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Please see below for THE PAYMENT OF GRATUITY ACT, 1972. Hope this will work as ready reference for you.
[u:ec2e0321e9]THE PAYMENT OF GRATUITY ACT, 1972
INTRODUCTION
The Working Journalists (Conditions of Service) and Miscellaneous Provisions Act, 1955 (45 of 1955) under section 5 provided for the payment of gratuity to the journalist. But there was no other Central Act which provided for the payment of gratuity to industrial workers. The Government of Kerala enacted legislation for payment of gratuity to workers employed in factories, plantations, shops and establishments. The Governor of West Bengal promulgated an Ordinance on 3rd June, 1971 wherein a scheme for payment of gratuity was enacted. The Ordinance was later replaced by the West Bengal Employees' Payment of Compulsory Gratuity Act, 1971 enacted by the President on 28th August, 1971. Gratuity was also being paid by some employers to their workers under Awards and Agreements. Since the enactment of the Kerala and West Bengal Acts, some other State Governments also wanted to enact similar measures. Taking into account the intention of the State Governments it was felt necessary to have a Central law on the subject so as to ensure a uniform pattern of payment of gratuity to the employees throughout the country. The proposal for Central legislation on gratuity was discussed in the Labour Ministers' Conference held at New Delhi on 24th and 25th August, 1971 and also in the Indian Labour Conference at its session held on 22nd and 23rd October, 1971. There was general agreement at the Labour Ministers' Conference and the Indian Labour Conference that Central legislation on payment of gratuity might be undertaken at the earliest. Accordingly the Payment of Gratuity Bill was introduced in the Parliament.
STATEMENT OF OBJECTS AND REASONS
There is at present no Central Act to regulate the payment of gratuity to industrial workers, except the Working Journalists (Conditions of Service) and Miscellaneous Provisions Act, 1955. The Government of Kerala enacted legislation last year for payment of gratuity to workers employed in factories, plantations, shops and establishments. The West Bengal Governor Promulgated an Ordinance on the 3rd June, 1971 prescribing a similar scheme of gratuity. This Ordinance has since been replaced by the West Bengal Employees' Payment of Compulsory Gratuity Act, 1971, enacted by the President on 28th August, 1971. Gratuity is also being paid by some employers to their workers under Awards and Agreements.
Since the enactment of the Kerala and the West Bengal Acts, some other State Governments have also voiced their intention of enacting similar measures in their respective States. It has become necessary, therefore, to have a Central law on the subject so as to ensure a uniform pattern of payment of gratuity to the employees throughout the country. The enactment of a Central law would also avoid different treatment to the employees of establishments having branches in more than one State when, under the conditions of their service, the employees are liable to transfer from one State to another.
The proposal for Central legislation on gratuity was discussed in the Labour Ministers' Conference held at New Delhi on 24th and 25th August, 1971 and also in the Indian Labour Conference at its session held on the 22nd and 23rd October, 1971. There was general agreement at the Labour Minister' Conference and the Indian Labour Conference that Central legislation on payment of gratuity might be undertaken as early as possible. It is accordingly proposed to undertake such legislation.
In enacting the President's Act for West Bengal in August 1971, care has been taken to so design its provisions that they could serve as far as possible as norms for the Central law. The Bill has, therefore, been drafted on the lines of the West Bengal Employees' Payment of Compulsory Gratuity Act, 1971 with some modifications which have been made in the light of the views expressed at the Indian Labour Conference relating to forfeiture of gratuity in cases of dismissal for gross misconduct.
The Bill provides for gratuity to employees drawing wages up to Rs. 270 per month in factories, plantations, shops, establishments and mines, in the event of superannuation, retirement, resignation and death or total disablement due to accident or disease, The quantum of gratuity payable will be 15 days' wages based on the rate of wages last drawn by the employees concerned for every completed year of service or part thereof in excess of six months subject to a maximum of 15 months' wages. The term "wages" will mean "basic wage plus dearness allowance".
It is proposed that the appropriate Government for administering the Act in relation to establishment belonging to or under the control of the Central Government or a railway company, or mine, a major port and oil field or in relation to establishments having departments or branches in more than one State, will be the Central Government, and, in relation to other establishments, the State Government. The Bill seeks to give effect to the above proposals.
ACT 39 OF 1972
The Payment of Gratuity Bill having been passed by both the Houses of Parliament received the assent of the President on 21st August, 1972. It came into force on 16th September, 1972 as THE PAYMENT OF GRATUITY ACT, 1972 (39 of 1972).
LIST OF AMENDING ACTS
1. The Payment of Gratuity (Amendment) Act, 1984 (25 of 1984).
2. The Payment of Gratuity (Second Amendment) Act, 1984 (26 of 1984).
3. The Payment of Gratuity (Amendment) Act, 1987 (22 of 1987).
4. The Payment of Gratuity (Amendment) Act, 1994 (34 of 1994).
5. The Payment of Gratuity (Amendment) Act, 1998 (11 of 1998).
THE PAYMENT OF GRATUITY ACT, 1972
(39 of 1972)
[21st August, 1972]
An Act to provide for a scheme for the payment of gratuity to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments and for matters connected therewith or incidental thereto.
BE it enacted by Parliament in the Twenty-third Year of the Republic of India as follows:-
1. Short title, extent, application and commencement.-(1) This Act may be called the Payment of Gratuity Act, 1972.
(2) It extends to the whole of India:
Provided that in so far as it relates to plantations or ports, it shall not extend to the State of Jammu and Kashmir.
(3) It shall apply to-
(a) every factory, mine. oilfield, plantation, port and railway company;
(b) every shop or establishment within the meaning of any law for the time being in force in relation to shops and establishments in a State, in which ten or more persons are employed, or were employed, on any day of the preceding twelve months;
(c) such other establishments or class of establishments, in which ten or more employees are employed, or were employed, on any day of the preceding twelve months, as the Central Government may, by notification, specify in this behalf.
1[(3A) A shop or establishment to which this Act has become applicable shall continue to be governed by this Act notwithstanding that the number of persons employed therein at any time after it has become so applicable falls below ten.]
(4) It shall come into force on such date2 as the Central Government may, notification, appoint.
COMMENTS
(i) The expression "law" used in section 1(3)(b) means any law in respect of shops, establishments commercial or non-commercial; K. Gangadhar v. The Appellate Authority under The Payment of Gratuity Act, (1993) 66 FLR 648 (AP).
(ii) The provisions of section 1(3)(b) of the Act are comprehensive. Municipal Board is covered under the Act; Municipal Board v. Union of India, (1993) 67 FLR, 973 (All).
1. Ins. by Act 26 of 1984, sec. 2 (w.e.f. 18-5-1984).
2. Came into force on 16-9-1972, vide S.O. 601(E), dated 16th September, Gazette of India, Extra., Pt. II, Sec. 3(ii), p. 1641.
2. Definitions-In this Act, unless the context otherwise requires,-
(a) "appropriate Government" means,-
(i) in relation to an establishment-
(a) belonging to, or under the control of, the Central Government,
(b) having branches in more than one State,
(c) of a factory belonging to, or under the control of, the Central Government;
(d) of a major port, mine, oil field or railway company, the Central Government;
(ii) in any other case, the State Government;
(b) "completed year of service" means continuous service for one year;
1[(C)"continuous service" means continuous service as defined in section 2A;]
(d)"controlling authority" means an authority appointed by the appropriate Government under section 3;
(e) "employee" means any person (other than an apprentice) employed on wages, 2[***] in any establishment, factory, mine, oilfield, plantation, port, railway company or shop to do any skilled, semi-skilled, or unskilled, manual, supervisory, technical or clerical work, whether the terms of such employment are express or implied, 3[and whether or not such person is employed in a managerial or administrative capacity, but does not include any such person who holds a post under the Central Government or a State Government and is governed by any other Act or by any rules providing for payment of gratuity].
4[***]
(f) "employer" means, in relation to any establishment, factory, mine, oilfield, plantation, port, railway company or shop-
(i) belonging to, or under the control of, the Central Government or a State Government a person or authority appointed by the appropriate Government for the supervision and control of employees, or where no person or authority has been so appointed, the head of the Ministry or Department concerned,
(ii) belonging to, or under the control of, any local authority, the person appointed by such authority for the supervision and control of employees or where no person has been so appointed, the chief executive officer of the local authority,
(iii) in any other case, the person, who, or the authority which, has the ultimate control over the affairs of the establishment, factory, mine, oilfield, plantation, port, railway company or shop, and where the said affairs are entrusted to any person, whether called a manager, managing director or by any other name, such person;
1. Subs. by Act 26 of 1984, sec. 3, for clause (c) (w.e.f. 11-12-1981).
2. Certain words omitted by Act 34 of 1994, sec. 2 (w.e.f. 24-5-1994).
3. Subs. by Act 25 of 1984, sec. 2, for certain words (w.e.f. 1-7-1984).
4. Explanation omitted by Act 34 of 1994, sec. 2 (w.e.f. 24-5-1994).
(g) "factory", has the meaning assigned to it in clause (m) of section 2 of the Factories Act, 1948 (63 of 1948);
(h) "family" in relation to an employee, shall be deemed to consist of-
(i) in the case of a male employee, himself, his wife, his children, whether married or unmarried, his dependent parents 1[and the dependent parents of his wife and the widow] and children of his predeceased son, if any,
(ii) in the case of a female employee, herself, her husband, her children, whether married or unmarried, her dependent parents and the dependent parents of her husband and the widow and children of her predeceased son, if any;
2[***]
Explanation.- Where the personal law of an employee permits the adoption by him of a child, any child lawfully adopted by him shall be deemed to be included in his family, and where a child of an employee has been adopted by another person and such adoption is, under the personal law of the person making such adoption, lawful, such child shall be deemed to be excluded from the family of the employee;
(i) "major port" has the meaning assigned to it in clause (8) of section 3 of the Indian Ports Act, 1908 (15 of 1908);
(j) "mine" has the meaning assigned to it in clause (j) of sub-section (1) of section 2 of the Mines Act, 1952 (35 of 1952);
(k) "notification" means a notification published in the Official Gazette;
(l) "oilfield" has the meaning assigned to it in clause (e) of section 3 of the Oilfields (Regulation and Development) Act, 1948 (53 of 1948);
(m) "plantation" has the meaning assigned to it in clause (f) of section 2 of the Plantations Labour Act, 1951 (69 of 1951);
(n) "port" has the meaning assigned to it in clause (4) of section 3 of the Indian Ports Act, 1908 (15 of 1908);
(o) "prescribed" means prescribed by rules made under this Act;
(p) "railway company" has the meaning assigned to it in clause section 3 of the Indian Railways Act, 1890 (9 of 1890);
(q) "retirement" means termination of the service of an employee otherwise than on superannuation;
3[(r) "superannuation", in relation to an employee, means the attainment by the employee of such age as is fixed in the contract or conditions of service as the age on the attainment of which the employer shall vacate the employment;]
1. Subs. by Act 22 of 1987, sec. 2, for "and the widow" (w.e.f. 1-10-1987).
2. The proviso omitted by Act 22 of 1987, sec. 2 (w.e.f. 1-10-1987).
3. Subs. by Act 25 of 1984, sec. 2, for clause (r) (w.e.f. 1-7-1984).
(s) "wages" means all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employment and which are paid or are payable to him in cash and includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance.
COMMENTS
(i) The teacher cannot be said to be an employee within the meaning of the Act and conferring the benefits of the Act to a teacher is illegal; Seth Soorajmal Jalan Balika Vidyalaya (Secondary School) v. The Controlling Authority, 2001 LLR 567 (Cal). But in case of General Educational Academy, Chembur, Mumbai v. Sudha Vasudeo Desai, 2001 LLR 627 the Bombay High Court held and declared that the definition of employee in section 2(e) includes and covers in its compass the class of teacher employed in a school.
(ii) If the main duties of an employee are only supervisory in nature, then certainly he cannot be excluded from the category of "employee" nor can he be deprived of the benefits of this Act, even though for a short period he is required to discharge additional or incidental functions; Vishwanath v. M.P.S.R.T. Corporation, (1987) 55 FLR 1 (Summary) (MP).
(iii) Any workman engaged for work on temporary basis according to the availability of work is not an "employee" within the meaning of section 2(e); K. Velukutty Achary v. Harrisons Malayalam Ltd., (1993) 66 FLR 423 (Ker) (DB).
(iv) A workman who rolls beedis for his employer but at his own house is an "employee" within the meaning of section 2(e) of the Act; P.H. Ramlal & Co. v. Smt. Chand Bibi, (1981) 1 LIC 790 (Guj).
(v) Home worker is very much a person working in the establishment within the meaning of section 2(e). Since, the place where he rolled the beedis, though situated away from the Beedi factory, was nevertheless apart of the establishment within the meaning of section 2(h) of the Beedi and Cigar Workers (Conditions of Employment) Act, 1966. Hence, Home maker is an employee of the establishment; M/s. Bagi Beedi Factory v. Appellate Authority, 1998 LLR 23.
(vi) After attaining the age of superannuation no employee is entitled, as a matter of right, to be in the employment in any establishment; Sir J.P. Srivastava Group of Industries v. State of U.P., (1993) 66 FLR 248 (All).
(vii) An educational, institution as per notification issued by Government of India is covered within the purview of the Act; Nitin A. Mehta v. Mehta Prafullaben Dalpatral, 2001 LLR 414 (Guj).
1[2A. Continuous service.- For the purposes of this Act,-
(1) an employee shall be said to be in continuous service for a period if he has, for that period, been in uninterrupted service, including service which may be interrupted on account of sickness, accident, leave, absence from duty without leave (not being absence in respect of which an order 2[***] treating the absence as break in service has been passed in accordance with the standing orders, rules or regulations governing the employees of the establishment), lay-off, strike or a lock-out or cessation of work not due to any fault of the employee, whether such uninterrupted or interrupted service was rendered before or after the commencement of this Act;
(2) where an employee (not being an employee employed in a seasonal establishment) is not in continuous service within the meaning of clause (1), for any period of one year or six months, he shall be deemed to be in continuous service under the employer-
1. Ins. by Act 26 of 1984, sec. 4 (w.e.f. 11-2-1981).
2. The words "imposing a punishment or penalty or" omitted by Act 22 of 1987, sec. 3 (w.e.f. 1-10-1987).
(a) for the sail period of one year, if employee during the period of twelve calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than-
(i) one hundred and ninety days, in the case of any employee employed below the ground in a mine or in an establishment which works for less than six days in a week; and
(ii) two hundred and forty days, in any other case;
(b) for the said period of six months, if the employee during the period of six calendar months preceding the date with reference to which the calculation is to be made, has actually worked under the employer for not less than-
(i) ninety-five days, in the case of an employees employed below the ground in a mine or in an establishment which works for less than six days in a week; and
(ii) one hundred and twenty days, in any other case.
1[Explanation.- For the purpose of clause (2) the number of days on which an employee has actually worked under an employer shall include the days on which.-
(i) he has been laid-off under an agreement or as permitted by standing orders made under the Industrial Employment (Standing Orders) Act, 1946 (20 of 1946), or under the Industrial Disputes Act, 1947 (14 of 1947), or under any other law applicable to the establishment;
(ii) he has been on leave with full wages, earned in the previous year;
(iii) he has been absent due to temporary disablement caused by accident arising out of and in the course of his employment; and
(iv) in the case of a female, she has been on maternity leave; so, however, that the total period of such maternity leave dose not exceed twelve weeks.]
(3) where an employee, employed in a seasonal establishment, is not in continuous service within the meaning of clause (1), for any period of an year or six, months, he shall be deemed to be in continuous service under the employer for such period if he has actually worked for not less than seventy-five per cent. Of the number of days on which the establishment was in operation during such period.]
COMMENTS
Mere absence cannot be said to result in breach of continuity of service for the purpose of the Act; Kothari Industrial Corporation v. Appellate Authority (Deputy Commissioner of Labour), Karnool, 1998 LLR 223.
3. Controlling authority.- The Appropriate Government may, by notification, appoint any officer to be a controlling authority, who shall be responsible for the administration of this Act and different authorities may be appointed for different areas.
4. Payment of gratuity.- (1) Gratuity shall be payable to an employee on the termination of his employment of his employment after he has rendered continuous service for not than five years,-
(a) on his superannuation, or
(b) on his retirement of resignation, or
(c) on his death or disablement due to accident or disease:
1. Added by Act 22 of 1987, sec. 3 (w.e.f. 1-10-1987).
Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement:
1[Provided further that in the case of death of the employee, gratuity payable to him shall be paid to his nominee or, if no nomination has been made, to his heirs, and where any such nominees or heirs is a minor, the share of such minor, shall be deposited with the controlling authority who shall invest the same for the benefit of such minor in such bank or other financial institution, as may be prescribed, until such minor attains majority.]
Explanation.- For the purposes of this section, disablement means such disablement as incapacitates an employee for the work which he was capable of performing before the accident or disease resulting in such disablement.
(2) For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days' wages based on the rate of wages last drawn by the employee concerned:
Provided that in the case of a piece-rated employee, daily wages shall be computed on the average of the total wages received by him for a period of three months immediately preceding the termination of his employment, and, for this purpose, the wages paid for any overtime work shall not be taken into account:
Provided further that in the case of 2[an employee who is employed in a seasonal establishment and who is not so employed throughout the year], the employer shall pay the gratuity at the rate of seven days' wages for each season.
3[Explanation.-In the case of a monthly rated employee, the fifteen days' wages shall be calculated by dividing the monthly rate of wages last drawn by him by twenty-six and multiplying the quotient by fifteen.]
(3) The amount of gratuity payable to an employee shall not exceed 4[three lakhs and fifty thousand] rupees.
(4) For the purpose of computing the gratuity payable to an employee who is employed, after his disablement, on reduced wages, his wages for the period preceding his disablement shall be taken to be the wages received by him during that period, and his wages for the period subsequent to his disablement shall be taken to be the wages as so reduced.
(5) Nothing in this section shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer.
(6) Notwithstanding anything contained in sub-section (1).-
(a) the gratuity of an employee, whose services have been terminated for any act, willful omission or negligence causing any damage or loss to, or destruction of, property belonging to the employer' shall be forfeited to the extent of damage or loss so caused;
1. Subs. by Act 22 of 1987, sec. 4, for the second proviso (w.e.f. 1-2-1991).
2. Subs. by Act, 25 of 1984, sec. 3, for "an employee employed in a seasonal establishment" (w.e.f. 1-7-1984).
3. Ins. by Act, 22 of 1987, sec. 4 (w.e.f. 1-2-1991).
4. Subs. by Act 11 of 1998 sec. 2, for "one lakh" (w. e.f. 24-9-1997).
(b) the gratuity payable to an employee 1[may be wholly or partially forfeited]-
(i) if the services of such employee have been terminated for his riotous or disorderly conduct or any other act of violence on his part, or
(ii) if the services of such employee have been terminated for any act which constitutes an offence involving moral turpitude, provided that such offence is committed by him in the course of his employment.
2[***]
COMMENTS
(i) If for the purposes of computation of quantum of the amount of gratuity the terms of agreement or settlement are better than the Act, the employee is entitled for that benefit but the maximum statutory ceiling limit as provided under sub-section (3) of section 4 of the Act cannot be reduced by mutual settlement or agreement; Bharat Commerce & Industries v. Ramprasad; 2001 LLR 918 (MP).
(ii) The Fifth Pay Commission recommendations are applicable to Central Government employees only and not applicable to employees of respondent Bank. Hence the claim of these employees for total amount of Rs. 3.50 lakh dismissed; Shitla Sharan Srivastava v. Government of India, 2001 LLR 898 (SC).
(iii) The appellant even after superannuation continued to occupy the quarter and the Government in accordance with the rules charged the penal rent from him and after adjusting other dues, the gratuity amount offered to be paid. The court held that there is no illegality in this amount of gratuity; Wazir Chand v. Union of India, 2001 LLR 172 (SC).
(iv) Refusal of employees to surrender land belonging to the employer is not a ground to withhold gratuity; Travancore Plywood Industries Ltd. v. Regional Joint Labour Commissioner, (1996) II LLJ 85 (Ker).
(v) The right of the employer to forfeit the amount of earned gratuity of an employee whose services were terminated for any act, willful omission or negligence causing any damage to the employer is limited to the extent of the damage, and the proof of such damage; Pennali Wallance Ltd. v. State of M.P. (1996) II LLJ 515 (MP).
(vi) By change of ownership, the relationship of employer and employees subsists and the new employer cannot escape from the liability of payment of gratuity to the employees; Pattathurila K. Damodaran v. M.Kass
Please see below for THE PAYMENT OF GRATUITY ACT, 1972. Hope this will work as ready reference for you.
[u:ec2e0321e9]THE PAYMENT OF GRATUITY ACT, 1972
INTRODUCTION
The Working Journalists (Conditions of Service) and Miscellaneous Provisions Act, 1955 (45 of 1955) under section 5 provided for the payment of gratuity to the journalist. But there was no other Central Act which provided for the payment of gratuity to industrial workers. The Government of Kerala enacted legislation for payment of gratuity to workers employed in factories, plantations, shops and establishments. The Governor of West Bengal promulgated an Ordinance on 3rd June, 1971 wherein a scheme for payment of gratuity was enacted. The Ordinance was later replaced by the West Bengal Employees' Payment of Compulsory Gratuity Act, 1971 enacted by the President on 28th August, 1971. Gratuity was also being paid by some employers to their workers under Awards and Agreements. Since the enactment of the Kerala and West Bengal Acts, some other State Governments also wanted to enact similar measures. Taking into account the intention of the State Governments it was felt necessary to have a Central law on the subject so as to ensure a uniform pattern of payment of gratuity to the employees throughout the country. The proposal for Central legislation on gratuity was discussed in the Labour Ministers' Conference held at New Delhi on 24th and 25th August, 1971 and also in the Indian Labour Conference at its session held on 22nd and 23rd October, 1971. There was general agreement at the Labour Ministers' Conference and the Indian Labour Conference that Central legislation on payment of gratuity might be undertaken at the earliest. Accordingly the Payment of Gratuity Bill was introduced in the Parliament.
STATEMENT OF OBJECTS AND REASONS
There is at present no Central Act to regulate the payment of gratuity to industrial workers, except the Working Journalists (Conditions of Service) and Miscellaneous Provisions Act, 1955. The Government of Kerala enacted legislation last year for payment of gratuity to workers employed in factories, plantations, shops and establishments. The West Bengal Governor Promulgated an Ordinance on the 3rd June, 1971 prescribing a similar scheme of gratuity. This Ordinance has since been replaced by the West Bengal Employees' Payment of Compulsory Gratuity Act, 1971, enacted by the President on 28th August, 1971. Gratuity is also being paid by some employers to their workers under Awards and Agreements.
Since the enactment of the Kerala and the West Bengal Acts, some other State Governments have also voiced their intention of enacting similar measures in their respective States. It has become necessary, therefore, to have a Central law on the subject so as to ensure a uniform pattern of payment of gratuity to the employees throughout the country. The enactment of a Central law would also avoid different treatment to the employees of establishments having branches in more than one State when, under the conditions of their service, the employees are liable to transfer from one State to another.
The proposal for Central legislation on gratuity was discussed in the Labour Ministers' Conference held at New Delhi on 24th and 25th August, 1971 and also in the Indian Labour Conference at its session held on the 22nd and 23rd October, 1971. There was general agreement at the Labour Minister' Conference and the Indian Labour Conference that Central legislation on payment of gratuity might be undertaken as early as possible. It is accordingly proposed to undertake such legislation.
In enacting the President's Act for West Bengal in August 1971, care has been taken to so design its provisions that they could serve as far as possible as norms for the Central law. The Bill has, therefore, been drafted on the lines of the West Bengal Employees' Payment of Compulsory Gratuity Act, 1971 with some modifications which have been made in the light of the views expressed at the Indian Labour Conference relating to forfeiture of gratuity in cases of dismissal for gross misconduct.
The Bill provides for gratuity to employees drawing wages up to Rs. 270 per month in factories, plantations, shops, establishments and mines, in the event of superannuation, retirement, resignation and death or total disablement due to accident or disease, The quantum of gratuity payable will be 15 days' wages based on the rate of wages last drawn by the employees concerned for every completed year of service or part thereof in excess of six months subject to a maximum of 15 months' wages. The term "wages" will mean "basic wage plus dearness allowance".
It is proposed that the appropriate Government for administering the Act in relation to establishment belonging to or under the control of the Central Government or a railway company, or mine, a major port and oil field or in relation to establishments having departments or branches in more than one State, will be the Central Government, and, in relation to other establishments, the State Government. The Bill seeks to give effect to the above proposals.
ACT 39 OF 1972
The Payment of Gratuity Bill having been passed by both the Houses of Parliament received the assent of the President on 21st August, 1972. It came into force on 16th September, 1972 as THE PAYMENT OF GRATUITY ACT, 1972 (39 of 1972).
LIST OF AMENDING ACTS
1. The Payment of Gratuity (Amendment) Act, 1984 (25 of 1984).
2. The Payment of Gratuity (Second Amendment) Act, 1984 (26 of 1984).
3. The Payment of Gratuity (Amendment) Act, 1987 (22 of 1987).
4. The Payment of Gratuity (Amendment) Act, 1994 (34 of 1994).
5. The Payment of Gratuity (Amendment) Act, 1998 (11 of 1998).
THE PAYMENT OF GRATUITY ACT, 1972
(39 of 1972)
[21st August, 1972]
An Act to provide for a scheme for the payment of gratuity to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments and for matters connected therewith or incidental thereto.
BE it enacted by Parliament in the Twenty-third Year of the Republic of India as follows:-
1. Short title, extent, application and commencement.-(1) This Act may be called the Payment of Gratuity Act, 1972.
(2) It extends to the whole of India:
Provided that in so far as it relates to plantations or ports, it shall not extend to the State of Jammu and Kashmir.
(3) It shall apply to-
(a) every factory, mine. oilfield, plantation, port and railway company;
(b) every shop or establishment within the meaning of any law for the time being in force in relation to shops and establishments in a State, in which ten or more persons are employed, or were employed, on any day of the preceding twelve months;
(c) such other establishments or class of establishments, in which ten or more employees are employed, or were employed, on any day of the preceding twelve months, as the Central Government may, by notification, specify in this behalf.
1[(3A) A shop or establishment to which this Act has become applicable shall continue to be governed by this Act notwithstanding that the number of persons employed therein at any time after it has become so applicable falls below ten.]
(4) It shall come into force on such date2 as the Central Government may, notification, appoint.
COMMENTS
(i) The expression "law" used in section 1(3)(b) means any law in respect of shops, establishments commercial or non-commercial; K. Gangadhar v. The Appellate Authority under The Payment of Gratuity Act, (1993) 66 FLR 648 (AP).
(ii) The provisions of section 1(3)(b) of the Act are comprehensive. Municipal Board is covered under the Act; Municipal Board v. Union of India, (1993) 67 FLR, 973 (All).
1. Ins. by Act 26 of 1984, sec. 2 (w.e.f. 18-5-1984).
2. Came into force on 16-9-1972, vide S.O. 601(E), dated 16th September, Gazette of India, Extra., Pt. II, Sec. 3(ii), p. 1641.
2. Definitions-In this Act, unless the context otherwise requires,-
(a) "appropriate Government" means,-
(i) in relation to an establishment-
(a) belonging to, or under the control of, the Central Government,
(b) having branches in more than one State,
(c) of a factory belonging to, or under the control of, the Central Government;
(d) of a major port, mine, oil field or railway company, the Central Government;
(ii) in any other case, the State Government;
(b) "completed year of service" means continuous service for one year;
1[(C)"continuous service" means continuous service as defined in section 2A;]
(d)"controlling authority" means an authority appointed by the appropriate Government under section 3;
(e) "employee" means any person (other than an apprentice) employed on wages, 2[***] in any establishment, factory, mine, oilfield, plantation, port, railway company or shop to do any skilled, semi-skilled, or unskilled, manual, supervisory, technical or clerical work, whether the terms of such employment are express or implied, 3[and whether or not such person is employed in a managerial or administrative capacity, but does not include any such person who holds a post under the Central Government or a State Government and is governed by any other Act or by any rules providing for payment of gratuity].
4[***]
(f) "employer" means, in relation to any establishment, factory, mine, oilfield, plantation, port, railway company or shop-
(i) belonging to, or under the control of, the Central Government or a State Government a person or authority appointed by the appropriate Government for the supervision and control of employees, or where no person or authority has been so appointed, the head of the Ministry or Department concerned,
(ii) belonging to, or under the control of, any local authority, the person appointed by such authority for the supervision and control of employees or where no person has been so appointed, the chief executive officer of the local authority,
(iii) in any other case, the person, who, or the authority which, has the ultimate control over the affairs of the establishment, factory, mine, oilfield, plantation, port, railway company or shop, and where the said affairs are entrusted to any person, whether called a manager, managing director or by any other name, such person;
1. Subs. by Act 26 of 1984, sec. 3, for clause (c) (w.e.f. 11-12-1981).
2. Certain words omitted by Act 34 of 1994, sec. 2 (w.e.f. 24-5-1994).
3. Subs. by Act 25 of 1984, sec. 2, for certain words (w.e.f. 1-7-1984).
4. Explanation omitted by Act 34 of 1994, sec. 2 (w.e.f. 24-5-1994).
(g) "factory", has the meaning assigned to it in clause (m) of section 2 of the Factories Act, 1948 (63 of 1948);
(h) "family" in relation to an employee, shall be deemed to consist of-
(i) in the case of a male employee, himself, his wife, his children, whether married or unmarried, his dependent parents 1[and the dependent parents of his wife and the widow] and children of his predeceased son, if any,
(ii) in the case of a female employee, herself, her husband, her children, whether married or unmarried, her dependent parents and the dependent parents of her husband and the widow and children of her predeceased son, if any;
2[***]
Explanation.- Where the personal law of an employee permits the adoption by him of a child, any child lawfully adopted by him shall be deemed to be included in his family, and where a child of an employee has been adopted by another person and such adoption is, under the personal law of the person making such adoption, lawful, such child shall be deemed to be excluded from the family of the employee;
(i) "major port" has the meaning assigned to it in clause (8) of section 3 of the Indian Ports Act, 1908 (15 of 1908);
(j) "mine" has the meaning assigned to it in clause (j) of sub-section (1) of section 2 of the Mines Act, 1952 (35 of 1952);
(k) "notification" means a notification published in the Official Gazette;
(l) "oilfield" has the meaning assigned to it in clause (e) of section 3 of the Oilfields (Regulation and Development) Act, 1948 (53 of 1948);
(m) "plantation" has the meaning assigned to it in clause (f) of section 2 of the Plantations Labour Act, 1951 (69 of 1951);
(n) "port" has the meaning assigned to it in clause (4) of section 3 of the Indian Ports Act, 1908 (15 of 1908);
(o) "prescribed" means prescribed by rules made under this Act;
(p) "railway company" has the meaning assigned to it in clause section 3 of the Indian Railways Act, 1890 (9 of 1890);
(q) "retirement" means termination of the service of an employee otherwise than on superannuation;
3[(r) "superannuation", in relation to an employee, means the attainment by the employee of such age as is fixed in the contract or conditions of service as the age on the attainment of which the employer shall vacate the employment;]
1. Subs. by Act 22 of 1987, sec. 2, for "and the widow" (w.e.f. 1-10-1987).
2. The proviso omitted by Act 22 of 1987, sec. 2 (w.e.f. 1-10-1987).
3. Subs. by Act 25 of 1984, sec. 2, for clause (r) (w.e.f. 1-7-1984).
(s) "wages" means all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employment and which are paid or are payable to him in cash and includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance.
COMMENTS
(i) The teacher cannot be said to be an employee within the meaning of the Act and conferring the benefits of the Act to a teacher is illegal; Seth Soorajmal Jalan Balika Vidyalaya (Secondary School) v. The Controlling Authority, 2001 LLR 567 (Cal). But in case of General Educational Academy, Chembur, Mumbai v. Sudha Vasudeo Desai, 2001 LLR 627 the Bombay High Court held and declared that the definition of employee in section 2(e) includes and covers in its compass the class of teacher employed in a school.
(ii) If the main duties of an employee are only supervisory in nature, then certainly he cannot be excluded from the category of "employee" nor can he be deprived of the benefits of this Act, even though for a short period he is required to discharge additional or incidental functions; Vishwanath v. M.P.S.R.T. Corporation, (1987) 55 FLR 1 (Summary) (MP).
(iii) Any workman engaged for work on temporary basis according to the availability of work is not an "employee" within the meaning of section 2(e); K. Velukutty Achary v. Harrisons Malayalam Ltd., (1993) 66 FLR 423 (Ker) (DB).
(iv) A workman who rolls beedis for his employer but at his own house is an "employee" within the meaning of section 2(e) of the Act; P.H. Ramlal & Co. v. Smt. Chand Bibi, (1981) 1 LIC 790 (Guj).
(v) Home worker is very much a person working in the establishment within the meaning of section 2(e). Since, the place where he rolled the beedis, though situated away from the Beedi factory, was nevertheless apart of the establishment within the meaning of section 2(h) of the Beedi and Cigar Workers (Conditions of Employment) Act, 1966. Hence, Home maker is an employee of the establishment; M/s. Bagi Beedi Factory v. Appellate Authority, 1998 LLR 23.
(vi) After attaining the age of superannuation no employee is entitled, as a matter of right, to be in the employment in any establishment; Sir J.P. Srivastava Group of Industries v. State of U.P., (1993) 66 FLR 248 (All).
(vii) An educational, institution as per notification issued by Government of India is covered within the purview of the Act; Nitin A. Mehta v. Mehta Prafullaben Dalpatral, 2001 LLR 414 (Guj).
1[2A. Continuous service.- For the purposes of this Act,-
(1) an employee shall be said to be in continuous service for a period if he has, for that period, been in uninterrupted service, including service which may be interrupted on account of sickness, accident, leave, absence from duty without leave (not being absence in respect of which an order 2[***] treating the absence as break in service has been passed in accordance with the standing orders, rules or regulations governing the employees of the establishment), lay-off, strike or a lock-out or cessation of work not due to any fault of the employee, whether such uninterrupted or interrupted service was rendered before or after the commencement of this Act;
(2) where an employee (not being an employee employed in a seasonal establishment) is not in continuous service within the meaning of clause (1), for any period of one year or six months, he shall be deemed to be in continuous service under the employer-
1. Ins. by Act 26 of 1984, sec. 4 (w.e.f. 11-2-1981).
2. The words "imposing a punishment or penalty or" omitted by Act 22 of 1987, sec. 3 (w.e.f. 1-10-1987).
(a) for the sail period of one year, if employee during the period of twelve calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than-
(i) one hundred and ninety days, in the case of any employee employed below the ground in a mine or in an establishment which works for less than six days in a week; and
(ii) two hundred and forty days, in any other case;
(b) for the said period of six months, if the employee during the period of six calendar months preceding the date with reference to which the calculation is to be made, has actually worked under the employer for not less than-
(i) ninety-five days, in the case of an employees employed below the ground in a mine or in an establishment which works for less than six days in a week; and
(ii) one hundred and twenty days, in any other case.
1[Explanation.- For the purpose of clause (2) the number of days on which an employee has actually worked under an employer shall include the days on which.-
(i) he has been laid-off under an agreement or as permitted by standing orders made under the Industrial Employment (Standing Orders) Act, 1946 (20 of 1946), or under the Industrial Disputes Act, 1947 (14 of 1947), or under any other law applicable to the establishment;
(ii) he has been on leave with full wages, earned in the previous year;
(iii) he has been absent due to temporary disablement caused by accident arising out of and in the course of his employment; and
(iv) in the case of a female, she has been on maternity leave; so, however, that the total period of such maternity leave dose not exceed twelve weeks.]
(3) where an employee, employed in a seasonal establishment, is not in continuous service within the meaning of clause (1), for any period of an year or six, months, he shall be deemed to be in continuous service under the employer for such period if he has actually worked for not less than seventy-five per cent. Of the number of days on which the establishment was in operation during such period.]
COMMENTS
Mere absence cannot be said to result in breach of continuity of service for the purpose of the Act; Kothari Industrial Corporation v. Appellate Authority (Deputy Commissioner of Labour), Karnool, 1998 LLR 223.
3. Controlling authority.- The Appropriate Government may, by notification, appoint any officer to be a controlling authority, who shall be responsible for the administration of this Act and different authorities may be appointed for different areas.
4. Payment of gratuity.- (1) Gratuity shall be payable to an employee on the termination of his employment of his employment after he has rendered continuous service for not than five years,-
(a) on his superannuation, or
(b) on his retirement of resignation, or
(c) on his death or disablement due to accident or disease:
1. Added by Act 22 of 1987, sec. 3 (w.e.f. 1-10-1987).
Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement:
1[Provided further that in the case of death of the employee, gratuity payable to him shall be paid to his nominee or, if no nomination has been made, to his heirs, and where any such nominees or heirs is a minor, the share of such minor, shall be deposited with the controlling authority who shall invest the same for the benefit of such minor in such bank or other financial institution, as may be prescribed, until such minor attains majority.]
Explanation.- For the purposes of this section, disablement means such disablement as incapacitates an employee for the work which he was capable of performing before the accident or disease resulting in such disablement.
(2) For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days' wages based on the rate of wages last drawn by the employee concerned:
Provided that in the case of a piece-rated employee, daily wages shall be computed on the average of the total wages received by him for a period of three months immediately preceding the termination of his employment, and, for this purpose, the wages paid for any overtime work shall not be taken into account:
Provided further that in the case of 2[an employee who is employed in a seasonal establishment and who is not so employed throughout the year], the employer shall pay the gratuity at the rate of seven days' wages for each season.
3[Explanation.-In the case of a monthly rated employee, the fifteen days' wages shall be calculated by dividing the monthly rate of wages last drawn by him by twenty-six and multiplying the quotient by fifteen.]
(3) The amount of gratuity payable to an employee shall not exceed 4[three lakhs and fifty thousand] rupees.
(4) For the purpose of computing the gratuity payable to an employee who is employed, after his disablement, on reduced wages, his wages for the period preceding his disablement shall be taken to be the wages received by him during that period, and his wages for the period subsequent to his disablement shall be taken to be the wages as so reduced.
(5) Nothing in this section shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer.
(6) Notwithstanding anything contained in sub-section (1).-
(a) the gratuity of an employee, whose services have been terminated for any act, willful omission or negligence causing any damage or loss to, or destruction of, property belonging to the employer' shall be forfeited to the extent of damage or loss so caused;
1. Subs. by Act 22 of 1987, sec. 4, for the second proviso (w.e.f. 1-2-1991).
2. Subs. by Act, 25 of 1984, sec. 3, for "an employee employed in a seasonal establishment" (w.e.f. 1-7-1984).
3. Ins. by Act, 22 of 1987, sec. 4 (w.e.f. 1-2-1991).
4. Subs. by Act 11 of 1998 sec. 2, for "one lakh" (w. e.f. 24-9-1997).
(b) the gratuity payable to an employee 1[may be wholly or partially forfeited]-
(i) if the services of such employee have been terminated for his riotous or disorderly conduct or any other act of violence on his part, or
(ii) if the services of such employee have been terminated for any act which constitutes an offence involving moral turpitude, provided that such offence is committed by him in the course of his employment.
2[***]
COMMENTS
(i) If for the purposes of computation of quantum of the amount of gratuity the terms of agreement or settlement are better than the Act, the employee is entitled for that benefit but the maximum statutory ceiling limit as provided under sub-section (3) of section 4 of the Act cannot be reduced by mutual settlement or agreement; Bharat Commerce & Industries v. Ramprasad; 2001 LLR 918 (MP).
(ii) The Fifth Pay Commission recommendations are applicable to Central Government employees only and not applicable to employees of respondent Bank. Hence the claim of these employees for total amount of Rs. 3.50 lakh dismissed; Shitla Sharan Srivastava v. Government of India, 2001 LLR 898 (SC).
(iii) The appellant even after superannuation continued to occupy the quarter and the Government in accordance with the rules charged the penal rent from him and after adjusting other dues, the gratuity amount offered to be paid. The court held that there is no illegality in this amount of gratuity; Wazir Chand v. Union of India, 2001 LLR 172 (SC).
(iv) Refusal of employees to surrender land belonging to the employer is not a ground to withhold gratuity; Travancore Plywood Industries Ltd. v. Regional Joint Labour Commissioner, (1996) II LLJ 85 (Ker).
(v) The right of the employer to forfeit the amount of earned gratuity of an employee whose services were terminated for any act, willful omission or negligence causing any damage to the employer is limited to the extent of the damage, and the proof of such damage; Pennali Wallance Ltd. v. State of M.P. (1996) II LLJ 515 (MP).
(vi) By change of ownership, the relationship of employer and employees subsists and the new employer cannot escape from the liability of payment of gratuity to the employees; Pattathurila K. Damodaran v. M.Kass