THE PAYMENT OF GRATUITY ACT, 1972

THE PAYMENT OF GRATUITY ACT, 1972

Q. 1. Under what circumstances gratuity becomes payable to an employee under Payment of Gratuity Act, 1972? Is Gratuity-A Statutory Right?

Ans. Before codification of the Payment of Gratuity Act, 1972 there was 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 for payment of gratuity to workers employed in factories, plantations, shops and establishments in 1971 and an ordinance was promulgated by the Governor of West Bengal on 3rd June 1971. Prescribing a similar scheme which was later replaced by the West Bengal Employee's Payment of Compulsory Gratuity Act, 1971. Payment of gratuity was also being made by some liberal employers under awards and settlements. On the lives of Kerala and West Bengal Acts some others States also expressed there opinion to make similar schemes for payment of gratuity to their workers. Keeping in view there factors the Bill was drafted on the lives of West Bengal Employee's Payment of Compulsory Gratuity Act, 1971 with some modifications on account of views expressed at the Indian Labour Conference relating to forfeiture of gratuity in cases of dismissal for gross misconduct.

The Act 1972 was passed receiving assent of the President on August 21, 1972. A serial of amendments have been made in 1984, 1987, 1994 and 1998 to meet special situations and requirements in the light of experience gained in its actual working. Judicial precedents and the industrial policy of the Government.

Payment of gratuity.- Sub-clause (i) of Section 4 of the Payment of Gratuity Act, 1972 provides that 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

(d) on his death, or

(e) on his disablement due to accident or disease.

But in the condition of death or disablement of the employee his employment become terminated then continuous service of five years shall not be necessary.

In the case of death of the employee, gratuity payable to him shall be paid to his nominee it no nomination has been made to his heirs and where such nominee or heir is 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 financial institution as prescribed, until such minor attains majority.

Disablement means such disablement as incapacitates an employee for the work which he was capable of performing before the accident or disease. Continuous service is defined in Section 2-A of the Act.

In Asbinwall and Co. v. Lalitha Padugady and others. 1995 SCC (L&S) 1275 the Supreme Court observed that Section 4 postulates determination of the "Completed year of Service" meaning thereby one year's period of continuous service rendered by an employee for the purposes of computation of gratuity and therein is a method provided for determining a completed years of service.

In the case of Lalappa Lingappa v. Laxmi Vishnu Textile Mills, 1981 (1) LLJ 308 (SC), it was held by Apex Court that Payment of Gratuity Act is a beneficial Legislation and that the word "continuous services" has to be interpreted liberally.

Sub-section (3) of Section 4 provides that the maximum amount payable to employee as a gratuity shall be three lakhs and fifty thousand rupees.

Sub-section (5) of Section 4 provides that 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.

Gratuity-A Statutory Right.-In Delhi Cloth and General Mills Ltd. v. The Workmen and others, the Supreme Court has observed that gratuity is a gift made by employer at his pleasure and the workmen has no right to claim it. But since then there has been a long live of precedents in which it has been ruled that a claim for gratuity is a legitimate claim which the workmen may make and which in appropriate cases may give rise to an industrial dispute. Gratuity paid to workmen is intended to help them after retirement on superannuation, death, retirement, physical incapacity, disability or otherwise.

It is of efficiency devices and it is not paid to an employee gratuitously or merely as a matter of boom held in the case of Balbir Kaur and another v. Steel Authority of India Ltd, 2000 SCC (L&S) 767.

In the case of Sudhir Chandra Sarkar v. TISCO Ltd., 1984 SCC (L & S) 540 the Supreme Court has observed that pension and gratuity coupled with contributory provident fund are well-recognised retrial benefits governed by various statutes. Further observed that the fundamental principle underlying gratuity is that it is retirement benefit for long service as a provisions for old age. Demands of social security and social justice made it necessary to provide for payment of gratuity. On the enactment of the Payment of Gratuity Act, 1972 a statutory liability was cast on the employer to pay gratuity.

In the conclusion we can say that after the enactment of the Payment of Gratuity Act, 1972 gratuity becomes a statutory right of the employee and its payment by employer is his duty or statutory liability.

References:-

https://taxguru.in/corporate-law/gratuity-payment-social-security-code-2020-wef-01-04-2021.html

https://indiankanoon.org/doc/1545788/

https://indiankanoon.org/doc/1868916/

https://www.legitquest.com/case/rajan-v-union-of-india-uoi-and-anr/16B339

https://www.casemine.com/judgement/in/5609117ee4b014971118445b

https://labour.delhi.gov.in/content/payment-gratuity-1972

https://indiankanoon.org/doc/92021/

https://www.casemine.com/search/in/gratuity%252Bcontinuous%252Bservice

https://authorzilla.com/oeYAK/labour-laws-department-of-higher-education.html

https://indiankanoon.org/doc/119736/