Gratuity Payment after 3 years of leaving the company? Staff forgot to approach the company

One of my cousins is facing a problem. He left a company in 2015 after completing a tenure of 5 years and 3 months. However, he was never paid gratuity by his company. He has written to the HR this month, but sadly, they have refused to pay, stating that he brought this matter to light three years after leaving the company.

My questions are:

1) Is there a rule that states gratuity will not be paid if an employee forgets to approach the company immediately after leaving or contacts the company after 2-3 years?

2) Is there a legal recourse available to ensure he receives his gratuity payment?

Thanking you in advance.

Dear Anish,

It is the employer's duty to pay the gratuity upon separation. You need to inform them that you will approach the labor office to resolve this matter. If they still do not support you, you can simply approach the labor office and file a complaint with them.

Thank you.

Gratuity Payment Under the Payment of Gratuity Act, 1972

Gratuity under the Payment of Gratuity Act, 1972, being a one-time lump sum terminal benefit, should be paid by the employer within 30 days from the date of termination of employment. Though there are certain procedural modalities prescribed under the Act as well as the Rules applicable to the establishment, any claim for gratuity by the employee cannot be rejected on the ground of delay by the employer or the Controlling Authority empowered to dispose of such a claim. Let me try to briefly explain the entire procedure.

Section 7 of the Payment of Gratuity Act, 1972

Section 7, which deals with the determination of the amount of gratuity, enjoins upon the employee and the employer certain rights and duties respectively. They are as follows:

1) Formal Claim by the Employee to the Employer

The employee/nominee in the case of a deceased employee should apply for gratuity in the form mentioned in the Central/State Rules to the employer within 30 days from the date gratuity becomes payable.

2) Notice of the Amount of Gratuity Determined by the Employer

Whether such an application for gratuity is made by the employee or his nominee or not, the employer has to determine the amount of gratuity as soon as it becomes payable and send a notice to the employee or his nominee as the case may be and the Controlling Authority under the Act.

3) Time Limit for Payment of Gratuity

It is the responsibility of the employer to pay the gratuity as determined by him within 30 days from the date it becomes payable. Even after this, if the employee fails to receive the gratuity without any reason or due to the reason of any dispute, the employer should forthwith deposit the amount with the Controlling Authority. Similarly, no claim of gratuity should be rejected by the employer on account of any delay in the submission of the application by the employee mentioned in point (1). Otherwise, he would be liable to pay interest later at 8% simple interest from the date gratuity became payable.

4) Application to the Authority

Within 90 days from the date of receipt of the application by the employer referred to in (1) or if the employer fails to pay gratuity or disputes the amount of gratuity, the employee has to make a claim before the Controlling Authority. In case of any delay, it shall be explained to the satisfaction of the Authority by means of a delay condonation petition attached to the claim.

For complete details, you may refer to the relevant Rules.

The Payment of Gratuity Act in India

The Payment of Gratuity Act is a beneficial labor law in India. The Gratuity Act in India came into effect to provide social benefits to employees after completing 5 years of service. Therefore, the law restricts the impounding of gratuity. Gratuity, under the Gratuity law in India, cannot be attached. Now, the question of whether gratuity can be paid at the employer's discretion is addressed below:

Section 7(3) casts a duty on employers to determine the amount of gratuity and give a notice in writing to the person to whom gratuity is payable and also to the Controlling Authority specifying the amount of gratuity so determined. Section 7(3) provides for the payment of gratuity within 30 days from the date on which it becomes payable to the concerned person. Section 7(3A) provides for interest if gratuity is not paid as provided in subsection 3 of Section 7.

The Hon’ble Supreme Court in the matter of State of Kerala vs. Padmanabhan Iyer, 1985, has held that delayed payment of gratuity must be visited with the penalty of interest at the current market rate until actual payment.

The provision in Section 7(1) cannot be construed as a leverage to deny gratuity to the employee on the specious plea that the person has not applied for gratuity as provided under Section 7(1) in Form I.

Relevant Legal Provisions

Section 7(1) of the Gratuity Act states that an employee who is eligible for payment of gratuity under the Act shall apply in writing to the employer for payment of such gratuity amount. Rule 7(1) of the Payment of Gratuity Rules, 1972, states that the above application shall be made ordinarily within 30 days from the date the gratuity became payable, in Form ‘I’ to the employer.

Further, Section 7(2) of the Act of 1972 states that the employer, whether or not the above application has been made, must determine the amount of gratuity payable and give a notice in writing to the concerned employee and Controlling Authority informing them about such amount.

Rule 8 of the Payment of Gratuity Rules, 1972, states that within 15 days of receipt of application under Rule 7, the employer must give a notice under ‘Form L’ if the claim is found admissible. If the claim for gratuity is not found admissible, the employer shall issue a notice under ‘Form M’ to the employee specifying the reasons why the claim for gratuity is considered not admissible.

Section 7(3) of the Act of 1972 states that the employer shall pay the amount of gratuity so determined, within 30 days from the date it becomes payable to the concerned employee.

Rule 10 of the Payment of Gratuity Rules, 1972, provides that a claimant employee may apply to the controlling authority in writing in ‘Form N’, if the employer either refuses to accept a nomination to entertain an application under Rule 7(1), or having received an application under Rule 7 fails to issue any notice as required under Rule 8. The Controlling Authority may accept any application after the expiry of the specified period for submission of such application if sufficient cause is shown by the applicant.

It may also be noted that the Limitation Act does not apply to the payment of gratuity.

Regards,
P.S. Lakshmanan
S. G. Management Services
(PAN INDIA Consultant – Labour Law Compliance, PF, ESI, P Tax, Benefit Management & POSH COMPLIANCE) - KOLKATA

Dear Friend, Your colleague has to make an application for the claim of gratuity and send it to his employer via registered post. You have to wait an additional 30 days after your application. If your case is valid, no one can prevent you from receiving it from your employer. Then, you need to file a claim petition before the labor department where your employer is registered if your employer makes no payment.

The Gratuity Act in India

The Gratuity Act in India came into effect to provide social benefits to employees after completing 5 years of service. Therefore, the law restricts the impounding of gratuity. Gratuity, under the Gratuity law in India, cannot be attached.

Employer's Obligation Under Section 7

Now, the question of whether gratuity can be paid at the employer's discretion is addressed below: Section 7(3) casts a duty on employers to determine the amount of gratuity and give a notice in writing to the person to whom gratuity is payable and also to the Controlling Authority specifying the amount of gratuity so determined. Section 7(3) provides for the payment of gratuity within 30 days from the date on which it becomes payable to the concerned person. Section 7(3A) provides for interest if gratuity is not paid as provided in subsection 3 of Section 7.

The Hon’ble Supreme Court in the matter of State of Kerala V/s Padmanabhan Iyer, 1985, has held that delayed payment of gratuity must be penalized with interest at the current market rate until actual payment. The provision in Section 7(1) cannot be construed as a leverage to deny gratuity to the employee on the specious plea that the person has not applied for gratuity as provided under Section 7(1) in Form I.

Relevant Legal Provisions

The relevant legal provisions are stated herein below: Section 7(1) of the Gratuity Act states that an employee who is eligible for payment of gratuity under the Act shall apply in writing to the employer for payment of such gratuity amount. Rule 7(1) of the Payment of Gratuity Rules, 1972, states that the above application shall be made ordinarily within 30 days from the date the gratuity became payable, in Form ‘I’ to the employer.

Further, Section 7(2) of the Act of 1972 states that the employer, whether or not the above application has been made, must determine the amount of gratuity payable and give a notice in writing to the concerned employee and Controlling Authority informing them about such amount. Rule 8 of the Payment of Gratuity Rules, 1972, states that within 15 days of receipt of application under Rule 7, the employer must give a notice under ‘Form L’ if the claim is found admissible. If the claim for gratuity is not found admissible, the employer shall issue a notice under ‘Form M’ to the employee specifying the reasons why the claim for gratuity is considered not admissible.

Section 7(3) of the Act of 1972 states that the employer shall pay the amount of gratuity so determined within 30 days from the date it becomes payable to the concerned employee. Rule 10 of the Payment of Gratuity Rules, 1972, provides that a claimant employee may apply to the controlling authority in writing in ‘Form N’, if the employer either refuses to accept a nomination to entertain an application under Rule 7(1), or having received an application under Rule 7 fails to issue any notice as required under Rule 8. The Controlling Authority may accept any application after the expiry of the specified period for submission of such application, if sufficient cause is shown by the applicant.

The right being statutory, cannot be equated to a debt, and the principles of the Limitation Act are not applicable. [The Kerala High Court; Neelakandan Nambodri vs State of Kerala]