Page 128 - DMGT306_MERCANTILE_LAWS_II

Unit 7: The Payment of Gratuity Act, 1972

matter, no exception can be taken to the reasons, findings and conclusions arrived by the Notes
Controlling Authority and Appellate Authority under the Act, declining to accept the plea
to treat that period as break in service, and deny a computation of gratuity by including
the said period as ‘continuous service’. The Court further held that the last contention over
justification to deduct and discharge the loan with the State Bank of Mysore, HSR Layout,
is frivolous. Sub-sections (1) and (6) of Section 4 of the Act when read, in conjunction, the
only irresistible conclusion is deduction by way of forfeiture to the extent of damage or
loss caused by the employee during his service, from the gratuity of that employee, whose
service is terminated for any act, willful omission or negligence causing any damage or
loss or destruction of property belonging to the employer; and the gratuity payable to an
employee may be wholly or partially forfeited; if the service of such employee is terminated
for his riotous disorderly conduct or any other act of violence on his part; or if the service
of such employee is 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.
The Court held that in the instant case the service of the 3rd Respondent was not terminated
for any of the aforesaid reasons, so as to withhold gratuity on the wholly or partially so as
to fall within the sub-section (6) of Section 4 of the Act. That being the factual position,
deduction of 54,350/- allegedly towards discharge of the loan extended to the 3rd
Respondent by the State Bank of Mysore. HSR Layout cannot but be held to be an illegal.
The Court held that the right to gratuity is a statutory right and cannot be withheld under
any circumstances, but for the exception enumerated in sub-section (6) of Section 4 of the
Act. It is elsewhere said that “Gratuity” as the term itself suggests is a gratuitous payment
extended to an employee on retirement or discharge, in addition to other retiral benefits
payable to the employee. The Court held that indisputably the Petitioner-Corporation
illegally deducted the amount from out of the gratuity payable to the 3rd Respondent,
which did not have the permission under the Act much less the Regulation, since no
provision under the Regulation is shown to invest such a power in the Petitioner.

Source: http://www.chadha-co.com/pdfs/C&Co-Labour-Law-Update-April-May-2012.pdf

Self Assessment

State whether the following statements are true or false:
1. Gratuity as an additional retirement benefit has been secured by labour in numerous
instances, either by agreement or by awards.
2. The Government of India enacted legislation on gratuity.
3. If the amount of gratuity payable under this Act is paid by the employer, within the
prescribed time, to the person entitled thereto.

7.2 Definitions

In this Act, unless the context otherwise requires, -

1. Completed Year of Service

The term ‘completed year of service’ means continuous service for one year. 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 imposing a

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