Page 123 - DMGT306_MERCANTILE_LAWS_II

Mercantile Laws – II

Notes 3. Profits earned in the past;
4. Reserves and the possibility of replenishing the reserves; and
5. Return on capital, regard being had to the risk involved.

The first central legislation to regulate the payment of gratuity was the Working Journalists
(Conditions of Service) and Miscellaneous Provisions Act, 1955. The Government of Kerala
enacted legislation in 1971, for payment of gratuity to workers employed in factories, plantations,
shops and establishments. In 1971, the West Bengal Government promulgated an ordinance
which was subsequently replaced by the West Bengal Employees’ Payment of Compulsory
Gratuity Act, 1971. After the enactment of these two Acts, some other State Governments also
voiced their intention of enacting similar measures in their respective states. It became 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, and
 To avoid different treatment to the employees of establishment having branches in more
than one state, when, under the conditions of their service, the employees were liable to
transfer from one state to another.
Hence the Government of India enacted legislation on gratuity. The Act came into force from
September 16, 1972. The Payment of Gratuity Central Rules also came into force from September
16. 1.972.

Did u know? The Act is administered by the Central Government in:- (i) establishments
which are under its control; (ii) establishments having branches in more than one State;
and (iii) major ports, mines, oil fields and the railways. While, in all other cases, it is
administered by the State Governments and the Union Territory administrations, that 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.
Besides, here is Central Industrial Relation Machinery (CIRM) in the Ministry of Labour which
is responsible for enforcing this Act. It is also known as the Chief Labour Commissioner (Central)
[CLC(C)] Organisation. It is headed by the Chief Labour Commissioner (Central).

7.1.1 Main Provision

There are many legal provisions of the Payment of Gratuity Act 1972. We are below discussing
some important provisions of the Act.
(i) Provisions relating to the payment of gratuity: Under sections 4 and 7 of the Act , different
provisions relating to the payment of gratuity are given According to Section 4(1), the gratuity
shall be payable to an employee on the termination of his employement after he has rendered
continuous service for not less than 5 years.
The gratuity is payable to an employee on his termination in the following cases:

(a) On his superannuation, or
(b) On his retirement or resignation
(c) On his death or disablement due to accident or disease.

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