The Payment of Gratuity Act is a beneficial labour law in India. The Gratuity Act in India came into effect in order to provide social benefits to employees after completion of 5 years of service. Therefore, the law restricts impounding of Gratuity. Gratuity, under Gratuity law in India, cannot be attached. Now, the question whether Gratuity can be paid at his sweet will by the employer is addressed below –
Section 7(3) casts a duty on employers to determine the amount of Gratuity and give a notice in writing to the person to whom Gratuity is payable and also to the Controlling Authority specifying the amount of Gratuity so determined. Section 7(3) provides for payment of Gratuity within 30 days from the date on which it becomes payable to the concerned person. Section 7(3A) provides for interest if Gratuity is not paid as provided in sub section 3 of Section 7.
The Hon’ble Supreme Court in the matter of State of Kerala V/s Padmanabhan Iyer, 1985 has held that delayed payment of Gratuity must be visited with the penalty of interest as the current market rate till actual payment.
The provision in Section 7(1) cannot be construed as a leverage to deny Gratuity to the employee on the specious plea that the person has not applied for Gratuity as provided under Section 7(1) in Form I.
The relevant legal provisions are stated herein below –
Section 7 (1) of the Gratuity Act states that an employee who is eligible for payment of gratuity under the Act, shall apply in writing to the employer for payment of such Gratuity amount.
Rule 7(1) of the Payment of Gratuity Rules, 1972 states that the above application shall be made ordinarily within 30 days from the date the gratuity became payable, in Form ‘I’ to the employer.
Further, Section 7(2) of the Act of 1972 states that the employer, whether or not the above application has been made, must determine the amount of Gratuity payable and give a notice in writing to the concerned employee and Controlling Authority informing them about such amount.
Rule 8 of the Payment of Gratuity Rules, 1972, states that within 15 days of receipt of application under Rule 7, the employer must give a notice under ‘Form L’ if the claim is found admissible. If the claim for Gratuity is not found admissible, the employer shall issue a notice under ‘Form M’ to the employee specifying the reasons why the claim for Gratuity is considered not admissible.
Section 7(3) of the Act of 1972 states that the employer shall pay the amount of Gratuity so determined, within 30 days from the date it becomes payable to the concerned employee.
Rule 10 of the Payment of Gratuity Rules, 1972 provides that a claimant employee may apply to the controlling authority in writing in ‘Form N’, if the employer either refuses to accept a nomination to entertain an application under Rule 7(1), or having received an application under Rule 7 fails to issue any notice as required under Rule 8. The Controlling Authority may accept any application after the expiry of the specified period for submission of such application, if sufficient cause is shown by the applicant.