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Payment ofGratuity Act , 1972KUNAL DAYANI 10PGHR21PURNIMA DHAR 10PGHR39RAHUL ROY 10PGHR40SANDEEP RATH 10PGHR44SHIKHA GOYAL 1OPGHR45URVASHI AGARWAL 10PGHR57Background

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 DeathPermanent disablement

Historical Background

The Payment of Gratuity Act, 1972 envisagesto provide a retirement benefit to the workmenwho have rendered long and unblemished service to the employer, and have thus contributed to the prosperity of the employer.

Objective of the Act

Concept of GratuityApplicability

Appropriate Government

DefinitionsEmployees Regular employees of the Institute + DirectorExclude persons appointed on a contract basis unless the terms of the contract provide for payment of any gratuity

MemberEmployee 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, head of Ministry of Dept. concerned/chief executive office of local authority

Definitions (Contd.)Qualifying Service Continuous service of not less than five years including periods of authorised leave.

SuperannuationAttainment of age for vacating employment

RetirementTermination of employment other than superannuation

WagesEarned while on duty or on leave.Includes DADoes not include bonus, HRA, overtime, commission etc.

Cases Definitions

Services rendered prior to re-employment cannot be treated as continuous service for claiming gratuity

Dungerbhai Meghabhai v. Shri Arbuda Mills Ltd., (1996) 1 CUR LR 149: 1996 lab IC 262Monitron Securities (P) Ltd. v. Mukundlal Khushalchand Dhavan, (2001) 1 CUR LR 507(GUJ)

A director of company not having ultimate control over the management of company will be employee of companyCases Definitions

A college run by a societies registered under the societies registration act is an establishment.

Gurudeo Ayurved Mahavidyalaya v. Madhav,(1994) (Bombay)Shri Jagganath Temple Puri V. Jagannath Padhi, 1992 , Orrisa.

A temple is an establishmentGratuity v. PensionBoth are efficiency devices and are considered necessary for orderly and human elimination from the industryGratuity v. Provident FundGratuity 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. Retrenchment CompensationCompensation for premature termination of employment- Section 25-F(b) of the Industrial Disputes Act, 1947Continuous ServiceSalient features of the Section 2-A

Sundays, National holidays and Weekly offs are to be included in computing period of 240 days.

Sri Ahilandeshwari Mills Ltd., Salem v. Assistant Commissioner of Labour( Controlling Authority), Salem, 1999 LLR 576 (Mad.)Payment Of GratuityGratuity when payable:

on termination of employment after he has rendered continuous service for not less than 5 yrs:

On his superannuationOn his retirement or resignationOn his death or disablement due to accident or disease

However in case of death or disablement of the employee it is not necessary to complete 5 years of continuous service Computation of GratuityFor every completed year of service or part thereof in excess of 6 months, gratuity has to be paid at a rate of 15days wages (last drawn salary)

In case of piece rated employee, 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 accountIn case of a seasonal establishment, employer shall pay gratuity at the rate of 7 days for each season

Computation of Gratuity- Contd.The amount of gratuity payable shall not exceed Rs 3.5 lacsIn 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.Compulsory Insurance

Every employer must, for his liability to pay towards the gratuity , obtain an insurance from the LICCases related to Computation of GratuityCases 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 actCan be given only by way of a notification in the Official GazetteNotification to be issued retrospectively a date not earlier than the date of commencement of this ActNo Notification shall be issued to prejudicially affect the interests of any personNominationEvery employee, who has completed 1 year of service, is compulsorily required to make a nomination. (Form F)The nomination must be made within 30 days of completion of one year of serviceThe 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 person.Determination of the amount of gratuity Application can be made by:An employee who is eligible for payment of gratuityAny person authorised in writing by such employeeNominee of the employee (if the deceased employee had made a nomination)Legal heir of the employee (if the deceased employee had not made any nominationApplication shall be made to the employer in writing within 30 days from the date gratuity becomes payableAs soon as the gratuity becomes payable, employer has to determine the amount of gratuity & give noticeIt is irrespective of the fact whether an application for payment of gratuity has been made or notDetermination of the amount of gratuity Within 15 days of receipt of application, employer shall,If claim is admissible, send notice within 30 daysIf claim is inadmissible, send notice on form MTo be paid within 30 days from the date it becomes payableIf not paid within 30 days, simple interest from the payable date to paid date.In case of any dispute wrt gratuity, the amount must be deposited with controlling authorityControlling Authority shall make due inquiries and if claim is found admissible, direct payment is made to person entitledAppeal

The appeal is made by the person aggrieved by order to Controlling Authority.

Limitation 60 days from the date of receipt of order which is further extended to 60 days more on sufficient cause.InspectorsPurpose of Appointment :-To ascertain whether or not the provisions of the Act have been complied with by an employer.

Duties of Owners etc. :-To produce accounts, books, registers or other documents required by the inspector;

To give information required by the InspectorInspectors 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.Such number of inspectors may be appointed as AG may deem fit.AG may define the area to which the authority of an inspector shall extend. Where two or more inspectors are appointed for the same area, AG may distribute or allocate work to be performed by them (i.e., AG may define the limits within which the inspector shall exercise jurisdiction).

Power of InspectorsTo call such information from the employer as he considers necessaryTo enter into or inspect, at all reasonable times, any premises of any establishment, factory, mine oilfield, plantation port or railway company or shop to which this Act applies, any books, registers, records, notices and other documentsTo examine the employer and his servantsTo make copies and take extracts of any books, registers, records, notices and other documentsTo exercise such other powers as may be prescribedRecovery 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 conditions- If 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, together with compound interest by notification from the date of expiry of the prescribed time

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 ten thousand rupees or with both.(2) An employer who contravenes, or makes default in complying with, 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 with fine which shall not be less than ten thousand rupees but which may extend to twenty thousand rupees or with bothExemption of employer from liability in certain casesWhere 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, consent or connivance, 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 OffencesNo cognizance of an offence save a complaint by or under the appropriate GovernmentUnder 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 MagistrateNo court inferior to Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any offence under this Act

Protection of gratuityNo 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 action taken in good faithNo gratuity shall be liable to attachment in execution of any decree or order of any civil, revenue or criminal court

Act to override other enactmentsThe provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than this ActThe appropriate Govt. may, by notification, make rules for the purpose of carrying out the provisions of this ActEvery rule made by the Central Govt. shall be laid before each House of Parliament, 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 rulePower to make rulesInterest on Delayed Payment of GratuityKerala State Cashew Development Corporation Limited v. N. Asokan (2009) 16 SCC 758Case Facts:Answering this question the SC referred to the provisions in section 7(3-A) of the PGA which reads as under: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.While interpreting the aforesaid provisions the court observed:[I]t is absolutely clear that if any amount of gratuity , which is payable under section 7 is not paid by the employer within the period specified in sub-section(3), the employer is liable to pay interest 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, but on those delayed payments, where the employer has obtained permission in writing from the controlling authority for delayed payment, in that case, no such interest shall be payable to the employee.Applying the above principle in this case the court held that as no such permission was obtained by the employer in writing from the controlling authority, section 7(3-A) and its term would be squarely applicable in the facts of this case. The court accordingly upheld the decision of the court below. Grand Kakatiya Sheraton Hotel and Towers Employees and Workers Union v. Srinivasa Resorts Limited (2009) 5 SCC 342Constitutional Validity of the Gratuity (service compensation under the Andhra Pradesh Shops and Establishments Act, 1988)This case decided the question relating to the validity of section 47(3) & (4) of Andhra Pradesh Shops and Establishments Act, 1988 (AP Shop Act) which is said to be in direct conflict with the Payment of Gratuity Act, 1972 (PGA)The HC on comparison of the provision of the PG Act and 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. The only change was to the extent of the minimum requirement period of six months to one year. It also observed that the service compensation was nothing, but a gratuity which was payable to the employee as a gift or reward for rendering long and continuous service. It accordingly held that limiting this period only to one year was unreasonable and discriminatory.A.Padmanabhan Vs. Joint Commissioner of Labour, (AppellateAuthority under the Payment or Gratuity Act), Labour welfareBuildings, Teynampet, Chennai and AnotherState of U.P. v. Smt. Anwari Begum and AnotherImportant:Gratuity, along with 8% interest, has been rightly directed by the Controlling Authority to be paid to the legal heirs of the deceased employee who was employed as electrician in work-charge establishment of the electrical and mechanical division, Public Works Department, Gorakhpur and has worked for more than 11 years till his deathThank You