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Thursday, September 6, 2012

THE PAYMENT OF GRATUITY ACT, 1972


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.
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.
Gratuity - Meaning
Gratuity is a lump sum payment made by the employer as a mark of recognition of the service
rendered by the employee when he retires or leaves service.
Applicability
The Act is applicable to every factory, shop or an establishment, in which ten or more persons
are employed, or were employed on any day of the proceeding twelve months. Every employee
irrespective of his salary will be entitled to gratuity. Once the Act becomes applicable, it shall
continue to be governed by the provisions notwithstanding that the number of persons
employed therein have fallen below ten.
Eligibility
An employee is eligible for receiving gratuity payment only after he has completed five years
of continuous service. He is said to be in continuous service when he has provided uninterrupted
service during that period.
on super annuation or
on his retirement or resignation or
death or disablement due to accident or disease.
This condition of five years is not necessary if the termination of the employment of an
employee is due to death or disablement. However, interruption on account of sickness,
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accident, leave, lay-off, strike, lockout, cessation of work not due to any fault of the employee
will not be considered as a break in service. (Section 4)
Amount Payable
Gratuity is payable @ 15 days wages for every year of completed service or part thereof in
excess of six months. In case of seasonal establishment, gratuity is payable @ 7 days wages for
each season. Wages will include basic and D.A. The daily wages in respect of piece rated
employees are to be computed on the average of the total wages received by an employee for a
period of three months. The maximum amount of Gratuity payable is Rs. 3.5 lakhs.
Amount - When payable
Any person to whom the gratuity amount is payable shall make a written application to the
employer. The employer is required to determine the amount of gratuity payable and give
notice in writing to the person to whom the same is payable and to the controlling authority
thereby specifying the amount of gratuity payable. The employer is under obligation to pay
the gratuity amount within 30 days from the date it becomes payable. Simple interest at the
rate of 10% p.a. is payable on the expiry of the said period. If there is a dispute as regards the
amount of gratuity payable or with regards the person to whom it is payable, the employer
shall deposit the said amount payable with the controlling Authority. If the gratuity is not paid
within the prescribed time, the controlling authority shall after due inquiry determine the
amount payable and direct the employer to deposit the said amount. If an employer agrees to
provide more benefits than the benefits flowing from the Act, he can always have a private
scheme.
Nomination
Every employee who completes one year of service is eligible to file nomination in Form - F in
duplicate to the employer. In case of death of employee, a nominee or legal heir shall submit
the application in Form J or K for claim amount. The employer shall pay the gratuity within 30
days of the receipt of the application. If no nomination has been made, it shall be paid to the
legal heirs of the deceased employee or if the heirs are minor, the share of such minor shall be
deposited by the controlling authority with a bank till he attains majority.
Forfeiture
Gratuity can be forfeited for any employee whose services have been terminated for any act,
willful omission or negligence causing damage or destruction to the property belonging to the
employer. It can also be forfeited for any act which constitutes an offence involving moral
turpitude. Where services have not been terminated on any of the above grounds, the employer
cannot withhold gratuity due to the employee. Where the land of the employer is not vacated
by the employee, gratuity cannot be withheld.
Obligation of the Employer
The employer is usually required to submit a notice of opening of an establishment to the
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controlling authority of the area in form A containing names and addresses of the
establishment, employer, number of persons employed, nature of business etc.
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
employees.
It is the duty of the employer to determine the amount of gratuity as soon as it becomes payable.
Failure to do so shall render him liable to pay the interest at the prevailing rate from time
taken.
To obtain insurance in the prescribed manner for his liability for payment of gratuity under the
Act or establish approved gratuity fund in the prescribed manner.
Penalties.
If any person makes a false statement for the purpose of avoiding any payment to be made by
him under this Act he 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. If an employer
contravenes any provision of the Act, he 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 a fine,
which may vary from ten thousand rupees to twenty thousand rupees.
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, within six months
from the expiry of the prescribed time, the appropriate Government shall authorise the
controlling authority to make a complaint against the employer, whereupon 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.
No court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class
shall try any offence punishable under this Act.

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