Chapter 6(D) Payment of Gratuity Act, 1972 – CS Professional Labour Laws and Practice Notes is designed strictly as per the latest syllabus and exam pattern.
Payment of Gratuity Act, 1972 – CS Professional Labour Laws and Practice Study Material
Question 1.
Choose the most appropriate answer from the given options in respect of the following:
Under the Payment of Gratuity Act, 1972 where the services of an 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, the gratuity payable to the employee may be –
(a) Wholly or partially forfeited
(b) Only partially forfeited
(c) Wholly forfeited
(d) Forfeited in instalments. [CSEP -If] (Dec 2008, 1 mark)
Answer:
(a) Wholly or partially forfeited
Question 2.
Choose the most appropriate answer from the given options in respect of the following:
The maximum amount of gratuity payable under the Payment of Gratuity Act, 1972 is—
(a) ₹ 5,00,000
(b) ₹ 3,50,000
(c) ₹ 2,50,000
(d) ₹ 20,00,000. [CSEP -11] (Dec 2009, 1 mark)
Answer:
(d) ₹ 20,00,000
Question 3.
Re-write the following sentences after filling-in the blank spaces with appropriate word(s)/figure(s):
The employer shall arrange to pay the amount of gratuity within ____ days from the date of its becoming payable to the person to whom it is payable. [CSEP -II] (Dec 2011, 1 mark)
Answer:
thirty
Question 4.
Re-write the following sentences after filling-in the blank spaces with appropriate word(s)/figure(s):
(iv) The employer is liable to pay the amount of gratuity within ____ days
from the date of its becoming payable to the employee.
(v) A period of service shall be deemed to be continuous which has not been interrupted by a period of absence exceeding ____ days. [CSEP -II] (June 2012, 1 mark each)
Answer:
(iv) 30 days
(v) 14 days
Question 5.
Re-write the following sentences after filling-in the blank spaces with appropriate word(s)/figure(s):
The ceiling on the amount of gratuity has been enhanced to ₹ _____ by the Payment of Gratuity (Amendment) Act, 2010. [CSEP -II] (Dec 2012, 1 mark)
Answer:
The ceiling on the amount of gratuity has been enhanced to ₹ 20,00,000
Write the most appropriate answer from the given options in respect of the following:
The minimum number of employees required in an establishment for it to come under the purview of the Payment of Gratuity Act, 1972 is—
(a) 10
(b) 15
(c) 20
(d) 25 [CSEP -II] (Dec 2012, 1 mark)
Answer:
(a) 10
Question 6.
Write the most appropriate answer from the given options in respect of the following:
What is the minimum number of employees required in an establishment for it to come under the purview of the Payment of Gratuity Act, 1972-
(a) 10
(b) 15
(c) 20
(d) 25. [CSEP -II] (June 2013, 1 mark)
Answer:
(a) 10
Question 7.
Write notes on the following:
‘Concept of continuous service for the payment of gratuity’ under the Payment of Gratuity Act, 1972. [CSEP -II] (Dec 2009, 5 marks)
Answer:
- Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than 5 years.
- A person is in continuous service if the employee has worked for:-
190 days – establishment which works for less than 6 days in a week. - 240 days – in any other case.
- In case of seasonal establishment, if he has worked for not less than 75% of the number of days on which the establishment was in operation during such period.
Question 8.
Write notes on the following:
Concept of ‘continuous service’ under the Payment of Gratuity Act, 1972. [CSEP -II] (Dec 2010, 5 marks)
Question 9.
Write notes on the following:
Rights and obligations of the employer under the Payment of Gratuity Act, 1972. [CSEP -II] (June 2011, 5 marks)
Answer:
Rights & obligations of the employer under the payment of Gratuity Act, 1972.
- As soon as the Gratuity becomes payable the employer shall determine the amount of gratuity & shall give the notice to the person to whom the gratuity is payable & to the controlling authority.
- The employer shall arrange to pay the amount of gratuity within 30 days of the date of its becoming payable to the person to whom it is payable.
- If such amount is not payable within due time, the employer shall pay from the date on which the gratuity becomes payable to the date on which it is paid, simple interest at the rate of 10% per annum.
- If the employer does not admit the claim submitted by employee, it shall issue a notice to the employee in prescribed format specifying reason why he does not admit the claim of gratuity.
- If the disputes related as to the amount of gratuity payable, the employer shall deposit with the controlling authority such, as he admits to be payable by him.
Question 10.
Write notes on the following:
‘Forfeiture of gratuity’ under the Payment of Gratuity Act, 1972. [CSEP -II] (Dec 2011, 5 marks)
Answer:
Gratuity forfeited on account of such act, omission or negligence which causes loss, damage or destruction is termed as partial forfeiture of gratuity since the same can be carried out only to the extent of loss, damage or destruction so caused.
As against this, in case the services of an employee get terminated due to violence or riotous act or committing an offence involving moral turpitude in relation to his employment, the same can lead to forfeiture of the whole or part of the gratuity.
If the services of an employee are terminated due to wilful omission or negligence which causes damage to the property of an employer, gratuity can be forfeited to the extent of damage or loss caused. The whole amount cannot be forfeited for wilful omission by employee.
Question 11.
Write notes on the following:
Protection of gratuity under the Payment of Gratuity Act, 1972. [CSEP -II] (June 2012, 5 marks)
Answer:
Payment of gratuity is covered under the Payment of Gratuity Act, 1972.
- Generally, gratuity is payable to an employee on the termination of his employment after he has rendered continuous service for not less than 5 years.
- It is one of the retirement benefits offered by the employer to employee.
- Gratuity has been exempted from attachment in execution of any decree or order of any Civil, Revenue or Criminal Court.
Question 12.
Distinguish between the following:
‘Partial forfeiture of gratuity’ and ‘total forfeiture of gratuity’ under the Payment of Gratuity Act, 1972. [CSEP -II] (Dec 2009, 5 marks)
Question 13.
Distinguish between the following:
‘Partial forfeiture of gratuity’ and ‘full forfeiture of gratuity’ under the Payment of Gratuity Act, 1972. [CSEP -II] (Dec 2012, 5 marks)
Question 14.
Define and explain the term ‘Continuous Service’ as laid down in the Payment of Gratuity Act, 1972. (Dec 2020, 6 marks)
Answer:
Gratuity is an old age retiral social security benefit. It is a lump sum payment made by an employer to an employee in consideration of his past service when the employment is terminated. The Payment of Gratuity Act provides for the payment of gratuity to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments.
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:-
- on his superannuation; or
- on his retirement or resignation; or
- on his death or disablement due to accident or disease, However, 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.
Continuous Service:
According to Section 2A of the Payment of Gratuity Act, 1972:
(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 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), layoff, 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:
- 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
- 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 calendar months preceding the date with reference to which the calculation is to be made, has actually worked under the employer for not less than:
- 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
- one hundred and twenty days in any other case;
Explanation.- The number of days on which an employee has actually worked under an employer shall include the days on which:
- he has been laid-off under an agreement or as permitted by standing orders made under the Industrial Employment (Standing Orders) Act, 1946, or under the Industrial Disputes Act, 1947, or under any other law applicable to the establishment;
- he has been on leave with full wages, earned in the previous year;
- he has been absent due to temporary disablement caused by accident arising out of and in the course of his employment; and
- 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 such period as may be notified by the Central Government from time to time.
(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 percent of the number of days on which the establishment was in operation during such period.
Question 15.
Attempt the following stating the relevant legal provisions and case law, if any:
Bhushan, who had put in 10 years of continuous service, was dismissed on the ground of misconduct and the amount of gratuity payable to him under the Payment of Gratuity Act, 1972 was forfeited in full. He was not given an opportunity of being heard and no show cause notice was served on him. He wants to institute a suit against the management. Will he succeed? [CSIG -II] (Dec 2004, 3 marks)
Answer:
Gratuity can be forfeited on account of misconduct or wilful negligence or on account of any offence constituting moral turpitude. But, notice of forfeiture must be given to employee.
In the given case, Bhushan’s gratuity was forfeited without giving any notice which is mandatory on part of employer. Hence, Bhushan will succeed in his claim.
Question 16.
Attempt the following stating the relevant legal provisions and case law, if any:
Ramesh was occupying service quarters of a company at the time of retirement. He did not vacate the house after retirement. The company withheld the payment of gratuity to the retired employee on this ground. Can Ramesh claim the payment of gratuity and succeed against the employer? [CSIG -II] (June 2006, 3 marks)
Answer:
No, in case of non-vacation of the house provided by employer, the employee’s gratuity cannot be forfeited. It is not a valid ground for forfeiture of gratuity.
Question 17.
Attempt the following stating the relevant legal provisions and case law, if any:
Rajesh was occupying service quarters of the company. After his retirement, he did not vacate the quarters. In retaliation, the company withheld the gratuity payable to him. Is the action of the company justified ? [CSIG -II] (Dec 2006, 3 marks)
Answer:
No, in case of non-vacation of the house provided by employer, the employee’s gratuity can not be forfeited. It is not a valid ground for forfeiture of gratuity.
Question 18.
Attempt of the following stating relevant legal provisions and case law, if any:
Kailash, a teacher in a private school having a basic salary of ₹ 3,500 per month, claims gratuity from the school management when he resigned from the service after serving for a period of 12 years. Will he succeed ? [CSIG -II] (June 2007, 3 marks)
Answer:
In a given case as Kailash is a school teacher, he will not succeed as teachers are not an employee under the Act. The teachers are not covered under the definition of ‘employee’ as held in Ahmedabad Pvt. Primary teachers association V/s Administrative officer.
Question 19.
Attempt of the following stating relevant legal provisions and decided case law, if any:
A worker went on leave. He continued to remain absent from duty even after the expiry of leave. The employer treated the ‘absence from duty without leave’ as breach of continuity of service for the purposes of the Payment of Gratuity Act, 1972. Is the employer justified ? [CSIG -II] (June 2008, 3 marks)
Answer:
No, the employer is not justified in treating the ‘absence from duty without leave’ as breach of continuity of service, as required under Section 2A of Payment of Gratuity Act, 1972, since proper explanation should be sought from the employee.
Question 20.
Attempt the following stating relevant legal provisions and case law, if any:
The company declined to pay gratuity to a deceased employee’s wife stating that the employee had worked for two years only whereas eligibility for receiving gratuity accrues only if he served for a period of five completed years of continuous service. Will she succeed ? [CSEP -II] (Dec 2008, 4 marks)
Answer:
Yes, the widow shall succeed since proviso to Section 4 of Payment of Gratuity Act, 1972 provides the exception to the clause of completion of 5 years of continuous service in case of death or disablement. Since the employee has died, his wife shall succeed in getting gratuity even though he has worked for two years only.
Question 21.
Attempt the following stating relevant legal provisions and decided case law, if any:
Mohan was in occupation of a residential quarters allotted to him by his employer. On his retirement on superannuation, he failed to vacate the quarters. His employer withheld the gratuity payable to him insisting that he should vacate the quarters first. Mohan approached the controlling authority claiming gratuity. Will he succeed ? [CSEP-II] (Dec 2009, 4 marks)
Answer:
No, in case of non-vacation of the house provided by employer, the employee’s gratuity can not be forfeited. It is not a valid ground for forfeiture of gratuity.
Question 22.
Attempt the following stating relevant legal provisions and decided case law, if any:
Mauji Ram was absent from duty without leave. The employer took the plea that it had resulted in the breach of continuous service for the purposes of gratuity under the Payment of Gratuity Act, 1972. Is the plea of the employer legal and enforceable? [CSEP -II] (June 2010, 4 marks)
Answer:
No, the plea of the employer on the ground that one of the employee Mauji Ram was absent from duty without leave and so the same has resulted in the breach of continuous service is not valid.
Question 23.
Attempt the following stating relevant legal provisions and decided case law, if any:
Suresh retired on attaining the age of superannuation. After retirement, it was noticed that he had misappropriated travelling allowance drawn by him. The employer decided to deduct the misappropriated amount from the gratuity payable to him. Is the action of the employer legally tenable ? [CSEP -II] (Dec 2010, 4 marks)
Answer:
No the action of the employer is not legally tenable.
- The facts of the given case study show resemblance with that of Mathur Spinning Mills v/s D.C. of labour & others
- Since Suresh has retired and his services have ended, the employer is not competent to take any sort of disciplinary action against him.
- Thus, Suresh will be entitled to receive the amount of gratuity.
Question 24.
Attempt the following stating relevant legal provisions and decided case law, if any:
Dinesh absented himself from duty without applying for leave and left the job. When he claimed gratuity, the company refused to pay gratuity quoting his absence from duty without proper leave resulted in break in service. Will he get gratuity ? [CSEP -II] (June 2011, 4 marks)
Answer:
Yes in the given Case Dinesh will get gratuity as mere absence from duty with proper leave will not deprive an employee to get gratuity. Mere absence from duty without leave cannot be said to result in breach of continuity of service in respect of the provisions of payment of Gratuity Act, 1872.
Question 25.
Attempt the following stating relevant legal provisions and decided case law.
Lotus Info. Ltd. entered into a settlement with its workmen providing for payment of gratuity at the rate of one month’s salary for every completed year of service. An employee retired on superannuation and claimed gratuity as per the settlement. The employer pleaded that he is under no obligation to pay gratuity more than the rate prescribed under the Payment of Gratuity Act, 1972. Is the employer’s contention tenable in law? [CSEP -II] (Dec 2011, 4 marks)
Answer:
- In this case, employer entered into a settlement for payment of gratuity at the rate of one month’s salary for every year. But later denied to pay more than the rate prescribed under the Act.
- As per the provisions of Payment of Gratuity Act, 1972, if an employee has made any agreement as a result of which he can receive better terms of gratuity, than in that case an employee can receive the gratuity as per the agreement/control.
- Thus employer’s contention is not tenable in law.
Question 26.
Attempt the following stating relevant legal provisions and decided case law, if any:
Naresh was working in Navodaya School continuously for 30 years. The school has been employing 30 teachers. On attaining the age of superannuation, he retired from service. The management declined to pay gratuity to Naresh. He preferred a claim for the payment of gratuity before the authority concerned under the Payment of Gratuity Act, 1972. Will he succeed ? [CSEP -II] (June 2012, 4 marks)
Answer:
- In the above case, Naresh will succeed.
- Definition of employee has been amended by the Payment of Gratuity (Amendment) Act, 2009 to include teachers in educational institutions retrospectively with effect from 3rd April, 1997.
- Thus Naresh will succeed.
Question 27.
Romesh was a godown keeper in a textile factory and in the course of his employment he committed theft of cotton bales worth ₹ 1.50 lakh and sold them in the market. This act of Romesh was caught red handed through the CCTV footage and physical inspection of the godown. Romesh was dismissed from his services immediately without paying gratuity to him. Whether the act of the employer is justified in forfeiting the amount of gratuity ? Narrate your answer as per the appropriate provisions of the Law. (June 2022, 6 marks)