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Union of India - Act

THE PAYMENT OF GRATUITY ACT, 1972

UNION OF INDIA
India

THE PAYMENT OF GRATUITY ACT, 1972

Act 39 of 1972

Published in Gazette of India on 21 August 1972
Not commenced
[This is the version of this document at 29 March 2018.]

[Amended by THE PAYMENT OF GRATUITY (AMENDMENT) ACT, 2009 (Act 47 of 2009) on 31 December 2009]
[Amended by The Payment of Gratuity (Amendment) Act, 2010 (Act 15 of 2010) on 17 May 2010]
[Amended by THE PAYMENT OF GRATUITY (AMENDMENT) ACT, 2018 (Act 12 of 2018) on 28 March 2018]

The Payment of Gratuity Act, 1972(39 of 1972)

19.

/836Statement of Objects and Reasons. - There is at present 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 last year for payment of gratuity to workers employed in factories, plantations, shops and establishments. The West Bengal Governor promulgated an Ordinance on the 3rd June, 1971 prescribing a similar scheme of gratuity. This Ordinance has since been replaced by the West Bengal Employees' Payment of Compulsory Gratuity Act, 1971, enacted by the President on 28th August 1971. Gratuity is also being paid by some employers to their workers under awards and agreements.2. Since the enactment of the Kerala and the West Bengal Acts, some other State Governments have also voiced their intention of enacting similar measures in their respective States. It has become necessary, therefore, to have a Central law on the subject so as to ensure a uniform pattern of payment of gratuity to the employees throughout the country. The enactment of a Central law would also avoid different treatment to the employees of establishments having branches in more than one State when, under the conditions of their service, the employees are liable to transfer from one State to another.3. The proposal for Central legislation on gratuity was discussed in the Labour Ministers' Conference held at New Delhi on the 24th and 25th August, 1971 and also in the Indian Labour Conference at its Session held on the 22nd and 23rd October, 1971. There was general agreement at the Labour Ministers' Conference and the Indian Labour Conference that Central legislation on payment of gratuity might be undertaken as early as possible. It is, accordingly, proposed to undertake such legislation.4. In enacting the President's Act for West Bengal in August, 1971, care has been taken to so design its provisions that they could serve as far as possible as norms for the Central law. The Bill has, therefore, been drafted on the lines of the West Bengal Employees' Payment of Compulsory Gratuity Act, 1971 with some modifications which have been made in the light of the views expressed at the Indian Labour Conference relating to forfeiture of gratuity in cases of dismissal for gross misconduct.5. The Bill provides for gratuity to employees drawing wages up to Rs. 270 per month in factories, plantations, shops, establishments and mines, in the event of superannuation, retirement, resignation and death or total disablement due to accident or disease. The quantum of gratuity payable will be 15 days' wages based on the rate of wages last drawn by the employees concerned for every completed year of service or part thereof in excess of six months subject to a maximum of 15 months' wages. The term "wages" will mean "basic wage plus dearness allowance".6. It is proposed that the appropriate Government for administering the Act in relation to establishment belonging to or under the control of the Central Government, or a railway company, or mine, a major port and oilfield or in relation to establishments having departments or branches in more than one State, will be the Central Government, and, in relation, to other establishments, the State Government.Amendment Act 25 of 1984-Statement of Objects and Reasons.-(1) The Payment of Gratuity Act, 1972 provides for payment of gratuity to the employees employed in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments and for matters connected therewith or incidental thereto.(2) The Supreme Court had in its judgment in the case of Lalappa Lingappa v. Lakshmi Vishnu Textile Mills, Sholapur (1981) 2 S.C.C. 238, held that in terms of the existing definition of "continuous service" in section 2(c) of the Act, the permanent employees were not entitled to payment of gratuity for the years they remained absent without leave and had actually worked for less than 240 days in a year. It has been represented that the enforcement of this ruling has resulted in denial of gratuity to a number of employees, whose short term absence had remained unregularised due to lack of appreciation of its significance for the purpose of working out their entitlement to gratuity. It is, therefore, now proposed to amend the definition of "continuous service" suitably and to specifically provide that a period of absence in respect of which no punishment or penalty has been imposed would not operate to interrupt the continuity of service for the purpose of payment of gratuity. It is also proposed to amplify the definition of "continuous service" to provide,-(a) that an employee working in an establishment which works for less than six days in a week and who is not in uninterrupted service for one year, shall be deemed to be in continuous service for a period of one year if he has actually worked for 190 days in the preceding year, and(b) that for determining the continuous period of six months for the purpose of payment of gratuity, an employee should have completed half the number of days of actual work which constitute "continuous service" for a whole year.(3) Opportunity is also being taken to provide that a shop or establishment once covered shall continue to be covered under the Act notwithstanding that the number of persons employed therein at any time falls below 10. This is intended to check the tendency among the employers to artificially reduce the number of employees so as to get out of the coverage under the Act. It is also proposed to provide for grant of exemption from the operation of the Act to any person or class of persons if they are in receipt of gratuity or pensionary benefits not less favourable than the benefits conferred under the Act.Amendment Act 22 of 1987-Statement of Objects and Reasons.-The Payment of Gratuity Act, 1972 provides for payment of gratuity to persons employed in factories, mines, oilfields, plantations, ports, railway companies, shops and certain other establishments employing ten or more persons and for matters connected therewith or incidental thereto. The Labour Ministers' Conference held in 1980 and 1982 had recommended inter alia that the time limit for payment of gratuity might be prescribed in the Act itself and that there should be a suitable provision for recovery of interest in cases where the payment of gratuity is delayed. The Indian Labour Conference held in November, 1985 had recommended that a provision for compulsory insurance of employers' liability and setting up of Gratuity Fund for payment of gratuity be incorporated in the Act. The Trade Unions have been representing for suitable enhancement in the wage limit for coverage and ceiling for payment of gratuity.2. Based on the above recommendations and representations, it is proposed to carry out certain amendments in the Act. Some of the more important amendments are:-(i) The coverage of the Act is being extended to persons drawing wages up to Rs. 2,500 per month and an enabling provision is being made for raising the wage limit for coverage from time to time;(ii) Provision is being made for depositing the amount of gratuity payable to a minor with the controlling authority who shall invest the money in a bank or a financial institution for the benefit of minor;(iii) The existing ceiling of 20 months' wages for payment of gratuity is being replaced by a monetary ceiling of Rs. 50,000;(iv) Provision is being made for compulsory insurance of employer's liability to pay gratuity under the Act or in the alternative for the setting up of a Gratuity Fund under the provisions of the Act in relation to establishments employing five hundred or more employees;(v) Provision is also being made for payment of simple interest at a specified rate, if the amount of gratuity is not paid within thirty days from the date it becomes payable;(vi) Penalties prescribed under the Act are being made more stringent.The other amendments proposed in the Bill are of a minor or consequential nature.Amendment Act 34 of 1994 - Statement of Objects and Reasons.-The Payment of Gratuity Act, 1972 provides for a scheme for payment of gratuity to the employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments and for matters connected therewith or incidental thereto. Under clause (e) of section 2 of the Act, the term "employee" means any person employed on wages not exceeding two thousand and five hundred rupees per mensem or such higher amount as the Central Government may having regard to the general level of wages, by notification, specify. In exercise of the powers conferred by clause (e) of section 2, the Central Government vide its notification dated the 26th November, 1992 specified with effect from the 1st day of December, 1992 three thousand and five hundred rupees per mensem as the higher amount of wage for definition of "employee" under the Act. There has been a demand for removal of the ceiling of wages for coverage of the Act, thus, making all the employees eligible for gratuity irrespective of their wages. The Labour Ministers' Conference held in 1983 has also recommended for the removal of the wage limit for payment of gratuity.2. Sub-section (3) of section 4 of the Act provides that the amount of gratuity payable to an employee shall not exceed fifty thousand rupees. This amount was fixed in 1987. There have been representations from trade unions to remove or enhance the ceiling on the maximum amount of gratuity.3. Based on the above-mentioned recommendations and representations, it is now proposed to carry out the following amendments in the Act:-(i) The provisions of the Act are being extended to all the persons employed on wages in the establishments, etc., covered under the Act by removing the wage ceiling under clause (e) of section 2 of the Act;(ii) The existing ceiling of fifty thousand rupees on the amount of gratuity payable under sub-section (3) of section 4 is being raised to one lakh rupees.4. The other amendments proposed in the Bill are of a minor or consequential nature.Amendment Act 15 of 2010 - Statement of Object and Reasons.The Payment of Gratuity Act, 1972 provides for payment of gratuity to the employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments and for matters connected therewith or incidental thereto.2. Sub-section (3) of section 4 of the Act provides that the amount of gratuity payable to an employee shall not exceed three lakh and fifty thousand rupees. This amount was fixed with effect from the 24th September, 1997 by amendment to the Payment of Gratuity Act, 1972. There have been representations from trade unions and individuals to remove or enhance the ceiling on the maximum amount of gratuity payable under the Act.3. Based on the representations and wide consultation with all stakeholders, it is now proposed to enhance the ceiling of three lakh and fifty thousand rupees on the maximum amount of gratuity payable under sub-section (3) of section 4 of the Act to ten lakh rupees.4. The Bill seeks to achieve the above objectives.[21st August, 1972]An Act to provide for a scheme for the payment of gratuity to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments and for matters connected therewith or incidental thereto.Be it enacted by Parliament in the Twenty-third Year of the Republic of India as follows:-

1. Short title, extent, application and commencement

.-(1) This Act may be called the Payment of Gratuity Act, 1972.

(2)It extends to the whole of India:Provided that insofar as it relates to plantations or ports, it shall not extend to the State of Jammu and Kashmir.

(3)It shall apply to-

(a)every factory, mine, oilfield, plantation, port and railway company;

(b)every shop or establishment within the meaning of any law for the time being in force in relation to shops and establishments in a State, in which ten or more persons are employed, or were employed, on any day of the preceding twelve months;

(c)such other establishments or class of establishments, in which ten or more employees are employed, or were employed, on any day of the preceding twelve months, as the Central Government may, by notification, specify in this behalf.

[(3-A) A shop or establishment to which this Act has become applicable shall continue to be governed by this Act notwithstanding that the number of persons employed therein at any time after it has become so applicable falls below ten.] [ Inserted by Act 26 of 1984, Section 2 (w.e.f. 18.5.1984).]

(4)It shall come into force on such date as the Central Government may, by notification, appoint.

Brought into force on 16.9.1972. This Act came into force in the State of Sikkim with effect from 1.11.1995.

2. Definitions

.-In this Act, unless the context otherwise requires,-

(a)"appropriate Government" means,-

(i)in relation to an establishment-

(a)belonging to, or under the control of, the Central Government,

(b)having branches in more than one State,

(c)of a factory belonging to, or under the control of, the Central Government,

(d)of a major port, mine, oilfield or railway company, the Central Government,

(ii)in any other case, the State Government;

(b)"completed year of service" means continuous service for one year;

(c)[ "continuous service" means continuous service as defined in section 2-A;] [ Substituted by Act 26 of 1984, Section 3, for Clause (c) and the Explanations (w.r.e.f. 11.2.1981).]

(d)"controlling authority" means an authority appointed by the appropriate Government under section 3;

(e)[ "employee" means any person (other than an apprentice) who is employed for wages, whether the terms of such employment are express or implied, in any kind of work, manual or otherwise, in or in connection with the work of a factory, mine, oilfield, plantation, port, railway company, shop or other establishment to which this Act applies, but does not include any such person who holds a post under the Central Government or a State Government and is governed by any other Act or by any rules providing for payment of gratuity;].

[Clause (e) substituted by Act 47 of 2009 w.e.f 3.4.1997.]

Prior to substitution by Act 47 of 2009, clause (e) read as;(e) "employee" means any person (other than an apprentice) employed on wages,[* * *] [ The words " not exceeding two thousand and five hundred rupees per mensem, or such higher amount as the Central Government may, having regard to the general level of wages, by notification, specify," omitted by Act 34 of 1994, Section 2 (w.e.f. 24.5.1994).]in any establishment, factory, mine, oilfield, plantation, port, railway company or shop, to do any skilled, semi-skilled, or unskilled, manual, supervisory, technical or clerical work, whether the terms of such employment are express or implied,[and whether or not such person is employed in a managerial or administrative capacity, but does not include any such person who holds a post under the Central Government or a State Government and is governed by any other Act or by any rules providing for payment of gratuity.] [ Substituted by Act 25 of 1984, Section 2, for the words beginning with the " but does not include any such person" and ending with the words " or the Navy Act, 1957 (62 of 1957)" (w.e.f. 1.7.1984).][* * *] [ Explanation omitted by Act 34 of 1994, Section 2 (w.e.f. 24.5.1994).]

(f)"employer" means, in relation to any establishment, factory, mine, oilfield, plantation, port, railway company or shop-

(i)belonging to, or under the control of, the Central Government or a State Government, a person or authority appointed by the appropriate Government for the supervision and control of employees, or where no person or authority has been so appointed, the head of the Ministry or the Department concerned,

(ii)belonging to, or under the control of, any local authority, the person appointed by such authority for the supervision and control of employees or where no person has been so appointed, the chief executive officer of the local authority,

(iii)in any other case, the person, who, or the authority which, has the ultimate control over the affairs of the establishment, factory, mine, oilfield, plantation, port, railway company or shop, and where the said affairs are entrusted to any other person, whether called a manager, managing director or by any other name, such person;

(g)"factory" has the meaning assigned to it in clause (m) of section 2 of the Factories Act, 1948 (63 of 1948);

(h)"family", in relation to an employee, shall be deemed to consist of-

(i)in the case of a male employee, himself, his wife, his children, whether married or unmarried, his dependent parents [and the dependent parents of his wife and the widow] [ Substituted by Act 22 of 1987, Section 2, for " and the widow" (w.e.f. 1.10.1987).] and children of his predeceased son, if any,

(ii)in the case of a female employee, herself, her husband, her children, whether married or unmarried, her dependent parents and the dependent parents of her husband and the widow and children of her predeceased son, if any:

[* * *] [ Proviso omitted by Act 22 of 1987, Section 2 (w.e.f. 1.10.1987).]Explanation .-Where the personal law of an employee permits the adoption by him of a child, any child lawfully adopted by him shall be deemed to be included in his family, and where a child of an employee has been adopted by another person and such adoption is, under the personal law of the person making such adoption, lawful, such child shall be deemed to be excluded from the family of the employee;

(i)"major port" has the meaning assigned to it in clause (8) of section 3 of the Indian Ports Act, 1908 (15 of 1908);

(j)"mine" has the meaning assigned to it in clause (j) of sub-section (1) of section 2 of the Mines Act, 1952 (35 of 1952);

(k)[ "notification" means a notification published in the Official Gazette and the expression "notified" shall be construed accordingly] [Substituted by Act No. 12 of 2018, dated 28.3.2018.]

(l)"oilfield" has the meaning assigned to it in clause (e) of section 3 of the Oilfields (Regulation and Development) Act, 1948 (53 of 1948);

(m)"plantation" has the meaning assigned to it in clause (f) of section 2 of the Plantations Labour Act, 1951 (69 of 1951);

(n)"port" has the meaning assigned to it in clause (4) of section 3 of the Indian Ports Act, 1908 (15 of 1908);

(o)"prescribed" means prescribed by rules made under this Act;

(p)"railway company" has the meaning assigned to it in clause (5) of section 3 of the Indian Railways Act, 1890 (9 of 1890);

(q)"retirement" means termination of the service of an employee otherwise than on superannuation;

(r)[ "superannuation", in relation to an employee, means the attainment by the employee of such age as is fixed in the contract or conditions of service as the age on the attainment of which the employee shall vacate the employment;] [ Substituted by Act 25 of 1984, Section 2, for Clause (r) (w.e.f. 1.7.1984).]

(s)"wages" means all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employment and which are paid or are payable to him in cash and includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance.

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 (not being absence in respect of which an order ] [* * *] [ The words " imposing a punishment or penalty or" omitted by Act 22 of 1987, Section 3 (w.e.f. 1.10.1987).][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)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;

(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 purposes 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 of 1947), or under any other law applicable 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 [such period as may be notified by the Central Government from time to time.]]

(3)[ 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.] [ Inserted by Act 26 of 1984, Section 4 (w.r.e.f. 11.2.1981).]

3. Controlling authority

.-The appropriate Government may, by notification, appoint any officer to be a controlling authority, who shall be responsible for the administration of this Act and different controlling authorities may be appointed for different areas.

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, 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:[Provided further that 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.] [ Substituted by Act 22 of 1987, Section 4 (w.e.f. 1.2.1991).]Explanation .-For the purposes of this section, disablement means such disablement as incapacitates an employee for the work which he was capable of performing before the accident or disease resulting in such disablement.

(2)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: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] [ Substituted by Act 25 of 1984, Section 3, for " an employee employed in a seasonal establishment" (w.e.f. 1.7.1984).], the employer shall pay the gratuity at the rate of seven days' wages for each season.[ Explanation .-In the case of a monthly rated employee, the fifteen days' wages shall be calculated by dividing the monthly rate of wages last drawn by him by twenty-six and multiplying the quotient by fifteen.] [ Inserted by Act 22 of 1987, Section 4 (w.e.f. 1.2.1991).]

(3)The amount of gratuity payable to an employee shall not exceed [such amount as may be notified by the Central Government from time to time]. [ Substituted 'ten lakh rupees' by Act No. 12 of 2018, dated 28.3.2018.]

(4)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;

(5)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.

(6)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;

(b)the gratuity payable to an employee [may be wholly or partially forfeited] [ Substituted by Act 25 of 1984, Section 3, for " shall be wholly forfeited" (w.e.f. 1.7.1984).]-

(i)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

(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.

[* * *] [ Sub-Section (7) omitted by Act 34 of 1994, Section 3 (w.e.f. 24.5.1994).][4-A. Compulsory insurance.-(1) With effect from such date as may be notified by the appropriate Government in this behalf, every employer, other than an employer or an establishment belonging to, or under the control of, the Central Government or a State Government, shall, subject to the provisions of sub-section (2), obtain an insurance in the manner prescribed, for his liability for payment towards the gratuity under this Act, from the Life Insurance Corporation of India established under the Life Insurance Corporation of India Act, 1956 (31 of 1956) or any other prescribed insurer:Provided that different dates may be appointed for different establishments or class of establishments or for different areas.

(2)The appropriate Government may, subject to such conditions as may be prescribed, exempt every employer who had already established an approved gratuity fund in respect of his employees and who desires to continue such arrangement, and every employer employing five hundred or more persons who establishes an approved gratuity fund in the manner prescribed from the provisions of sub-section (1).

(3)For the purpose of effectively implementing the provisions of this section, every employer shall within such time as may be prescribed get his establishment registered with the controlling authority in the prescribed manner and no employer shall be registered under the provisions of this section unless he has taken an insurance referred to in sub-section (1) or has established an approved gratuity fund referred to in sub-section (2).

(4)The appropriate Government may, by notification, make rules to give effect to the provisions of this section and such rules may provide for the composition of the Board of Trustees of the approved gratuity fund and for the recovery by the controlling authority of the amount of the gratuity payable to an employee from the Life Insurance Corporation of India or any other insurer with whom an insurance has been taken under sub-section (1), or as the case may be, the Board of Trustees of the approved gratuity fund.

(5)Where an employer fails to make any payment by way of premium to the insurance referred to in sub-section (1) or by way of contribution to an approved gratuity fund referred to in sub-section (2), he shall be liable to pay the amount of gratuity due under this Act (including interest, if any, for delayed payments) forthwith to the controlling authority.

(6)Whoever contravenes the provisions of sub-section (5) shall be punishable with fine which may extend to ten thousand rupees and in the case of a continuing offence with a further fine which may extend to one thousand rupees for each day during which the offence continues.Explanation .-In this section "approved gratuity fund" shall have the same meaning as in clause (5) of section 2 of the Income-tax Act, 1961 (43 of 1961).] [ Added by Act 22 of 1987, Section 3 (w.e.f. 1.10.1987).]

5. Power to exempt

.- [(1)] [ Section 5 renumbered as sub-Section (1) thereof by Act 26 of 1984, Section 5 (w.e.f. 18.5.1984).] The appropriate Government may, by notification, and subject to such conditions as may be specified in the notification, exempt any establishment, factory, mine, oilfield, plantation, port, railway company or shop to which this Act applies from the operation of the provisions of this Act if, in the opinion of the appropriate Government, the employees in such establishment, factory, mine, oilfield, plantation, port, railway company or shop are in receipt of gratuity or pensionary benefits not less favourable than the benefits conferred under this Act.

(2)[ The appropriate Government may, by notification and subject to such conditions as may be specified in the notification, exempt any employee or class of employees employed in any establishment, factory, mine, oilfield, plantation, port, railway company or shop to which this Act applies from the operation of the provisions of this Act, if, in the opinion of the appropriate Government, such employee or class of employees are in receipt of gratuity or pensionary benefits not less favourable than the benefits conferred under this Act.] [ Inserted by Act 26 of 1984, Section 5 (w.e.f. 18.5.1984).]

(3)[ A notification issued under sub-section (1) or sub-section (2) may be issued retrospectively a date not earlier than the date of commencement of this Act, but no such notification shall be issued so as to prejudicially affect the interests of any person.] [ Inserted by Act 22 of 1987, Section 6 (w.e.f. 1.10.1987).]

6. Nomination

.-(1) Each employee, who has completed one year of service, shall make, within such time, in such form and in such manner, as may be prescribed, nomination for the purpose of the second proviso to sub-section (1) of section 4.

(2)An employee may, in his nomination, distribute the amount of gratuity payable to him under this Act amongst more than one nominee.

(3)If an employee has a family at the time of making a nomination, the nomination shall be made in favour of one or more members of his family, and any nomination made by such employee in favour of a person who is not a member of his family, shall be void.

(4)If at the time of making a nomination the employee has no family, the nomination may be made in favour of any person or persons but if the employee subsequently acquires a family, such nomination shall forthwith become invalid and the employee shall make, within such time as may be prescribed, a fresh nomination in favour of one or more members of his family.

(5)A nomination may, subject to the provisions of sub-sections (3) and (4), be modified by an employee at any time, after giving to his employer a written notice in such form and in such manner as may be prescribed, of his intention to do so.

(6)If a nominee predeceases the employee, the interest of the nominee shall revert to the employee who shall make a fresh nomination, in the prescribed form, in respect of such interest.

(7)Every nomination, fresh nomination or alteration of nomination, as the case may be, shall be sent by the employee to his employer, who shall keep the same in his safe custody.

7. Determination of the amount of gratuity

.-(1) A person who is eligible for payment of gratuity under this Act or any person authorised, in writing, to act on his behalf shall send a written application to the employer, within such time and in such form, as may be prescribed, for payment of such gratuity.

(2)As soon as gratuity becomes payable, the employer shall, whether an application referred to in sub-section (1) has been made or not, determine the amount of gratuity and give notice in writing to the person to whom the gratuity is payable and also to the controlling authority specifying the amount of gratuity so determined.

(3)[ The employer shall arrange to pay the amount of gratuity, within thirty days from the date it becomes payable to the person to whom the gratuity is payable.(3-A) 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 Government from time to time for repayment of long-term deposits, as that Government may, by notification specify:Provided 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 permission in writing from the controlling authority for the delayed payment on this ground.] [ Substituted by Act 22 of 1987, Section 7, for sub-Section (3) (w.e.f. 1.10.1987).]

(4)

(a)If there is any dispute as to the amount of gratuity payable to an employee under this Act or as to the admissibility of any claim of, or in relation to, an employee for payment of gratuity, or as to the person entitled to receive the gratuity, the employer shall deposit with the controlling authority such amount as he admits to be payable by him as gratuity.

[* * *] [ Explanation omitted by Act 25 of 1984, Section 4 (w.e.f. 1.7.1984).]

(b)[ Where there is a dispute with regard to any matter or matters specified in clause (a), the employer or employee or any other person raising the dispute may make an application to the controlling authority for deciding the dispute.] [ Clauses (b), (c) and (d) shall be relettered as Clauses (c), (d) and (e) respectively, and before Clause (c) as so relettered, Clause (b) inserted and new Clause (c) substituted by Act 25 of 1984, Section 4 (w.e.f. 1.7.1984).]

(c)[] [Clauses (b), (c) and (d) shall be relettered as Clauses (c), (d) and (e) respectively, and before Clause (c) as so relettered, Clause (b) inserted and new Clause (c) substituted by Act 25 of 1984, Section 4 (w.e.f. 1.7.1984). ] The controlling authority shall, after due inquiry and after giving the parties to the dispute a reasonable opportunity of being heard, determine the matter or matters in dispute and if, as a result of such inquiry any amount is found to be payable to the employee, the controlling authority shall direct the employer to pay such amount or, as the case may be, such amount as reduced by the amount already deposited by the employer.

(d)[] [Clauses (b), (c) and (d) shall be relettered as Clauses (c), (d) and (e) respectively, and before Clause (c) as so relettered, Clause (b) inserted and new Clause (c) substituted by Act 25 of 1984, Section 4 (w.e.f. 1.7.1984). ] The controlling authority shall pay the amount deposited, including the excess amount, if any, deposited by the employer, to the person entitled thereto.

(e)[] [Clauses (b), (c) and (d) shall be relettered as Clauses (c), (d) and (e) respectively, and before Clause (c) as so relettered, Clause (b) inserted and new Clause (c) substituted by Act 25 of 1984, Section 4 (w.e.f. 1.7.1984). ] As soon as may be after a deposit is made under clause (a), the controlling authority shall pay the amount of the deposit-

(i)to the applicant where he is the employee; or

(ii)where the applicant is not the employee, to the [nominee or, as the case may be, the guardian of such nominee or] [ Substituted by Act 25 of 1984, Section 4, for " nominee or" (w.e.f. 1.7.1984).] heir of the employee if the controlling authority is satisfied that there is no dispute as to the right of the applicant to receive the amount of gratuity.

(5)For the purpose of conducting an inquiry under sub-section (4), the controlling authority shall have the same powers as are vested in a Court, while trying a suit, under the Code of Civil Procedure, 1908 (5 of 1908), in respect of the following matters, namely:-

(a)enforcing the attendance of any person or examining him on oath;

(b)requiring the discovery and production of documents;

(c)receiving evidence on affidavits;

(d)issuing commissions for the examination of witnesses.

(6)Any inquiry under this section shall be a judicial proceeding within the meaning of sections 193 and 228, and for the purpose of section 196, of the Indian Penal Code (45 of 1860).

(7)Any person aggrieved by an order under sub-section (4) may, within sixty days from the date of the receipt of the order, prefer an appeal to the appropriate Government or such other authority as may be specified by the appropriate Government in this behalf:Provided that the appropriate Government or the appellate authority, as the case may be, may, if it is satisfied that the appellant was prevented by sufficient cause from preferring the appeal within the said period of sixty days, extend the said period by a further period of sixty days.[Provided further that no appeal by an employer shall be admitted unless at the time of preferring the appeal, the appellant either produces a certificate of the controlling authority to the effect that the appellant has deposited with him an amount equal to the amount of gratuity required to be deposited under sub-section (4), or deposits with the appellate authority such amount.] [ Inserted by Act 25 of 1984, Section 4 (w.e.f. 1.7.1984).]

(8)The appropriate Government or the appellate authority, as the case may be, may, after giving the parties to the appeal a reasonable opportunity of being heard, confirm, modify or reverse the decision of the controlling authority.[7-A. Inspectors.-(1) The appropriate Government may, by notification, appoint as many Inspectors, as it deems fit, for the purposes of this Act.

(2)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.

(3)Every Inspector shall be deemed to be a public servant within the meaning of section 21 of the Indian Penal Code (45 of 1860).

7.

-B. Powers of Inspectors .-(1) Subject to any rules made by the appropriate Government in this behalf, an Inspector may, for the purpose of ascertaining whether any of the provisions of this Act or the conditions, if any, of any exemption granted thereunder, have been complied with, exercise all or any of the following powers, namely:-(a)require an employer to furnish such information as he may consider necessary;(b)enter and inspect, at all reasonable hours, with such assistants (if any), being persons in the service of the Government or local or any public authority, as he thinks fit, any premises of or place in any factory, mine, oilfield, plantation, port, railway company, shop or other establishment to which this Act, applies, for the purpose of examining any register, record or notice or other document required to be kept or exhibited under this Act or the rules made thereunder, or otherwise kept or exhibited in relation to the employment of any person or the payment of gratuity to the employees, and require the production thereof for inspection;(c)examine with respect to any matter relevant to any of the purposes aforesaid, the employer or any person whom he finds in such premises or place and who, he has reasonable cause to believe, is an employee employed therein;(d)make copies of, or take extracts from, any register, record, notice or other document, as he may consider relevant, and where he has reason to believe that any offence under this Act has been committed by an employer, search and seize with such assistance as he may think fit, such register, record, notice or other document as he may consider relevant in respect of that offence;(e)exercise such other powers as may be prescribed.

(2)Any person required to produce any register, record, notice or other document or to give any information by an Inspector under sub-section (1) shall be deemed to be legally bound to do so within the meaning of sections 175 and 176 of the Indian Penal Code (45 of 1860).

(3)The provisions of the Code of Criminal Procedure, 1973 (2 of 1974) shall so far as may be, apply to any search or seizure under this section as they apply to any search or seizure made under the authority of a warrant issued under section 94 of that Code.] [ Inserted by Act 26 of 1984, Section 4 (w.r.e.f. 11.2.1981).]

8. Recovery of gratuity

.-If the amount of gratuity payable under this Act 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] [ Substituted by Act 22 of 1987, Section 8, for " at the rate of nine per cent. per annum" (w.e.f. 1.10.1987).], 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.] [ Added by Act 22 of 1987, Section 8 (w.e.f. 1.10.1987).]

9. Penalties

.-(1) Whoever, for the purpose of avoiding any payment to be made by himself under this Act or of enabling any other person to avoid such payment, knowingly makes or causes to be made any false statement or false representation, shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to [ten thousand rupees] [ Substituted by Act 22 of 1987, Section 9, for " one thousand rupees" (w.e.f. 1.10.1987).] or with both.

(2)An employer who contravenes, or makes default in complying with, any of the provisions of this Act or any rule or order made thereunder shall be punishable with imprisonment for a term [which shall not be less than three months but which may extend to one year, or with fine which shall not be less than ten thousand rupees but which may extend to twenty thousand rupees, or with both] [ Substituted by Act 22 of 1987, Section 9, for " which may extend to one year, or with fine which may extend to one thousand rupees, or with both" (w.e.f. 1.10.1987).]:Provided that where the offence relates to non-payment of any gratuity payable under this Act, the employer shall be punishable with imprisonment for a term which shall not be less than [six months but which may extend to two years] [ Substituted by Act 22 of 1987, Section 9, for " three months" (w.e.f. 1.10.1987).] unless the Court trying the offence, for reasons to be recorded by it in writing, is of opinion that a lesser term of imprisonment or the imposition of a fine would meet the ends of justice.

10. 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

(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:

Provided that in seeking to prove as aforesaid, the employer may be examined on oath and his evidence and that of any witness whom he calls in his support shall be subject to cross-examination on behalf of the person he charges as the actual offender and by the prosecutor:Provided further that, if the person charged as the actual offender by the employer cannot be brought before the Court at the time appointed for hearing the charge, the Court shall adjourn the hearing from time to time for a period not exceeding three months and if by the end of the said period the person charged as the actual offender cannot still be brought before the Court, the Court shall proceed to hear the charge against the employer and shall, if the offence be proved, convict the employer.

11. Cognizance of offences

.-(1) No Court shall take cognizance of any offence punishable under this Act save on a complaint made by or under the authority of the appropriate Government:Provided that where the amount of gratuity has not been paid, or recovered, within six months from the expiry of the prescribed time, the appropriate Government shall authorise the controlling authority to make a complaint against the employer, whereupon the controlling authority shall, within fifteen days from the date of such authorisation, make such complaint to a Magistrate having jurisdiction to try the offence.

(2)No Court inferior to that of a [Metropolitan Magistrate or a Judicial Magistrate of the first class] [ Substituted by Act 34 of 1994, Section 4, for " Presidency Magistrate or a Magistrate of the First Class" (w.e.f. 24.5.1994).] shall try any offence punishable under this Act.

12. Protection of action taken in good faith

.-No suit or other legal proceeding shall lie against the controlling authority or any other person in respect of anything which is in good faith done or intended to be done under this Act or any rule or order made thereunder.

13. 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] [ Inserted by Act 25 of 1984, Section 6 (w.e.f. 1.7.1984).] shall be liable to attachment in execution of any decree or order of any civil, revenue or criminal Court.

13A. [ Validation of payment of gratuity. [Section 13A added by Act 47 of 2009 w.e.f 3.4.1997.]

- Notwithstanding anything contained in any judgment, decree or order of any court, for the period commencing on and from the 3rd day of April, 1997 and ending on the day on which the Payment of Gratuity (Amendment) Act, 2009, receives the assent of the President, the gratuity shall be payable to an employee in pursuance of the notification of the Government of India in the Ministry of Labour and Employment vide number S.O. 1080, dated the 3rd day of April, 1997 and the said notification shall be valid and shall be deemed always to have been valid as if the Payment of Gratuity (Amendment) Act, 2009 had been in force at all material times and the gratuity shall be payable accordingly:Provided that nothing contained in this section shall extend, or be construed to extend, to affect any person with any punishment or penalty whatsoever by reason of the non-payment by him of the gratuity during the period specified in this section which shall become due in pursuance of the said notification.]

14. Act to override other enactments, etc.

-The provisions of this Act or any rule made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than this Act or in any instrument or contract having effect by virtue of any enactment other than this Act.

15. Power to make rules

.-(1) The appropriate Government may, by notification, make rules for the purpose of carrying out the provisions of this Act.

(2)Every rule made by the Central Government under this Act shall be laid, as soon as may be after it is made, before each House of Parliament while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or both Houses agree that the rule should not be made, the rule shall, thereafter, have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.

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