THE PAYMENT OF

GRATUITY ACT,1972
PRESENTATION BY:
SHANKARNAG
INTRODUCTION
Gratuity means gifts or service often in
return of favors and services.
In the present context, it means, a sum of
money paid to an employee at the end of
employment.
Gratuity in case of retirement,
superannuation or death helps family to
adjust in a new situation in which income
ceases partially or completely.
Gratuity Schemes, serves as an important
tool of social security.
TO WHAT SHALL THE ACT
APPLY TO
Every factory, mine, oilfield, plantation,
port and railway company.
Every Shop or establishment if it employs
10 or more person in preceding one year.
Such other establishment in which 10 or
more employees are employed or were
employed on any day of preceding twelve
months.

Payment of Gratuity
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, or

(c) on his death or disablement due to accident or
disease : 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 .
Payment Of Gratuity
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.
Payment of Gratuity
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.
CALCULATING FORMULA
Provided further that in the case of 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.

FIFTEEN DAYS WAGE=
(MONTHLY RATE OF WAGES LAST DRAWN BY HIM / 26) *
15
Payment of Gratuity
Gratuity Amount payable under Payment of Gratuity
Act enhanced from Rs.3.5 lakhs to Rs. 10 lakhs

As Per

Payment of Gratuity (Amendment) Act,2010 (No. 15 of
2010), dated 17-5-2010

Section 4 (4) now reads as

The amount of gratuity payable to an employee shall
not exceed Ten Lakh Rupees
Payment Of Gratuity
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.

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.
Payment Of Gratuity
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
the damage or loss so caused.
Payment of Gratuity
The gratuity payable to an employee may be
wholly or partially forfeited
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

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.
INSPECTORS
The appropriate Government may, by notification,
appoint as many Inspectors, as it deems fit, for the
purposes of this Act.

The appropriate Government may, by general or special
order, define the area to which the authority of an
Inspector so appointed shall extend and where two or
more Inspectors are appointed for the same area, also
provide, by such order, for the distribution or allocation of
work to be performed by them under this Act.

Every Inspector shall be deemed to be a public servant
within the meaning of section 21 of the IPC, 1860 (45 of
1860).
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POWER OF INSPECTORS
Require an employer to furnish such
information as he may consider
necessary.
Enter and inspect.
Examine .
Exercise such other powers as may
be prescribed.

RECOVERY OF GRATUITY
If the amount of gratuity payable is not paid by the
employer, within the prescribed time, to the person entitled
thereto, the controlling authority shall, on an application
made to it in this behalf by the aggrieved person, issue a
certificate for that amount to the Collector, who shall
recover the same, together with compound interest thereon
at such rate as the Central Government may, by
notification, specify, from the date of expiry of the
prescribed time, as arrears of land revenue and pay the
same to the person entitled thereto :Provided that the
controlling authority shall, before issuing a certificate under
this section, give the employer a reasonable opportunity of
showing cause against the issue of such certificate
:Provided further that the amount of interest payable under
this section shall, in no case exceed the amount of gratuity
payable under this Act.
EXEMPTION OF EMPLOYER FROM
LIABILITY IN CERTAIN CASES
Where an employer is charged with an offence
punishable under this Act, he shall be entitled,
upon complaint duly made by him and on giving
to the complainant not less than three clear
days' notice in writing of his intention to do so, to
have any other person whom he charges as the
actual offender brought before the court at the
time appointed for hearing the charge; and if,
after the commission of the offence has been
proved, the employer proves to the satisfaction
of the court
(a) that he has used due diligence to enforce the
execution of this Act, and
Cont
(b) that the said other person committed
the offence in question without his
knowledge, consent or connivance, that
other person shall be convicted of the
offence and shall be liable to the like
punishment as if he were the employer
and the employer shall be discharged from
any liability under this Act in respect of
such offence :
PROTECTION OF GRATUITY
No gratuity payable under this Act and no
gratuity payable to an employee employed
in any establishment, factory, mine,
oilfield, plantation, port, railway company
or shop exempted under section 5 shall be
liable to attachment in execution of any
decree or order of any civil, revenue or
criminal court.
CASE
Dena bank vs. Manjulaben M. Thakor(smt)
& Anr.(2012 LLR 648)

Forum: Kerala High Court

JUDGEMENT
The contention of the petitioner-bank was
that the deceased workman had
committed an act involving moral turpitude
& therefore was not entitled to the gratuity
amt under sec (6)(b)(ii) of the gratuity Act
read with the plaintiff's Banks Service
regulations.

Cont
The court, after perusal of the dismissal order by
the bank, observed that there was no direction in
the dismissal order for forfeiture of the gratuity
amt, which the deceased workman was
otherwise entitled to, it being a statutory right.
The charge sheet had not stated forfeiture of
gratuity on the ground of moral turpitude & no
inquiry had been conducted on that count. Also,
the petitioner-bank had admittedly not initiated
any penal action with a view to forfeit the gratuity
amount.

Cont
Thus, in the absence of a proper order by
the employer, the Court held the forfeiture
of gratuity of the employee to be not
sustainable.


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