payment of gratuity act 1972 in arif creation

PAYMENT OF GRATUITY ACT, 1972
1. Short title, extent, application and commencement
2. Definitions
10[2A. Continuous service
3. Controlling authority
4. Payment of gratuity
18[4A. Compulsory insurance
5. Power to exempt
6. Nomination
7. Determination of the amount of gratuity
22[7A. Inspectors
7B. Powers of Inspectors
8. Recovery of gratuity
9. Penalties
10. Exemption of employer from liability in certain cases
11. Cognizance of offences
12. Protection of action in good faith
13. Protection of gratuity
14. Act to override other enactments, etc.
15. Power to make rules
Foot Notes

[Act No. 39 of Year 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 in so far 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.

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1[(3A) 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.]
(4) 2[It shall come into force on such date] as the Central Government may by notification, appoint.
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;
3[(c) “continuous service” means continuous service as defined in section 2A;]
(d) “controlling authority” means an authority appointed by the appropriate government under
section 3;
(e) “employee” means any person (other than an apprentice) employed on wages, 4[***] 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 expressed or implied 5[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].
6[* * *]
(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,

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(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 7[and the dependent parents of his wife and the widow] 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:
8[***]
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;
(l) “oilfield” has the meaning assigned to it in clause (e) of section 3 of the Oilfields (Regulation and
Development) Act, 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;
9[(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;]

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(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.
10[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
11[***] 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 calender 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.
12[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–
(a) 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 twelve weeks.]

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(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.
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:
13[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.]
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 14[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.
12[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.]

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(3) The amount of gratuity payable to an employee shall not exceed 15[three lakhs and fifty
thousand] rupees.
(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, wilful 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 16[may be wholly or partially forfeited]–
(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.
17[ * * *]
18[4A. 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).

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(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).]
5. Power to exempt
19[(1)] 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.
10[(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.]
12[(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.]
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.

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(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.
20[(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.
(3A) 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.]
(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.
21[***]
22[(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.]
23[(c) 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

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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.]
24[(d) The controlling authority shall pay the amount deposited, including the excess amount, if
any, deposited by the employer, to the person entitled thereto.
25[(e) 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 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, 1860 (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:
22[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.]
(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.
22[7A. Inspectors
(1) The appropriate government may, by notification, appoint as many Inspectors, as it deems fit,
for the purposes of this Act.

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(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 areas, 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).
7B. 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 assistant (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 l974) 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.]
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 26[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:

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