Page 137 - DMGT306_MERCANTILE_LAWS_II

Mercantile Laws – II

Notes

Notes As gratuity is paid for meritorious service of the employee throughout the
employment rendered by him with the employers, so if he is guilty of misconduct or
wilful omission or negligence, causing damage to the property of the employer, under
clause (a) of Section 4 he cannot be deprived altogether of the benefit of gratuity under the
Act The proper remedy is such that he should be paid his dues of gratuity of gratuity after
deducting the amount of loss caused to the employer by his conduct.

7.6.1 When is Gratuity Payable?

According to Section 4(1) of the Payment of Gratuity Act, 1972, 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.

Notes The completion of continuous service of five years is not necessary where the
termination of the employment of any employee is due to death or disablement.

Further, the period of continuous service is to be reckoned from the date of employment and not
from the date of commencement of this Act (CLA-1996-III-13 Mad.). Mere absence from duty
without leave can not be said to result in breach of continuity of service for the purpose of this
Act. [Kothari Industrial Corporation v. Appellate Authority, 1998 Lab IC, 1149 (AP)]

7.6.2 To Whom is Gratuity Payable?

It is payable normally to the employee himself. However, in the case of death of the employee,
it shall be paid to his nominee and 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.

7.6.3 Recovery

Section 8 provides that if the gratuity payable under the Act is not paid by the employer within
the prescribed time, 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 the compound interest thereon at such rate as the Central Government
may be 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:
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.

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