INTRODUCTION

The Payment of Gratuity Act 1972 is a government disability sanctioning. An Act to

accommodate a plan for the installment of tip to workers occupied with production lines, mines,
oilfields, estates, ports, Railway organizations, shops or other establishments

[i]. The criticalness of this enactment lies in the acknowledgment of the standard of tip as a
necessary statutory retiral benefit.

[ii] The Act acknowledges, on a basic level, mandatory installment of tip as a standardized
savings measure to the blue collar populace in ventures, processing plants and foundations.
Subsequently, the primary reason and idea of tip are to help the laborer after retirement,
regardless of whether retirement is a consequence of the guidelines of superannuation or physical
disablement or debilitation of essential piece of the body.

Therefore, it is a kind of budgetary help to hold over post retiral hardships and inconveniences.

[iii] It is gotten from the word 'needless', which signifies 'blessing' or 'present'. In any case,
having being sanctioned as a government managed savings structure, it stops to hold the idea of a
blessing yet it must be viewed as a social commitment by a business towards his representative.
Tip will be payable to a worker on the end of his work after he has rendered constant assistance
for at the very least five years,-

(a) on his superannuation, or

(b) on his retirement or abdication, or

(c) on his passing or disablement (five-year administration not required) because of mishap or
ailment

On account of death of the worker, tip payable to him will be paid to his candidate or, if no
designation has been made, to his beneficiaries, and where any such chosen people or
beneficiaries is a minor, the portion of such minor will be stored with the controlling position
(for example government official) who will contribute the equivalent to help such minor in such
bank or other money related foundation, as might be endorsed, until such minor achieves
majority[iv]. In processing the tip payable to a worker who is re-utilized, after his disablement,
on decreased wages, his wages for the period going before his disablement, will be taken to be
the wages gotten by him during that period, and his wages for the period ensuing to his
disablement will be taken to be the wages as so diminished.

PRINCIPLE OF SOCIAL SECURITY

Lord William Beveridge, the pioneer in starting an extensive government managed savings plan
who referenced five monsters in the way of social advancement in particular, 'need', 'infection',
'obliviousness', 'filthiness' and 'inaction' making progress toward standardized savings which
ought to be assaulted and murdered, characterizes 'social security'[v] as "security of a pay to
replace income when they are hindered by joblessness, disorder or mishap, to accommodate
retirement through age, to give against loss of help by death of someone else and to meet
remarkable consumption, for example, those worried about birth, passing and marriage."

As a rule, the rule of standardized savings might be viewed as a piece of the rule of government
assistance, yet taking into account its extraordinary implication, it is alluring to hold it under a
different classification. In modern social orders, pay uncertainty coming about because of
different possibilities of life, for example, disablement, mature age and passing and others, has
become a difficult issue. The issue has gotten progressively intense taking into account amazing
development of the lasting class of breadwinners. During such possibilities the pay of the
workers either stops inside and out or is decreased generously or becomes discontinuous causing
hardships not exclusively to the workers, yet in addition to their relatives. One of the
extraordinary measures to moderate the hardship is to make accessible standardized savings
benefits under the inclusion of legislation[vi].

Government disability enactment might be held under two general classes social protection
enactment and social help enactment. In social protection, benefits are commonly made
accessible to the guaranteed people, under the state of having paid the necessary commitments
and satisfying certain qualification conditions. The store for social protection plots as a rule
originates from commitments of the recipients and their managers, frequently enhanced by state
awards. Under social protection, the recipients get benefits as an issue of right.[vii] The
advantages are not connected to the monetary needs or budgetary states of the recipients who get
these at the rates and in the structures, set up by law.
In social help likewise, the recipients get benefits as an issue of right, yet they don't need to make
any commitments. The fund is made accessible by the state or a source determined by the state.
Social help benefits are commonly paid to people of deficient methods and on thought of their
base needs. To start with, government disability laws predominantly secured modern specialists
however in this manner, different classes of laborers, independently employed people and
individuals everywhere, additionally went under its inclusion.

APPLICABILITY OF THE ACT

The Payment of Gratuity Act 1972 applies to the entire of India thus far as it identifies with ports
and ranches it doesn't make a difference to the State of Jammu and Kashmir. It applies to:

(a) each industrial facility, mine, oilfield, ranch, port and railroad organization.

(b) Every shop or foundation inside the significance of any law for the present in power
comparable to shops and foundation in a State, in which at least 10 people are or were utilized on
any day in the first a year.

(c) Such different foundations or class of foundation, in which at least 10 workers are or were
utilized on any day in the previous a year, as the Central Government may advise right now.

Any shop or foundation will keep on being represented by the Act regardless of whether the no.
of its representatives comes underneath 10 people whenever in the future.[viii] Public altruistic
and strict trusts are additionally secured by this Act, given that they are shops or foundations
inside the importance of the Shops and Establishment Act appropriate to their zone of activity
and that 10 or people have been utilized by them on any day in the former a year.

SALIENT FEATURES OF THE PAYMENT OF GRATUITY ACT, 1972

The Act is an independent and a comprehensive Act and the arrangements of this Act and rules
made under it overridingly affect every single other Act or instruments or agreements so far as
they are conflicting with this Act. The Act is genuinely clearing in inclusion, as it applies to all
processing plants, mines, oil fields, manors, ports and railroads regardless of the quantity of
laborers utilized by them. It additionally covers shops and foundations utilizing at least 10
people.
The Act gives a statutory right of tip to all the workers, who have rendered five years' persistent
assistance and whose administrations stand ended subsequent to coming into power of the Act by
virtue of superannuation, or retirement, or renunciation, or passing or disablement. The Act gives
both official and semi legal apparatus for issues relating to selection, assurance and recuperation
of tip.

The official hardware relates to support of records with respect to opening, change or conclusion
of foundations, show of notification and upkeep of records by the controlling power. The semi
legal capacities have been partitioned between the businesses and the Controlling Authority in as
much with respect to installment of tip, the principal discussion gave is an application to the
business. At the point when the business has declined or stayed away from installment of tip, at
that point an application is required to be made to the Controlling Authority. The hardware
furnished for recuperation rests with the Controlling Authority.

The sets of the Controlling Authority for installment or assurance of tip are material before the
fitting government or the redrafting authority. Tip is an award for good, productive and
unwavering assistance rendered for an impressive period. A laborer gets experienced during the
residency of his business. This empowers him to move out for better occupation roads. Different
businesses can toss compulsions to him. To lose him might be a misfortune to the business. Be
that as it may, in the event that he remains on, that is his loyality to the employer.[ix] Section 4
of Payment of Gratuity Act, 1972 gives that tip will be payable to a representative on the end of
his work after he has rendered nonstop help for at the very least five years.[x]

It is commonly payable on superannuation or on retirement or passing or disablement of

representative because of mishap or infection. The state of culmination of administration of five
years will not be vital where the end of business is because of death or disablement of the
worker. In the event of death of the worker, tip payable to the representative will be paid to his
chosen one, or if no selection has been made, to his heirs[xi].

Disablement has been disclosed in the clarification to sub-segment (1) of S.4 of the Act all things
considered disablement which cripples a worker for the work which he was fit for performing
before the mishap or ailment bringing about such disablement. Sub-segment (1) of S.4 of the Act
fuses the idea of tip being a compensation for long, nonstop and praiseworthy help. The
accentuation in that isn't on 'congruity of work', yet on rendering of 'consistent assistance'. The
lawmaking body embedded the two Explanation in the definition to stretch out the advantage to
representatives who are not in continuous help for one year subject to the satisfaction of the
conditions set down in that.

By the utilization of lawful fiction in these Explanations, a representative is considered to be in

'consistent assistance' for reasons for sub-area (1) of S. 4 of the Act. The lawmaking body never
planned that the articulation 'really utilized' in Explanation I and the articulation 'really worked'
in Explanation II ought to have two distinct implications since it needed to stretch out the
advantage to a representative who 'works' for a specific number of days in a year in either
case[xii].

AMOUNT OF GRATUITY
For each finished year of completed service or part thereof more than a half year, the business
will pay gratuity to a representative at the pace of fifteen days' wages dependent on the pace of
wages last drawn by the worker worried For the situation of a piece-evaluated worker, day by
day compensation will be processed on the normal of the complete wages got by him for a time
of a quarter of a year promptly going before the end of his work, and, for this reason, the wages
paid for any extra time work will not be considered (in a piece appraised framework there may
not be the idea of fundamental, DA, HRA, CCA and so forth.

On account of a representative who is utilized in an occasional foundation and who isn't so

utilized consistently, the business will pay the gratuity at the pace of seven days' wages for each
season. On account of a month to month evaluated representative, the fifteen days' wages will be
determined by isolating the month to month pace of wages last drawn by him by twenty-six and
increasing the remainder by fifteen. The measure of gratuity payable to a worker will not surpass
Rs. 3,50,000. In the event that there is an honor, understanding or agreement for a higher
measure of gratuity it is allowed[xiii].

EMPLOYER TO INITIATE CALCULATION AND NOTICE OF

PAYMENT
Any individual qualified to get gratuity will make an application to the business for installment
of the equivalent inside the recommended time. Regardless of whether an application is made or
not the business will decide the sum payable and pull out to the qualified individual/s. The
controlling authority will play out the accompanying functions[xiv].

(I) Specifying the measure of gratuity decided.

(ii) Prescribe as far as possible for installment of gratuity

(iii) The business will orchestrate to pay the measure of gratuity inside thirty days from the date
it gets payable.

(iv) If not paid inside the period stipulated above business is at risk to pay enthusiasm for the
postponed installment.

(v) Interest isn't payable if the postponement was caused because of the flaw of the worker and
the business has acquired authorization recorded as a hard copy from the controlling expert for
the deferred installment on this ground.

(vi) If there is any debate with regards to the sum payable or the people qualified to get it the
business will store sum according to his estimation with the controlling authority.[xv]

PROCEDURE FOR RESOLVING THE DISPUTES

Where there is a question the distressed party will make an application to the controlling expert
for choosing the debate. controlling authority will, after due request and in the wake of giving the
gatherings to the question a sensible chance of being heard, decide the issue and pass proper
orders.[xvi]

POWERS OF CONTROLLING AUTHORITY

The controlling authority will have the forces in regard of the accompanying issues, to be
specific (an) upholding the participation of any person(b) requiring the disclosure and creation of
documents;(c) accepting proof on sworn statements; (d) giving commissions for the assessment
of witnesses. Bid if any will be made inside 60 days from the date of the order[xvii]. Offer by
manager won't be conceded except if the contested sum is saved re-appraising position, in the
wake of giving the gatherings to the intrigue a sensible chance of being heard, affirm, alter or
invert the choice of the controlling power.

FORFEITURE OF GRATUITY

A representative, whose administrations have been fired for any demonstration, resolved
oversight or carelessness making any harm or misfortune, or annihilation of, property having a
place with the business, will be relinquished to the degree of the harm or misfortune so caused.
[xviii]

RETIREMENT AND SUPERANNUATION

Retirement implies end of the administration of a worker in any case than on superannuation;
superannuation corresponding to a representative, implies the accomplishment by the worker of
such age as is fixed in the agreement or states of administration as the age on the achievement of
which the representative will clear the business. Wages are for the most part payments which are
earned by a representative while on the job or on leave, as per the terms and states of his business
and which are paid or are payable to him in real money and incorporates dearness remittance yet
does exclude any reward, commission, house lease recompense, extra time compensation and
some other allowance[xx].

PAYMENT OF GRATUITY

Gratuity will be paid to a representative on the end of his work after s/he has rendered consistent
assistance of at the very least 5 years for example on superannuation, retirement, acquiescence,
demise or disablement because of mishap or illness (Sec 4). The time of 5 years isn't essential if
the end of the worker is a direct result of death or disablement. On account of death the sum is
paid to the lawful beneficiaries "Consistent Service" signifies continuous assistance which might
be hindered by virtue of disorder, mishap, leave, nonattendance from obligation without (not
being treated as break in administration), lay-off, strike, lock-out or suspension ofwork not
because of the issue of the worker. (Sec 2A)[xxi].

ESTIMATION OF GRATUITY
Gratuity is determined at 15 days compensation last drawn by the representative for each
finished year of administration. The month to month wage is isolated by 26 and increased by 15.
In registering a finished year of administration the period more than a half year will be taken as
an entire year. Gratuity = Monthly compensation x 15 days x No. of long periods of
administration. The greatest measure of tip payable under the Act is Rs. 3,50,000.00.[xxii]

COMPULSORY INSURANCE

The Payment of Gratuity (Amendment) Act, 1987 has endorsed arrangements for necessary
protection for boss' obligation for installment towards the gratuity under the Act from the Life
Insurance Corporation of India set up under the Life Insurance Corporation of India Act,1956 or
some other recommended Insurer. Notwithstanding, manager of a foundation having a place with
or heavily influenced by the Central Government or the State Government are absolved from
tasks of these arrangements. (Area 4A)[xxiii]

NOMINATION

Every worker who has finished one year of administration is required to make an assignment for
the reasons for gratuity if there should be an occurrence of his demise. (Sec 6) There can be more
than one candidate. (Structure F). Chosen people might be changed whenever by the
representative, by giving a composed notification to the business. (Structure H). On the off
chance that no selection has been made, it will be paid to the legitimate beneficiaries of the
expired worker or if the beneficiaries are minor, the portion of such minor will be saved by the
controlling authority with a bank till he accomplishes majority.[xxiv]

PROTECTION OF GRATUITY

No gratuity payable under the Act will be at risk to connection in execution of any
pronouncement or request of any respectful, income or criminal court. Nonetheless if the
representative had consented to a finding from the sum due as tip then that sum can be
recovered[xxv]. (Sec. 13)

PENALTIES
Failure to comply with the Payment of Gratuity Act 1972 entails certain penalties (Sec. 9)
[xxvi], which are the following:

(i)     For avoiding any payment knowingly makes any false statement or representation shall be
punishable with imprisonment upto 6 months or fine upto Rs. 10,000.00 or both.

(ii)   Failure to comply with any provision of the Act or Rules Shall be punishable with
imprisonment upto 1 year but will not be less than 3 months or with fine, which will not be less
than Rs. 10,000.00 but may extend upto Rs. 20,000.00 or with both.

(iii)Any offense relating to non-payment of gratuity under the Act Employer shall be punishable
with imprisonment for a term which shall not be less than 6 months but may extend to 2 years,
unless the court for reasons recorded decides for a lesser term of imprisonment or fine.

CONSTITUTIONAL VALIDITY OF THE ACT

The privilege to tip is a statutory right. It is vital that the representative ought to have been
standard in business. In any case, if a worker is re-utilized with no break in administration he
will likewise be qualified for gratuity.[xxvii] According to segment 4(2), each representative is
qualified for tip at the pace of 15 days' wages for each finished year of administration. A
representative who leaves the administration is qualified for tip. A candidate of a representative
can make an application for tip without creating a progression endorsement.

Under area 4(6)(a), tip payable to a representative will be relinquished to the degree of
misfortune or harm caused if end is affected for any demonstration, hardheaded exclusion or
negligence[xxviii]. In any case, the business needs to demonstrate the degree of harm or
misfortune brought about by the representative's wrongdoing. Without any evidence the option to
relinquish the tip under segment 4(6)(a) isn't accessible to the employer.[xxix] The option to
recuperate harms for not giving up the quarters of the business was held to be not associated with
the direct for which the administrations were fired. Retaining of tip on that record was held to be
not justified.[xxx] For the reason for discovering the degree of harm or misfortune brought about
by the worker, the business needs to give a notification of the proposed relinquishment to the
representative. Where no such notification was given, it was held that the issue required
reconsideration.[xxxi] Gratuity can't be relinquished except if quantum of misfortune or harm
has been ascertained.[xxxii]
In Bakshish Singh v. Darshan Engineering Works[xxxiii], it was held that arrangement of a time
of 5 years administration as qualifying period in segment 4(1)(b) is one of least help conditions
made accessible to representatives despite money related limit of manager to tolerate its weight
and it is sensible limitation on the privilege of the business to carry on business inside the
importance of Article 19 of the Constitution and area 4(1)(b) of the Act is legitimate and
substantial. In any event, accepting that the assumption that a more drawn out time of
administration for privilege to tip on deliberate retirement or abdication is important to keep
work from changing business as often as possible, that thought makes little difference to the
inquiry whether a brief time of qualifying administration is violative of Article 19(1)(g) of the
Constitution. That Article comes into picture just if, among others-

(a) It is indicated that the short passing time of administration tosses on a specific boss such
money related weight as would compel him to close his foundation and

(b) The arrangement isn't one of the base assistance conditions, which must be made accessible
to the workers.

Consequently the arrangement for a short passing period as such isn't invalid and can't be struck
down commonly as being violative of Article 19(1)(g) of the Constitution. The arrangements of
the Act were intended for setting down tip as one of the base assistance conditions accessible to
all workers secured by the Act. There is no arrangement in the Act for absolving any processing
plant, shop and so forth from the domain of the Act secured by it with the exception of those
where, the workers are in receipt of tip or pensionary benefits which are no less favourable than
the advantage gave under the Act. The installment of tip under the Act is accordingly
compulsory being one of the base states of administration. The foundations which have no ability
to provide for their laborers the base states of administration endorsed by the resolution reserve
no option to exist[xxxiv].

Installment of Gratuity Act is on the class of resolutions like the Minimum Wages Act, ESI and
so on which set out the important least advantages which must be made accessible to the
representatives. Installment of Gratuity Act is a government assistance measure presented in
light of a legitimate concern for the overall population to tie down social and financial equity to
laborers to help them in mature age and to guarantee them a fair standard of life on their
retirement. In this manner the Act forced a sensible limitation on the business in regard of the
key right under Article 19(1)(g)[xxxv]. The arrangement for installment of tip contained in area
4(1)(b) of the Act is one of the base assistance conditions which must be made accessible to the
workers despite money related limit of manager to endure its weight and it is sensible limitation
on the privilege of the business to carry on business inside the importance of Article 19 of the
Constitution and segment 4(1)(b) of the Act is lawful and legitimate.