an employee can not be with held on the ground of Non-Vacation of service quarter. 

Sec. 6, Nomination:- 

 Each employee who has completed one years of his service, shall make nomination in form „F‟ 

 If an employee has family and employee makes nomination in Form F other than his family member than such nomination is void, but if he has no family at the time of Nomination than such nomination is valid.

  If an employee acquire family after nomination than he has to give fresh nomination in Form-G within 90 days of acquiring family. 

 In case of any modification or nominee dies before the employee than employee shall give again nomination in Form- H 

 Rule- 7, Application for gratuity:- 

Rule 7 (1):- An employee who is eligible for payment of gratuity shall give an application in Form I To the employer within 30 days when gratuity becomes payable. 

Rule 7 (2):- When a Nominee is eligible for payment of Gratuity shall apply in Form- J within 30 days when gratuity becomes payable.

 Rule 7(3):- When a Legal Hear of an employee is eligible for gratuity, shall apply with in 1 year in Form – K to the employer. 

 Notice for payment of gratuity:- 

After receipt of application for payment of gratuity the employer shall with 15 days of such receipts:-

 1. If claim is admissible issue a Notice in Form- L to employee/Nominee/Legal Hear in which specifying the Amount as well as a date for payment which is not Later than 30th day of Receipt of application.

 2. If claim is Not admissible than employee issue Form-M to employee/Nominee/Legal Hear and controlling authority, in which specifying reason of Not admissible claim. 

3. If the claim is made by Nominee or Legal Hear than employer must be verified their identity by two witnesses.

 4. Notice in Form L or Form – M shall be served by personal service or by registered post. 

Note:- If the date of the payment of gratuity is more than 30th day when gratuity becomes due than the employer has to pay a simple interest @ 10% per Annum till the date of Actual payment.

  Mode of payment of gratuity:-

  Gratuity must be paid in cash and if agreed by employee, Nominee or Legal Hear than it can be paid in demand draft or by cheque.

  If the Amount of gratuity is Less than Rs. 1000 than payment can be made through money order after deducting commission of money order there to

 Sec. 7(4), Dispute:- 

Dispute can be related to – Amount of gratuity payable or Admissibility of claim 

1. Dispute As per the Amount [Amount of gratuity payable]:- In this case, the employer shall deposited such Amount with the controlling authority as he admits to be payable by him. The controlling authority after the enquiry shall pay the amount of deposit to the employee/Nominee or Legal hear as the case may be.

 2. Dispute as to admissibility of claim:- In this case employer shall issue a Notice in Form-M to the employee/Nominee or Legal Hear as the case may be, In which specifying the reason why the claim of gratuity is Not admissible

  A copy of such Notice shall be endorsed to the controlling authority. The controlling authority after due enquiry issue directions to the employer for payment of gratuity within prescribed time.

  Sec. 8 Recovery of gratuity:- If the gratuity is Not Paid by employer within time than controlling authority shall issue a certificate to the collector, who shall recover such amount along with 12% of compound interest or at such rate specified by central Govt. from the date of expiry of prescribed time. As an arrear of Land Revenue. 

 Sec. 9 Penalties:- 

 Sec. 9(1):- If any person makes falls statement for avoiding any payment under this act- punishable with imprisonment upto6 months or fine upto Rs. 1000 or both. 

 Sec. 9(2): When an employer contravenes the provision of the Act – Punishable upto 1 year or fine up to Rs. 1000 or both. 

 Sec. 9(2):-Where offence related to Nonpayment of gratuity- Then employer shall be punishable minimum 3 months presentment, which can be extended to 1 year. 

Sec. 13, Protection of gratuity:- Gratuity payable to an employee can‟t be attached in execution of any decree or order of civil/Revenue/ Criminal Court.