Hi, I work for a software company. Recently our company had divested few products and i am a part of it.
I completed service of 4 years 11 months and 7 days. As per the judgment given by Madras Hight court in 1998, Payment of Gratuity Act 1972. The person who has entitled his service of 10months and 18 days in the fifth year is eligible for Gratuity.(document attached)
Can someone confirm this, please? Is this applicable in Hyderabad (Andhra Pradesh).

From India, Hyderabad

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File Type: pdf Madras High Court _ Gratuity Judgement.pdf (1.55 MB, 565 views)

PROFESSIONALS AND BUSINESSES PARTICIPATING IN DISCUSSION
Anita P Panicker
Sr Hr Executive
Pkjain62
Legal Adviser
+3 Others

An employee completing 4 years and 11 months will be eligible and entitled to receive gratuity. Read with section(s) 4(1),4(2) and 2A of the Payment of Gratuity Act
Any employee rendering continuous service for a period of 240 days in a year, i.e the fifth year will be deemed to have continued in service for one year as stipulated by section 2A of the Act. Accordingly, an employee who has put in his service for 10 months for the fifth year subsequent to the fourth year should be deemed to have completed 5 years and is entitled to get gratuity.{Mettur Beardsell Ltd, Madras V Regional labour Commissioner(central), Madras LLR1072(Mad HC)
An employee who had completed 4 years 10 months and 18 days would constitute 5 years held the Apex court in the matter of Surendra Kumar Verma v Central Govt. Industrial Tribunal (1980 (4) SCC 433)
Rgds

From India, Coimbatore
Thanks for the Reply.
When i had a talk with our company HR, they mentioned that as per our company it should be 5yrs. And as part of divestment i had to resign from the company. The day i got relieving letter was 4yr 11months and 7days.
Is this also applicable for the employee who resigned?? and is there any possibility that Company can have separate rules?
Thanks
Sravan

From India, Hyderabad
Dear Sravan,
The case of Surendra Kumar Verma was for the purposes of Section 25 F of the Industrial Disputes Act, 1947. It does not relevant for gratuity matters.
Since the Madras high court does not have jurisdiction over Andhra Pradesh the decision doesn’t have a binding effect.
There is no clear cut verdict of Apex Court in the matter to the best of my information. However, as per section 4 of the G. Act it is payable to the employee who has rendered continuous service for not less than five years.
In view of the above it is still a matter of debate which required a clear cut verdict of the apex court.
However, you have a right to file a case before the prescribed Authority on the basis of the Madras HC. If you so wish.
PKJain

From India, Delhi
Hi,

As all even I was under the impression that a person is eligible for gratuity after completion of 5 yrs, but this is not true, do read this

Section: 2

Definitions.(b) “completed year of service” means continuous service for one year;

[2] [(c) "continuous service" means continuous service as defined in section 2A;]

Section 2A itself is defined as below



Section: 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….

(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 -

(a) for the said period of one year, if the 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 an 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;





Building on the above definition, the Gratuity Act defines the payment of Gratuity in Section 4

Section: 4

Payment of gratuity.



1) Gratuity shall be payable to an employee on the termination of his employment after he

has rendered continuous service for not less than five years, -(a) on his superannuation, or (b) on his retirement or resignation,



Most people referring the Act only refer to Section 4 and infer that a minimum of 5 years of service is required for Gratuity – but if seen in light of the previous DEFINITIONS of continuous service it is clear the Act implies that 4 years and 240 days/190 days (depending on the number of days the organization works in a week) is enough to satisfy the requirement of continuous service for not less than five years, as stated in above Section 4 – Payment of Gratuity

Many companies have started subscribing to the above logic and have started to provide gratuity to employees leaving after 4 years 8 months instead of requiring exact 4 years 12 months of service.

Regards

Anita

From India, Mumbai
Below is an opinion of a leading lawyer in the subject matter, which I am posting for the benefit of the all----

“In my opinion as to certain employees having made a claim for gratuity, who have worked for four years and in the fifth year, have worked for 240 days but have not completed five years of service.

kind attention is invited to Section 4(1) of the Payment of Gratuity Act, which is reproduced as under:

“Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years:-

(a) on his superannuation, or

(b) on his retirement or resignation,

(c) on his death or disablement due to accident or disease.”

The Querist’s kind attention is also invited to a decision of the Madras High Court in the case of Mettur Beardsell Ltd., Madras v/s Regional Labour Commissioner (Central), Madras, reported in 1998 III LLN 414. In the facts of the said case, the concerned employee had put in 4 years, 10 months and 18 days of service. The Competent Authority held that there was a continuous service under the provisions of Section 2-A of the Payment of Gratuity Act and he must be deemed to have completed continuous service of 5 years. The Company challenged the said order by filing a Writ Petition before the Madras High Court under Article 226 of the Constitution of India. The Hon’ble High Court has observed as under:

“Sec.2-A defines continuous service. According to this section, if an employee renders continuous service for a period of 240 days in a year he will be deemed to have continued in service for one year. This deeming provision contained in Sec.2-A must be applied in interpreting the period of five years mentioned in Sec.4(1). Section 2(b) also supports this interpretation because as per the said section completed year of service means continuous service for one year. Therefore, these provisions are emphatic in stating that if an employee serves continuously for a period of 240 days in a year, he must be deemed to have continuously served for one year. In this case admittedly the third respondent has served for 4 years, 10 months and 18 days. 10 months and 18 days service is definitely more than 240 days. Therefore when the third respondent was relieved from service he has thus completed five years of service ………………… Therefore, I am not convinced with the contentions raised by learned counsel for the Petitioner. Hence the writ petition fails……..”

The attention of the Querist is invited to the following provisions of the said Act:

“2(b) “completed year of service” means continuous service for one year.”

“2(c) “continuous service” means continuous service as defined in Section 2-A.”

“2-A. Continuous Service:- (1) For the purpose 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 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-

(a) for the said period of one year, if the 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) hundred and ninety days, in the case of an 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 employees 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 less than:

(i) ninety-five days, in the case of an employee 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.”

On going the above provisions under the said Act, I am of the view that the Querist can differ with the view taken by the Hon’ble Madras High Court. The language of Section 4(1), and particularly the words emphasized by me above, strongly suggest that Parliament consciously and deliberately prescribed a minimum employment period which an employee must complete before becoming eligible for gratuity. The words “after he has rendered continuous service for not less than five years”, to my mind, lay down an absolute minimum which is not susceptible to any reduction, except in cases of death or disablement, which are specifically excluded from the minimum requirement under the proviso. When the legislative draftsman uses words in the negative such as “not less than”, or “until” or “unless”, they are normally treated as being imperative in character, and depending on the context in which they are used, the Supreme Court has generally treated them as mandatory.

Sub-Section (1) applies to all situations where the period of employment is in question, whether it be a period of five years, or one year, or six months. Hence, sub-section (1) uses the words highlighted by me above, namely “for a period”, and “for that period”. This sub-section is only concerned with specifying what types of interruption in work will not be treated as interruptions in service for the purpose of gratuity. If the period to be considered is five years, then one would merely read in the words “five years” in place of “a period” and “that period” in sub-section (1). That sub-section then makes it clear that an employee will be said to be in continuous service for five years, if he has, for five years, been in uninterrupted service, including service which may have been interrupted in any of the circumstances set out in the sub-section. On the other hand, if the period to be examined were one year, or six months, one would need to read in the words “one year” or “six months” in place of “a period” and “that period.”

However, while sub-section (1) of Section 2A deals with all the different periods which may arise for consideration under the Act, sub-section (2) deals only with periods of “one year” and “six months”, while sub-section (3) deals with period of employment in seasonal establishment. The effect of the three sub-sections when read as a composite whole, is that sub-section (1) is a general provision which excludes certain types of interruptions / breaks in work while considering continuous service for any period, whether it be 5 years, 1 year, 6 months, or seasonal work; sub-section (2) pertains only to periods of 1 year or 6 six months; and sub-section (3) is concerned only with seasonal establishments. To try and telescope the provisions pertaining to 1 year service or 6 months service into calculation of the 5-year minimum qualifying service, is thus based on an essential fallacy which treats all the sub-sections of Section 2A as one, and overlooking the clear distinction between the areas covered by each sub-section.

The Querist is advised to note that apart from the Hon’ble Madras High Court, no other High Court had the occasion to consider the question raised by the Querist and there is, therefore, only the said judgment which directly addresses the issue of whether an employee has to actually serve for five years before becoming eligible for gratuity or whether service shorter than five years could also be taken as fulfilled qualifying period, if the employee has worked for 240 days in the last year of employment. In the most recent decision of the Hon’ble Supreme Court in the case of In Grand Kakatiya Sheraton Hotel and Towers Employees and Workers Union v/s Srinivasa Resorts Ltd., reported in 2009 5 SCC 342, the Supreme Court upheld the judgment of the Andheri Pradesh High Court, by which that court had struck down as unconstitutional the provisions of the Andhra Pradesh Shops and Establishments Act by which gratuity was made payable even to employees who had not completed 5 years service as per the Payment of Gratuity Act, 1972. In para 47 of its judgment, the Supreme Court held as follows:

“47. It is already held by this Court time and again that the concept of gratuity as conceived in the Payment of Gratuity Act and even earlier to that in labour jurisprudence is that gratuity is a reward for long and continuous service. It is for the first time by that Act, a worker or an employee was made entitled to the gratuity by his rendering continuous service for five years. If this is so, then providing only one year for entitlement to get the gratuity, is certainly unreasonable.

Though the precise question raised by the Querist was neither considered in the above-mentioned judgment nor in any other pronouncement of the Supreme Court, the approach adopted supports the view that the minimum qualifying period of 5 years as prescribed in the Act should receive a strict construction.”

It may, however, be noted that the Querist would not be legally bound to follow the decision of the Madras High Court in respect of the locations / establishments of the Querist situated outside the State of Tamil Nadu. However, in the State of Tamil Nadu, the Querist’s establishment will be bound by the decision of the Hon’ble Madras High Court. However, if the Querist decides not to follow the binding precedent laid down by the Hon’ble Madras High Court in the State of Tamil Nadu, the Querist will have to contest the subject-matter independently before the Madras High Court till the said matter is conclusively decided by the higher courts.

I am, therefore, of the view that an employee who has completed four years of service and worked for 240 days in the fifth year, does not complete five years of continuous service and will not be entitled to gratuity under the provisions of the said Act.

From India, Delhi
Hi PKJain,
Actually usually most of the organization usually release the Gratuity after the employee completes 4 yrs and 240 days, you can say they wave off the remaining days. Because it is considered to be 5 yrs. What you have said is also true, because the rules says 5 years, I have no argument about it.
Regards
Anita

From India, Mumbai
Hi Anita
I would appreciate your point of view.
Both views are possible and there is no final verdict in the matter so far.
The problem of Sarvan is that his employer is not allowing gratuity taking the shelter of the Act and rules of their company which cannot be held to be illegal as detailed in my previous mail. Therefore, I advised him to file a case before the Authority, if he so wish, on the basis of decision of HC Madras.
Regards
PKJain

From India, Delhi
Hi,
Please have a look at this link, as there are some "Judgment from Supreme Court" regarding the same
Gratuity
Regards
Anita

From India, Mumbai

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