Case Laws

• Compensation of Rs. 50,000 will be payable for withholding gratuity for three years.

Mohd. Zaheeruddin Siddiqui v. Executive Council, A.M.U. And Anr., 2000 LLR 458

• Budget Speech of Finance Minister will not justify the claim for higher gratuity.
Shitla Sharan Srivastava & Ors. v. Gvot. of India & Ors., 2001 LLR 898

• An employee has an option to claim gratuity where it is more beneficial.
E.I.D. Parry (I) Ltd. v. G. Omkar Murthy & Ors., 2001 LLLR 497

• Incentive payment of bonus will not be ‘wages’ for calculation of gratuity.
T.I. Cycles of India, Ambattur v. M.K. Gurumani and Ors., 2002 LLR 57

• Interest on delayed payment of gratuity will be payable by employer when the delay is not because of fault on the part of the employee.
H. Gangahanume Gowda v. Karnataka Agro Industries Corporation Ltd., 2003 LLR 354: 2003-I LLN 805

• A teacher, though engaged in very nobel profession of educating the young generation but neither performing any skilled, semi-skilled or unskilled, manual or supervisorh, technical work, will not be an ‘employee’ under section 2(e) of the Payment of Gratuity Act, thus not entitled to gratuity under the Act.
Ahmedabad Pvt. Primary Teachers v. Administrative Officer & Ors., 2004 LLR 97

• Even though the Government by its notification dated 3nd April, 1997, has extended the Payment of Gratuity Act upon the educational institutions also but the teachers being not ‘employees’ under the Act will not be eligible for gratuity.
Ahmedabad Pvt. Primary Teachers v. Administrative Officer & Ors., 2004 LLR 97

• Workman not entitled to take the benefit of both employment contract and amended Law under Payment of Gratuity Act.
Beed District Central Co-op. Bank Ltd. vs. State of Maharashtra & Ors. 2006 III CLR 667

• Services rendered by employee in different units of same establishment has to be considered for gratuity calculation.
M.C. Chamaraju vs. Hind Nippon Rural Industrial (P) Ltd. 2007 LLR 1129


 

Expects clarifications with Case Laws reference

(i) MEANING OF ACTUALLY WORKED

What is meant by 'actually worked' or 'actually employed' in context with the provisions of the Payment of Gratuity Act?

In Explanation I to section 4 of the Payment of Gratuity Act, the legislature has used the words 'actually employed’. If it was contemplated by Explanation I that it was sufficient that there should be a subsisting contract of employment, then it was not necessary for the legislature to have used the words 'actually employed'. It is not permissible to attribute redundancy to the legislature to defeat the purpose of enacting the explanation. The expression 'actually employed', in Explanation I to section 2 (c) must in the context in which it occurs, mean 'actually worked'.

The Supreme Court while upholding the decision of the High Court has held that permanent employees were not entitled to payment of gratuity for the years they remained absent without leave and have actually worked for less than 240 days. The Punjab and Haryana High Court has also held in one case that the expres¬sion 'actually worked' cannot mean those days only when the employee has worked with hammer, sickle or pen but must comprehend all those days during which he was in the employment and for which has been paid wages either under express or implied contract of service by compulsion of statutes or standing orders.

References:

Lalappa Lingappa vs. Laxmi Vishnu Textile Mills, Shalapur, AIR 1981 SC 852; 1981 Lab. IC 307; 1981 LLJ 301 SC; (1981) 58 rJR 152; 42 Fac. LR 258; (1981) LLN 347; (1981) 2 SCC 238; 1981 SUIT. LJ 420.

Tarlok Singh vs. Labour Court,jullunder and others, 1989 LLR 254 (P&H HC).

(ii) CLAIM FOR ADDITIONAL GRATUITY.

Whether an employee will be stopped from making a claim for additional sum of gratuity?

Where an employee has asked for payment of gratuity under a particular scheme, the employer will stand absolved of his statutory obligation to pay the employee the prescribed amount of gratuity for he is en titled to. Section 14 of the Act lays down the provisions of the Act or any rules made there under will have over¬riding effect over any other enactments other than the Act.

Reference:

jeevanlal (1929) Ltd. vs. Controlling Authority under the Payment of Gratuity Act, 1982-1 LLJ 86 (DB) (Mad).

(iii) GRATUITY ON ALLOWANCES

Whether the calculation of gratuity will be made on the basis of allowances?

Bonus, commission, house rent allowance, overtime wages and other allowances though paid in cash have been deliberately excluded by the legislature to form part of emolument. In a case where gratuity was claimed for free supply of food to his employees by the employer, the employee claimed that an equiva¬lent money for free supply of food should form part and be added to cash salary paid to him to form total wages for computing the amount of gratuity payable to him. His claim was rejected on the plea that merely an amenity could not form part of and be added to the cash salary paid to him to form his total wages for computing the amount of gratuity payable to him.1 The Madras High Court has held that the value of food provided to the employee court be taken into account while calculating the amount of gratuity payable to him under the Act.2

References :

Ambika Saw Mill vs. Assistant Labour Commissioner & Ors., 1987-1 LLN 364; (Ors HC).

N. Sivadasan vs. Appellate Authority under Payment of Gratuity Act, Madras & others 1993 (1) CLR 39 (Madras High Court).

(iv) AITACHMENT OF GRATUITY Can gratuity of an employee be attached?

No. It cannot be attached. Even if where the gratuity is payable under a scheme, it squarely comes within the purview of the Payment of Gratuity Act, 1972, and, therefore, the immunity of section 13 of the Act will be available.1 Section 60(1) (g) of the Civil Procedure Code also provides that gratuity payable to an employee cannot be attached and the Civil Court cannot grant injunction restraining the employer from payment of gratuity to an employee.

References :

Calcutta Dock Labour Board and another vs. Smt. Sandhya Mitra and others, 1.985 Lab. IC 714; AIR 1985 SC 996; 1985-1 UN 767; 1985(50) FLR332.

Chrisostom vs. Federal Bank Ltd. 1993-1 LLJ 422 (Kerala High Court).

(v) ATTACHED GRATUTIY-PAYABLE TO LEGAL HEIRS

Is gratuity to the legal heirs of a deceased employee attachable in a decree under Civil Procedure Code?

If the gratuity is payable to the employee then it is not liable to attachment. But if the employee is dead, obviously the gratuity cannot be deemed to be payable to the employee. If the said gratuity becomes payable to the heirs of the employees obviously the same becomes attachable in the hands of the employer as the employer is not legally bound to pay the said gratuity to the legal heirs of the employee.

Reference :

Ramwati vs. Krishna Gopal & Ors., 1988-1 CLR 253 (Delhi HC).

(vi) AVERAGE MONTHLY WAGES-CALCULATION OF

How the expression, 'average of the monthly wage' should be determined for payment of gratuity?

The expression, 'average of the monthly basic wage'. can only mean the wage earned by an employee during a month divided by the number of days for which he has worked and multiplied by 26 days in order to arrive at the monthly wages for computation of gratuity payable under a scheme of gratuity framed by the employer.

Reference :

Delhi Cloth and General Mills Ltd. vs. Workmen, (1969) 2 SCR 307; AIR 1970 SC 919; 1970 Lab. IC 787.

(vii) GRATUITY AND BREAK IN SERVICE

When does Break in service constitute under the Payment of Gratuity Act?

Section 2 (c) of the Payment of Gratuity Act as amended in 1984 defines the expression 'continuous service' as defined in section 2-A of the Act. Under that section, an employee is 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 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-offs, strike or 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 the Payment of Gratuity Act.

(viii) COMPUTATION OF 5 YEARS FOR GRATUITY

How ‘Five year service' is to be computed under the Payment of Gratuity Act? Whether the period prior to the enforcement of the Act will be taken into consideration for computing Five years of service ?

The Payment of Gratuity Act applies to all those employees who are in service as on 16th September, 1972, or subse¬quent thereto. The computation of five years' service from 16th September, 1972, cannot be spelt out from any provision and the Act applies on and from 16th September, 1972 to the employees who have the credit of five years' service. The position is made amply clear by the definition of 'continuous service' contained in section 2(c) of the Act. (Cases of Bombay HC in Grindweli Norton Ltd., 1980 (40) FLR 53 and of Andhra Pradesh HC in Central Bank of India vs. T.K Ramamoorthy 1978 (52) FJR 490 were relied upon.).

Reference :

Duncans Agro Industries Ltd. vs. B. Subbanna and others, 1981 (64) FJR 134 decided by A.P. (HC); 1985 Lab. IC (NOG) 94.

(ix) MEANING OF CONTINUOUS SERVICE What is meant by 'continuous service' under the Act?

The term 'continuous service' has been controversial ever since the Payment of Gratuity Act came into force in 1972. In one case, the Supreme Court has also interpreted the term which has led to the amendment of the definition by the Amended Act 25 of 1984 whereby a separate section 2-A defining continuous service was added. Again by an Amending Act 22 of 1987, the amendment was made in the definition. In order to determine as to what continu¬ous service means it is imperative to reproduce section 2-A defining continuous service which reads:

(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), layoff, 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 the Act;

(2) Where an employee (not being an employee employed in a seasonal establishment) is not in continuous service within the meaning of clause (i) 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 employer during the period of twelve calendar months preceding the date with reference to which calcula¬tion 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 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 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.

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 ofl947) or under any other law applic¬able 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 does not exceed twelve weeks).

Where 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 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.

(x) GRATUITY OF A DECEASED EMPLOYEE

How gratuity is to be paid to the legal heirs of a deceased, if there is no nomination by the deceased to this effect?

In case of death of an employee, the gratuity payable to him shall be paid to his nominee or, if no nomination has been made, to his heirs, and where any such nominee or heir is a minor, the share of such minor, shall be deposited with the controlling authority who shall invest the same for the beI1eflt of such minor in such bank or other financial institution, as may be prescribed, until such minor attains majority. This provision has been incorporated by Amended Act 221987 effective from 1st October, 1987.

(xi) DEPOSIT OF GRATUI'IY-CONDMON PRECEDENT FOR FILING APPEAL

Is it obligatory on the part of an employer to deposit gratuity when he chooses to file an appeal before the appellate authority against the order of the controlling authority whereby gratuity has been awarded?

Section 7 of the Payment of Gratuity Act, 1972 provides that an employer, while filing the appeal before the appellate authority against the order of the controlling authority must deposit the gratuity, as awarded by the controlling authority. In one case, instead of depositing the gratuity, the employer furnished bank guarantee. It has been held by the Madras High Court that deposit of the disputed amount is statutory requirement for filing an appeal and as such the employer must deposit the amount with the appell¬ate authority.1 The Allahabad High Court has also confirmed that while filing an appeal, the appellant must deposit the amount of gratuity as ordered by the controlling Authority.

References :

1. Onward Trading Company, Madras vs. Deputy Commissioner of Labour, Madras and another, 1990 LLR 28 (Madras HC).

Sahaari Gamme Vikas Samiti Ltd Baitapur vs. The Controlling Authority under the Payment of Gratuity Act cum Lahore Commissioner, Gorakhpur 1993 LLR 448, (Allahabad High Court).

(xii) DISPLAY OF NOTICE

Is it necessary that an employer should display any notice under the Payment of Gratuity Act and the Rules?

Yes. There is statutory obligation under rule 4(1) to display a notice conspicuously at or near the main entrance of the establishment in bold letters in English and in language understood by the majority of the employees specifying the name of the officer with designation authorized to receive notices under the Act or the Rules. A fresh notice is required to be displayed as per rule 41 (2) of the Rules immediately after the notice referred to in sub-rule (1) becomes illegible or requires a change. The displaying of abstract of the Act and the Rules at a conspicuous place at or near the main entrance of the establishment by the employer has also been made obligatory under Rule 20 of the Payment of Gratuity (Central) Rules, 1972. The Rule provides that the employer shall display an abstract of the Act and the Rules made there under as given in Form 'U' in English and in the language understood by the majority of the employees at a conspicuous place at or near the main entrance of the establishment.

(xiii) DUTY OF AN EMPLOYER TO PAY GRATUITY

What are the duties of an employer in making payment of gratuity?

Section 4 of the Act casts an obligation on employer of an establishment to which the Payment of Gratuity Act applies, to consider the case of each individual employee in the matter of payment of gratuity to him. This is a statutory duty or obligation cast on the employer by the Act and the factory, shop or establishment is there under bound to consider the case of an employee whether he is entitled to receive gratuity. The employer shall arrange to pay to amount of gratuity within thirty days from the date it becomes payable. 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 Govern¬ment from time to time for repayment of long term deposits. The rate of interest for delayed payment of gratuity has been fixed at 10% per annum by amendment by the Act 22 of 1987. However, 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 permis¬sion in writing from the controlling authority for the delayed payment on this ground.

(xiv) EMPLOYEE UNDER THE GRATUITY ACT Can every employee claim gratuity under the Act?

Not necessarily. An employee should be regular one.

Where a person is called whenever there is work and paid wages for the work done, he will not be an 'employee' within the meaning of Seetion2(e) of the Payment of Gratuity Act. It has also been held that a person who is not an employee engaged by way of contract of employment to work continuously from day-to-day but is offered work whenever available and paid wages, he will not be treated as an 'employee'.

Reference :

Velukutty Achhary vs. Harrisons, Malayalam Ltd., 1992 II CLR 989 (Ker HC).

(xv) EMPLOYEE WORKING IN FIELD AND AT HOME

Whether a worker doing work of canvassing of general insurance business by going from place to place to meet prospective clients will be an employee under the Payment of Gratuity Act?

The field worker visiting customers at their houses and canvassing and doing the business by selling the insurance policies and collecting the premium amount from the customers and depos¬iting ultil1l.ately in the office will be performing mannual work and the clerical work will fall within the definition of 'employee' under the Payment of Gratuity Act and will be entitled to gratuity. The Karnataka High Court has held that the workers under Beedi Cigar, Workers (Conditions of Employment) though not working at the establishment but at their homes will also be entitled to gratuity.2

Reference :

1.United India Assurance Co. Ltd. VS. H.K. Khatua, 1984 Lab IC 33.

Bagi Beedi Factory vs. The Appellate Authority & Ors.1998 LLR23 (Kar HC).

(xvi) ENTITLEMENT OF GRATUITY

Will an employee whose wages have exceeded Rs. 2500 be eligible for gratuity for the past period or he will be an excluded employee?

An employee whose services are terminated for any of the reasons mentioned in section 4 (1) of the Payment of Gratuity Act, after coming into force of the Act, is entitled to. payment of gratuity, if he has rendered continuous service for not less than 5 years, for that period during which he satisfied the definition of 'employee' in section 2(e) of the Act.

The salary ceiling was raised to Rs.3500 w.ef. l.12.1992 but thereafter by Act 34 of 1994 effective from 24.5.1994, it is provided every employee irrespective of his salary will be entitled to gratuity. However, the maximum amount will be rupees two lakh and fifty thousand as promulgated by an Ordinance No. 18 of 1997 dated 24th September, 1997.

Reference :

Goodyear India Ltd. VS. KS. Devessar, 1985 (67) FJR 187 (SC) 1985¬II LLN 822.

(xvii) FIVE YEARS SERVICE FOR GRATUITY

Is it necessary that an employee must have worked for five years in order to claim gratuity under the Payment of Gratuity Act?

Yes. The minimum period for becoming eligible for payment of gratuity is continuous service of not less than five years and hence it should be complete five years. The words 'or part in excess of six months' are only meant for the purpose of computation of gratuity. Where in one case, the employee has worked for 4 years 11 months and 10 days, it has been held by the Andhra Pradesh High Court that he will not be eligible for gratuity for want of completion of five years.

Reference :

P. Raghavulu & Son VS. Addl. Labour Court Andhra Pradesh, Hyderabad and another, 1985-1 LLN 612.

(xviii) FORFEITURE OF GRATUITY

Under what circumstances gratuity of an employee can be forfeited?

The gratuity payable to an employee shall be wholly forfeited:

(i) If the services of such employees have been terminated for his riotous or disorderly conduct or any other act or 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.

In order to forfeit gratuity of an employee, there must be termination order containing the charges as established to the effect that the employee was guilty of any of the aforesaid misconducts. In one case, it has been held that in the absence of termination order containing any of the above allegations, the gratuity of an employee cannot be forfeited.

Reference :

Bombay Gas Pu blic Company Ltd. vs. Shri Papa Akbar & others, 1990 (1) CLR 102 (Bom.HC); 1990 LLR 118.

(xix) FORFEITURE OF GRATUITY AND MORAL TURPITUDE

The law is clear that the gratuity of an employee can be forfeited on account of moral turpitude nature but the Act has not defined as to what is moral turpitude? In such circumstances how the moral turpitude could be interpreted?

In order to come within the scope of the phrase 'Moral Turpitude' there must be an element of baseness and depravity in the act for which a particular individual has been punished. The act must be vile or harmful to society in general or contrary to accepted rules or rights and duties between man and man. It has also been held that mere violation of a particular statute cannot amount to commission of an act involving moral turpitude. The expression 'Moral Turpitude' means anything done contrary to justice, hone¬sty, principle, or good morals; an act of baseness, vileness or deprav¬ity in the private and social duties which a man owes to his fellow men or to his society in general contrary to the accepted and customary rule of right and duty between man and man. What constitutes moral turpitude or what will be held such, is not entirely clear. A contract to promote public wrong, short of crime, mayor may not involve it. If parties intend such wrong, as where they conspire against the public interests by agreeing to violate the law or some rule of public policy, the act doubtless involves moral turpitude. When no wrong is contemplated but is unintentionally committed, through error of judgment, it is otherwise, everything done contrary to justice, honesty, modesty or good moral is done with turpitude, so that embezzlement involves moral turpitude. The test which should ordinarily be applied for judging whether a certain offence does or does not involve moral turpitude are:

(i) whether the act was such as could shock the moral conscience of society in general,

(ii) Whether there was intention or base motive in doing the act.

References :

The management of Tractors and Farm Equipment Ltd. vs. Presiding Officer First Addl. Labour Court and T.A. Dass 1983 Lab. IC 460; (1982) 95 Mad. LW 537; 1982-Il LLN 591; 1982 II LLJ 403; (1983) 1 Mad. LJ 41.

Also see Jay Singh Rangarao Raut vs. M.S. Elec. Board Maharashtra, 1980-1 LLJ 117;

Housainbhai vs. Atath Factory Tezhelal Union, 1978 Lab. lC 1264; AIR 1978 SC 1410;

Crompton Engg. Co. vs. Additional Labour Court (Madras), 1977 Lab. IC 1006;

Calicut Madrum Spg. and Wvg. Mills vs. I. Tri. 1977 Lab. IC 1673;

Balashwar Singh vs. Distt. Magistrate of Collector, AIR 1959 P.71 (All.HC)

Sahiram vs. Rajasthan State, AIR 1957 page 27 (Raj.).

(xx) FORFEITURE OF GRATUITY FOR THEFT

Whether gratuity can be forfeited on the ground of theft committed by an employee ?

Section 4(6) (b) (i) of the Payment of Gratuity Act is very clear in this regard which says that if the services of an employee are terminated on the charges of committing theft during the period of employment then the gratuity payable to him can be fully forfeited. The amended section 4(6) (b) also provides that gratuity payable to a dismissed employee may be wholly or partially forfeited. However, a notice has to be given to the employee and his reply is to be considered by the employer.

References :

Bharath Gold Mines Ltd. Kolar vs. Regional Labour Commissioner (Central), Bangalore & Ors., ]987-1 LLN 308 (Kar.HC).

(xxi) FORUM FOR CLAIMING GRATUITY

Which will be the forum for redress if an employee is not paid gratuity payable to him by the employer?

An employee, who is eligible for gratuity and is not paid by the employer, can file his claim before the Authority appointed under the Payment of Gratuity Act. Be it made clear that if an establishment has its branches in more than one State the compet¬ent authority will be one as appointed under the Central Govern¬ment. Where the establishment has no branches in other States then the authority appointed in that particular State will be compet¬ent to entertain the application for payment of gratuity. In one case the question arose whether the authority appointed by the Central Government or the State Government will be competent to enter¬tain the application for gratuity? The facts of the case revealed that the management has been a separate independent unit and not a branch of another unit in another State. It has been held that the competent controlling authority in the instant case will be the officer appointed by the State Government and not the Officer appointed by the Central Government.

Reference :

K.Gangadhar and others vs. Appellate Authority under Payment of Gratuity Act and others, 1993 1 CLR 480 (AP HC).

(xxii) JURISDICTION OF AUTHORITY UNDER PAYMENT OF GRATUITY ACT

Can the authority appointed under Payment of Gratuity Act have jurisdiction when the employer has agreed to pay a higher quantum of gratuity than that laid down in the Act?

The Payment of Gratuity Act, 1972, is a beneficial legisla¬tion intended to give benefits to the employees and the provisions of the Act should be construed liberally in a way so that the beneficial intention is not frustrated by any strict or narrow interpretation. The aim should be to interpret the Act in such a way as the maximum possible benefits reach the employees. The provisions of section 4 (5) of Gratuity Act authorized the Controlling Authority to grant higher quantum than the quantum of gratuity under the Act in view of the favorable condition of service although in the absence of such favorable condition, such higher quantum could not have been decided by the controlling authority.

Reference :

Eastern Coal Field Ltd. vs. National Labour Commissioner, Central and others, 1982-IILLN91 (Cal.HC).

(xxiii) GRATUITY AND LAWYERS' ESTABLISHMENTS Whether the Payment of Gratuity Act will be applicable to the establishments of lawyers?

No. The establishment of an advocate or solicitor is not a commercial establishment and as such the Payment of Gratuity Act will not be applicable. In a case before the Bombay High Court it has been held that the establishment of an advocate will be neither an industry under the Industrial Disputes Act nor a commercial establishment under the Bombay Shops and Establishments Act, 1948, the Payment of Gratuity Act will not be applicable.

Reference :

Dorab Pirojoha Singanporia vs. PresidentandAppellate Authority oflndustrial Tribunal, Maharashtra, 1986-II LLN 114.

(xxiv) LIMITATION FOR CLAIMING GRATUITY

Whether the pertaining to limitation for claiming gratuity are strictly applicable? Can the delay in making the claim for gratuity be condoned?

Payment of Gratuity Act prescribes time limit for claim¬ing of gratuity and filing an appeal to the appellate authority when a person is aggrieved by the order of controlling authority. It does not prohibit the authorities in condoning delay whenever there is sufficient case in not making the claim or filing of an appeal before the authorities.1 In another case, the Controlling Authority considered all the factors and held that the Gratuity Act is a social welfare legislation and an employee cannot be deprived of his gratu¬ity on account of late filing of the application for gratuity and decided the application in favour of the employee. The Appellate Authority upheld the finding of the Controlling Authority. The employer challenged the orders in the High Court and their Lordships held that the Controlling Authority as well as the Appell¬ate Authority has rightly exercised the discretion and no interfer¬ence is called for in this subject. 2 In one case, the Kerala High Court has held that for making of delay, no separate application is necessary.

References :

Mac;lar Union Sanatorium & Hospital vs. M.B. Sathe & others, 1986 11 LLJ135 (Raj.HC); Binny Ltd., Bangalore vs. A.R. Madiah, 1986-II LLN 530 (Kerala HC).

Texmaco Ltd. vs. Shri Ram Dham & others, 1992 LLR369 (Delhi High Court).

Kataraja Pillai vs. The Appellate Authority of Payment of Gratuity Act, Kollam & others. 1993 LLR 410 (Kerala High Court).

(xxv) MODE FOR PAYMENT OF GRATUITY

Is there any prescribed mode for payment of gratuity under the Payment of Gratuity Act?

The mode for payment of gratuity is prescribed in section 9 of the Payment of Gratuity Act, 1972. The said section contemplates that gratuity payable under the Act should be paid in cash, or if so desired by the payee, in demand draft or bank cheque to the eligible employee, nominee or legal heir, as the case may be. The second proviso to sub-section (1) of section 4 of the Act further lays d0wn that in case of death of the employee, gratuity payable to him should be paid to his nominee or, as the case may be, to the guardian of such nominee or, if no nomination has been made, to his heirs. The use of the word, 'eligible' before the expression, 'employee, nominee or legal heir' is also not without significance. In case of death, the gratuity amount payable under the Act has to be paid to the 'eligible nominee or the guardian of such nominee' and where no nomination has been made, to his heirs. A further obligation of the employer is to intimate the details of payment to, the controlling authority of the area while making payment of the gratuity amount. Where, however, the eligible employee, his nominee, legal heir or the guardian of the nominee, as the case may be, so desires and the amount of gratuity payable is less than one thousand rupees, payment may be made by postal money order after deducting the postal money order commission thereof from the amount payable.

(xxvi) MUNICIPAL CORPORATION'S / BOARD'S EMPLOYEES AND GRATUITY

Is Gratuity Act applicable to the employees of Municipal Corporation/Board?

Yes. The Punjab and Haryana High Court has held that the Payment of Gratuity Act is applicable to the municipalities since the term 'establishment' covers Municipalities. Similar view has been taken by Delhi High Court. The Allahabad High Court has also held that Municipal Board is an establishment and the Payment of Gratuity Act will be applicable even though they participate in benefits of Provident Fund Act, since section 14 of the Payment of Gratuity Act overrides the V.P. Municipalities Act.

Reference :

Chan nan Lal vs. Municipal Committee, Panipat, 1986 Lab. IC 638 (P&H).

(xxvii) OBLIGATION OF AN EMPLOYER TO GIVE NOTICE FOR THE APPLICATION OF THE ACT

Is an employer under an obligation to give notice to the controlling authority about the applicability of the Act?

Yes. The application of the Payment of Gratuity Act does not depend upon the vigilance of the controlling authority and the issue of notice. Rather the relevant provisions of Rule 3 of Central Rules call upon the employer to give notice of its application to the controlling authority. The Act, therefore, comes into operation by its own vigour. It applies if the conditions stated in the Act are satisfied. Its operation is not dependent on any decision being taken by the authorities under the Act. It requires the employer to give notice of its application to the controlling authority.

(xxviii) PHILOSOPHY OF GRATUITY

What is the philosophy behind Payment of Gratuity Act? Will it amount to break of service and bebar an employee from gratuity if for any year he has not actually worked for 240 days?

It is well known that gratuity is in the nature of a retiring benefit to those employees who have rendered long 'and unblemished service to the employer and have thus contributed to the prosperity of the employer or organization. It is this concept of reward for long and meritorious service that is incorporated in section 4(1) of the Act. Long and meritorious service would necessarily contemplate that an employee has in fact rendered service and it was not enough if he was merely on the muster roll of the employer under a subsisting contract of employment. It has been held that concept of continuous service contemplates render¬ing of service for 240 days "in a year. The employee though eligible for gratuity will not be entitled to gratuity for those years when he has not rendered service for 240 days.

Reference :

Bombay Union Dying and Bleaching Mills vs. Narain Tukaram More, 19SO-II LLJ 424 (DB) (Bom).

(xxix) PIECE-RATED EMPLOYEES & GRATUITY

How the gratuity is to be calculated for piece-rated workers?

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 average of the total wages of the last three months is to be determined by dividing total wages by the number of days he worked and not the number of days or even the number of working days in the said period of three months. The daily wages to be ascertained are thereafter to be multi¬plied by the number of completed years of service to find out the total amount of gratuity payable under the Act.

(xxx) PRELIMINARY ORDER-APPEAL AGAINST

Can the appellate authority under the Act entertain an appeal against a preliminary order passed by the controlling authority?

An appeal will be maintainable under section 7(7) of the Act only against the final order of the controlling authority. In one case, the controlling authority has held that the application for gratuity was maintainable and further adjudication was to continue. Since there was no final order adjudicating the rights and liabilities of the parties to the proceedings the appeals of the management before the appellate authority did not lie.

Reference :

Malabar Spinning & Weaving Mill vs. N.Narayanan Nair and others (1989) 74 FJR 1989(1); 1989 CLR50 (Ker.HC).

(xxxi) PUNISHMENT FOR NON-PAYMENT

Is there any punishment prescribed for non-payment of gratuity?

Sub-section (2) of section 9 of the Payment of Gratuity Act which contemplates punishment of imprisonment up to one year or fine up to one thousand rupees or both for any default in complying with any of the provisions of this Act or any rule or order made there under including the order for payment of gratuity, has a proviso. The proviso says that where the offence relates to non¬payment of any gratuity payable under the Act, the employer shall be punished with imprisonment which shall not be less than three months. If, however, the court trying the offence of non-payment of gratuity is of the opinion that a lesser term of imprisonment or the imposition of a fine would meet the ends of justice then it can reduce the irreducible minimum imprisonment of three months or impose in lieu thereof a fine if the ends of justice so demand in view of the peculiar facts and circumstances of a particular case. This is, however, subject to the condition that the court trying the offence records the reasons in writing for imposition of a lesser penalty then the irreducible minimum imprisonment of three months or impose in lieu thereof a time if the ends of justice so demand in view of the peculiar facts and circumstances of a particular case. This is, however, subject to the condition that the court trying the offence records the reasons in writing for imposition of a lesser penalty than the irreducible minimum justifying the imprisonment of three months, and the reasons must be germane to meet the ends of justice and not whimsical or arbitrary.

In cases not covered by sub-section (1) of section 9 of the Act, The criminal intention is not the essential element of the offence under sub-section (2) of section 9 of the Act. For an offence under section 9(2) of the Actmensrea (Criminal intent) is not an essential element.

(xxxii) GRATUITY ON RESIGNATION

Will an employee resigning from service be entitled to gratuity?

An employee satisfying the conditions with regard to length of service and salary limit will be entitled to gratuity under the Payment of Gratuity Act even if he is resigning from service. This has also been confirmed by Delhi High Court in one case.

Reference :

M/s Texmaco Ltd. vs. Shri Ram Dhan and another, 1992 LLR 69 (Delhi HC).

(xxxiii) NON-ACCEPTANCE OF RESIGNATION AND ENTITLEMENT OFGRATUITY

Whether an employee resigning during the pendency of disciplinary proceedings will be entitled to gratuity?

In one case, an employee had resigned from service during the pendency of disciplinary proceedings and applied for payment of gratuity which was contested by the employer. The matter went to the High Court, where it was held that even though the resignation of the employee has .not been accepted by the employer, yet his claim for gratuity will be maintainable.

Reference :

Meuur Spinning Mills vs. Deputy Commissioner of Labour, Coimbatore, 198 LLJ 188.

(xxxiv) GRATUITY AND RETIRAL BENEFIT SCHEMES whether the Payment of

Gratuity Act will supersede all the schemes prevailing in an establishment prior to enactment of the Act?

In a beneficial legislation, such as the Payment of Gratuity Act deprivation of an existing benefit cannot be inferred without a provision to that effect either express or implied. Where payment of pension and gratuity are available under a settlement in an organization. it has been held that on the introduction of Payment of Gratuity and the scheme under the settlement cannot be discontinued.

Reference:

Shalimar Paints Head Office Employees Union vs. Shalimar Paints, 1981 (1) ILJ 471 Cal; 1981 Lab. IC ~49; 1981 Servo LJ 20.

(xxxv) GRATUITY TO A RETRENCHED EMPLOYEE

Whether gratuity will be payable to an employee on his retrenchment?

Gratuity is payable to an employee on termination of his employ¬ment retrenchment also means termination of the services of an employee. The expression ‘retrenchment’ has also been defined by section 2(00) of the Industrial Disputes Act, which means termination of the services of an employee other than on superannuation. The definition is framed in widest terms, 'except for superannuation', any termination of service would amount to retrenchment for the purpose of the Act his, therefore, immater¬ial that the termination is occasioned by the need to discharge of surplus labour, and it has been held by the Supreme Court that retrenchment of the employees will full within the scope of section 4(1) of the Payment of Gratuity Act and a retrenched employee will be entitled to gratuity.

Reference :

State of Punjab vs. Labour Court.Jullunder, 1980-1 LLN 39; 1980 Lab. IC 1 084; (1980) 1 Lab. LN 39; 1980 Mah. LJ 166; (1980) 1 SCJ 346; (1980) 1 SCR 953.

(xxxvi) RIVAL CLAIMANTS AND AUTHORITY

Whether controlling authority can adjudicate if there are rival claimants of a deceased claiming gratuity?

Section 4(a) (ii) does not authorize the controlling authority to decide who is the person entitled to gratuity amount. If a dispute arises between rival claimants in this behalf, the controll¬ing authority cannot adjudicate upon the rights of such rival claimants. The Payment of Gratuity Act does not confer any power on controlling authority in this regard. The said power cannot be conferred by the rules. In a case before the Allahabad High Court, rule 12 of the Payment of Gratuity Rules was held to be ultra vires.

Reference :

Smt. Asha Devijauari vs. Smit Sharda Devi, 1977 Lab. IC 1939; 35 Fac. LR 306; 1978-1 LLJ 344 (ALL.).

(xxxvii) SERVICES PRIOR TO THE ACT-GRATUITY FOR

Whether gratuity will be payable to an employee who has been working prior to the Payment of Gratuity Act came into force?

Persons getting wages more than Rs. 1000 on the date of coming into force of the Payment of Gratuity Act or on the dates of termination of service, are also covered by the Act, but the benefit is restricted to the period during which the wages did not exceed Rs. 1000 per month. An employee who was drawing more than Rs. 1000 as wages at the time the Payment of Gratuity Act came into force would not be covered under the definition of 'employee' in the Act and, therefore, not entitled to Gratuity. If a person for a continuous period of five years or more in the past employment was receiving wages not exceeding Rs. 1000 per month and was not employed in a managerial or administrative capacity during such period, he is entitled to gratuity for such period, according to the Payment of Gratuity Act, irrespective of the question whether on the date when the Act came into force he was covered by the definition of employee in the Act. An employee who was getting less than Rs. 1000 per month for more than five years before 16th September, 1972, i.e. when the Payment of Gratuity Act was brought into force, is entitled to gratuity according to the Act, though his wages on and after 16th September, 1972 were more than Rs. 1000 per month.Be it made clear that last salary ceiling of Rs. 3500/., has been removed by the amendment w.e.f. 24.5.1994 hence every employee will be entitled to gratuity upto one lakh rupees provided' he or she worked for five years.

References :

Vasant Industrial and Engineering Works, Bombay vs. V. Narain Demodar Desai and another, 1980(1) LLN 109.

N.N. Pandit vs. Printers House (P) Ltd. Monthly Digest of Labour Cases Delhi Admn., vol.6 (Sept.& Oct.) 1975 p.145 (Controlling Authority - Delhi).

Hindustan Brown Boveri Ltd., Baroda vs. C.A. Panchal 1977(51) FJR 102 (GujaratHC);Sarabhai Chemical vs. Amba Ram Amtharam Patel, 18 GLR455; LLN 1977(2) 70.

Jogendra Lal Malakar vs. Regional Labour Commissioner (C), 1977 (51) FJR 421 (CaL HC).

(xxxviii) NECESSITY OF SUCCESSION CERTIFICATE

Can an employer ask the legal heir of a deceased to produce a succession certificate for payment of gratuity when there is a valid nomination by the deceased employee?

The nominee of an employee can make an application for gratuity under section 9 of the Payment of Gratuity Act. When there was no opposition to the grant of gratuity to the claimant then he should be treated as then legal heir of the deceased. In one case it has been held that the law does not require the claimant to first obtain a succession certificate and to apply for the payment of gratuity amount. The claimant in this case was the nominee of the deceased employee and the Nagar Palika (employer) was insisting that the widow of the deceased should produce a succession certific¬ate despite her being nominee under the Payment of Gratuity Act.

Reference :

Nagar Palika, Moradabad vs. Appellate Authority and Additional Labour Commissioner, U.P. Kanpur and Ors., 1989 Lab.lC 173 (All. High Court).

(xxxix) GRATUITY TO SUPERANNUATED EMPLOYEE

Whether an employee re-employed after superannuation be eligible to payment of gratuity.

If an employee having been superannuated is re-employ¬ed by the employer without any break in service, he will be eligible for payment of gratuity.

Reference :

jeewanlal (1929) Ltd. vs. C.A. under Gratuity Act, 1982-1 LLN 217.

(xl) WHETHER THEFT A MORAL TURPITUDE

whether theft amounts to moral turpitude?

'Moral turpitude' is anything done contrary to justice, honesty, modesty or good morals. In re Williams (167 page 1149,1152,64 c.K.L. 316). 'Moral turpitude' includes all acts done contrary to justice, honesty, modesty or good morals. Considering above the High Court of Karnataka has held theft amounts to moral turpitude.

Reference :

Bharath Gold Mines Ltd.,Kolar vs. Regional Labour Commissioner (Central) Bangabre & Ors. 1987-1 LLN 308.

(xli) WHETIIER WAGES INCLUDE INCENTIVES

Whether the 'wages' as defined under Payment of Gratuity Act include incentive wages for the purpose of calculation of gratuity under the Payment of Gratuity Act?

As the definition of the expression 'wages' in sections of the Act excludes only bonus, commission, house rent allowance, overtime wages and other allowances and not incentive wages, it will include 'incentive wages'. Merely because the management is paying to its employees bonus and incentive wages separately and the fact that the definition of 'basic wages' in the Employees' Provi¬dent Fund Act includes 'incentive wages' in the expression, 'bonus' will not justify the taking of a contrary view since the expressions 'wages' and 'basic wages' defined by the two Acts are different and since there is fundamental difference between the two concepts. Therefore, 'incentive wages' are included in the definition of 'wages' as contained in section 2(s) of the Act.

Reference :

Anglo French Textile Ltd. vs. P.O. Labour Court and another, 1981 Lab. IC 202; (1981) 58 FJR 252 (Mad.); (1981) I LLN 522.

(xlii) WITHHOLDING OF GRATUTIY ON OCCUPATION OF QUARTER

Can an employer withhold the payment of gratuity of an employee when the latter fails to vacate the accommodation allotted to him by the employer?

There is no provision in the Act or the Rules framed there under which provides that the vacating of the quarter, if any, given to a workman, after his retirement or resignation, is a condi¬tion precedent for claiming gratuity. In such a case, it cannot even be contended that though the employee had retired long back, he was squatting on the quarter allotted to him and as a result the other employees who are in service had been deprived of the benefit of quarters, and on account of such illegal action on the part of the employee, he was not entitled to gratuity. It is true that it is wrong on the part of the workman to squat on the quarter even after his retirement but the only course open for the employer in such a case is to get him evicted in accordance with law. The right to the amount of gratuity is not circumscribed or made dependent on the conduct of the employee subsequent to the date of his retirement. A right to secure gratuity amount cannot be defeated or cannot be used as lever by the employer for securing back possession of the premises from the employee. It is, therefore, not permissible under the Act to withhold the amount for any such reason even though the conduct of the employee in holding back possession of the premises is not very praiseworthy, still that is not a sufficient reason to deprive him of the right of gratuity.

References :

Binny Ltd., Bangalore vs. Appellate Authority and others, 1984 LLR 109,110 (Ker.HC); 1984(6) l'}R2.

Ramjilal Chimanlal Sharma vs. Elphinstone Spg.and Wvg. Mills Co.Ltd, 1984 Lab. 1 C 1703 (Bom.H C); 1984 APS Lab. Cases 31.

Texmaco Ltd. vs. Ram Dhan & others, 1992 (2) CLR 256; 1992 LLR 369 (Delhi High Court).

MoharnmadShabbirNadvi vs.JamiaMilialsiamia, 1995 LLR5 (Delhi High Court)

(xliii) MAINTAINABILITY OF-WRIT PETITION INSTEAD OF APPEAL

Can an employer or an employee file a writ petition against the order of controlling authority ?

Since there is a provision for filing of an appeal before the appellate authority against the order of the controlling author¬ity, the aggrieved party can file an appeal before the appellate authority under the Payment of Gratuity Act, 1972. In one case, the controlling authority gave direction for payment of gratuity to the concerned employee. The employer filed a writ petition challenging the direction instead of preferring appeal before the appellate authority. It has been held that the writ petition was liable to be dismissed on the ground that the appeal was not preferred and no explanation was given for non-filing of appeal.

Reference :

The Bombay Gas Public Co. Ltd. vs. Shri Papa Akbar & Others, 1990 (1) CLR 102 (Bom. High Court); 1990 LLR 118.

(xliv) TRAINEE-ALSO ENTITLED TO GRATUITY

Will a trainee having worked for 5 years be entitled to gratuity?

Yes, it has been held that a "trainee" being different from "apprentice" will be included in the definition of the 'employee'.

Reference :

The Chairman. Cum - Managing Director, Orissa Mining Corporation Ltd., Bhubaneswar vs. The Controlling Authority ,1994 LLR 789 (Orissa High Court)(DB).