THE PAYMENT OF GRATUITY ACT 1972 · THE PAYMENT OF GRATUITY ACT 1972 . GRATUITY ~~ GIFT . MEANING ....

THE PAYMENT OF GRATUITY ACT 1972 BUSINESS LAW

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THE PAYMENT OF GRATUITY ACT 1972

GRATUITY ~~ GIFT

MEANING

A Lump sum payment paid by employer to his employee

at the time of retirement or when he leaves the establishment

EXTENT AND APPLICABILITY

Except Jammu & Kashmir extend to the whole of India

APPLIES TO:

1) Every Factory ,mine ,oilfield , plantation , port and railway

company

2) Every shop or establishment where 10 or more person

employed in any day of 12 months proceeding

3) Other establishments or class of establishment in which 10 or

more person employed

4) A shop or establishment where the act applicable

Establishment include Municipal Board

SALARY =BASIC +DA only

!! Not allowed any BONUS, COMMISSION, HRA, OT WAGES, and

OTHER ALLOWANCES!!


Appropriate Government

In relation to an establishment

Belonging to or under the control of CG

Having branches in more than one states

Of a factory belonging to , or under the control of the CG

Of a major port, mine, oil field or railway co ,CG

In any other case, SG

Employee

Any person other than Apprentice

Employed on wages in any establishment, Factory ,mine

,oilfield , plantation , port, railway co or shop

To do any skilled , semi-skilled or unskilled

Who employed in managerial or administrative capacity

Does not include any such person hold a post under CG or SG

and is governed by any other act or providing for payment of

gratuity

KEY

Retirement ::Termination of the service of an employee

otherwise then on superannuation

Superannuation::Attain the age or contract period


CONTINIOUS SERVICE

1YR 6MONTH

GENERAL 240 DAYS 120 DAYS

<6day/week 190days 95days

(Underground ,mine)

Seasonal Not less than 75% of no. of operational days

WORKING DAYS INCLUDE

1) Lay off (with Industrial Dispute Act)

2) Leave with Salary/wages

3) Temporary disablement Caused by Accident

4) Maternity leave (not exceed 12 weeks)

Pay ability of gratuity

o on his superannuation

o on his retirement or resignation

o on his death or disablement due to accident or disease


Calculation of Gratuity payable

other than Seasonal Establishment

=LAST DRAWN SALARY *15/26 *No. of completed year of

service or part excess 6months

piece rated employee

Daily wages calculated on averages of total wages

received by him for a period of 3 months immediately

preceding the termination. Over time work wages will not

be added

Seasonal Establishment

=Wages *7/26 *No. of completed year of service or part

excess 6months

Compulsory Insurance

Gratuity Act prescribed provisions for compulsory insurance for

employees which introduces employer’s liability for payment

towards the gratuity under the act from HC

Employer of establishment belongs to CG or SG controls are

exempted from operations of these provisions. (include

Appropriate Government also)


If employer fails to pay premium of insurance or to contribute

to an approved gratuity fund. He shall be liable to pay gratuity

including interest

PENALTY

Fine up to 10000 and in case of conducting offence with further

fine extended to 1000/ day

Other key

Powers of Inspectors

Nomination for gratuity

Appointment of Inspectors

Forfeiture of gratuity


THE PAYMENT OF

BONUS ACT 1965 BUSINESS LAW


THE PAYMENT OF BONUS ACT 1965

Act not apply to certain classes of employee

LIC

SEAMEN u/s Merchant shipping act

DOCK WORKERS

Authority of any depart of CG or SG or LOCAL AUTHORITY

a) Indian Red cross society

b) University & other education institution

c) Institution.

Contracting on building operation

RBI

IFCI, UTI, IDBI, OTHER FINANCIAL INSTITUTION

Inland water transport establishment operating on routes

passing through any other country

ALLOCABLE SURPLUS

67% of the available Surplus

BANKING 60% of the available Surplus


APPROPRIATE GOVT

Any person other than Apprentice employed or a wages or salary

not exceeding 10000/month

SALARY

All emolument/remuneration other than OT WAGES

BASIC +DA+FOOD ALLOWANCE+CITY COMPENSATION ALLOWANCE

DISQUALIFICATION TO CLAIM

Employee DISMISSED from service for

a) FRAUD b) RIOTOUS or VIOLENT behaviour in establishment

c) Theft/ misappropriation or sabotage of any property of the

establishment

Others –APPRENTICE- CONTRACTOR EMPLOYEE- DISMISSED

MINIMUM BONUS

8.33% OR RS 100 WHICH EVER HIGHER

8.33% OR RS 60 WHICH EVER HIGHER (AGE<15)


PRODUCTIVITY LINKED BONUS

Situation: employee agreement with employer

On a payment of bonus on agreed ratio

MAXIMUM BONUS

20% OF SALARY / WAGES

WORKING DAYS

Deemed working day

Lay off (with Industrial Dispute Act)

Leave with Salary/wages

Temporary disablement Caused by Accident

Maternity leave

SET ON /SET OFF OF ALLOCABLE SURPLUS


Summary of EMPLOYEE’S PROVIDENT FUNDS AND MISCELLANEOUS PROVISIONS ACT, 1952


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Summary of Employee’s Provident Fund And Miscellaneous provisions Act, 1952

An approach to make students easily understand the concept of this law, and can easily prepare for their examination in a very short period of time.

For CA-IPCC Students


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THE EMPLOYEE’S PROVIDENT FUND AND MISCELLANEOUS PROVISIONS ACT, 1952

Meaning of Provident Fund:

Provident Fund means a fund which is created employer and employee together for the benefit of the employee. In Provident Fund contributions are made by employer and employees and contribution are invested, from investment whatever income is received is reinvested The total amount of Provident Fund will be given to employee on their retirement. This amount will be given to the dependents of employee on his death.

EMPLOYER EMPLOYEE

CentralGovernment

Central Board of Trustees

Executive Committee Provident fund Investment

INCOME


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This diagram shows the functioning of Provident Fund Act. Explaination- fFirstly ,both employee and employer with contribute same amount to the provident fund which is being transferred to executive committee which is being made Central Board of Trustees on the recommendation of the Central Government. Thus the amount of provident fund is being invested by the executive committee and the income generated is being reinvested till the retirement of the employee and the total amount generated is being transferred to employee on his retirement.

Provident Fund Contribution- (Sec.6)

EMPLOYER 10% or more of salary

EMPLOYEE equal to employer’s contribution

(i) The employers contribution in Provident Fund must be at least 10% of salary income of employees however the contribution may be more.

(ii) The employer’s contribution depends upon the will of employer.

(iii) The employee’s contribution must be at least equal to employer’s contribution however it may be more.

(iv) The contributions may be different hence employee and employer may contribute different amounts.

In EPF Salary means = Basic salary+ Dearness Allowance

Provident Fund


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The salary does not include any other payment for the purpose of EPF.

Benefits and Purpose of EPF Act-

EPF Act was passed by parliament to provide 3 benefits.

(1) Employee’s Provident Fund

(2) Pension Fund for Employees

(3) Deposit Linked Insurance Plan

Applicability of EPF Act-

(1)According to Section 1 EPF Act is applicable to whole of India except Jammu& Kashmir.

(2) The EPF Act applies to those businesses in which 20 or more workers are employed.

Constitution of Central Board of Trustees

It consists

1 Chairman

1 Vice Chairman

1 Provident Fund Commissioner

15 Officers of Central Government

15 Officers of State Government

10 Representative of Employer

10 Representative of Employees


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Constitution of Executive Committee

1 Chairman

1 Vice Chairman

1 Provident Fund Commissioner – same as in CBT

3 Officers of Central Government

3 Officers of State Government

2 Representative of Employer

2 Representative of Employees

NOTE- The CBT and EC have basic function of managing the EPF Act. Hence in EPF Act these bodies perform various functions.

Functions of Board-

1. Management and Administration of EPF

2. Management and Administration of PF

3. Management and Administration of DLIP

Employees Pension Scheme (Sec 6A)

1. The Central Government has prepared pension scheme for the benefit of employees. This pension scheme provides that after retirement of employees pension will be given.

2. Or the pension to be given to widow or children of employee after his death.

3. The normal pension of employee is equal to the 50% of his last drawn salary.

Family Pension-

1. Means the pension given to the widow of employee or his children after his death.


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2. Widow pension is given till the death of widow or till her second marriage.

3. Children pension is given to the children till they become major.

4. The widow pension is 50% of employees pension and children pension is 25% of employees pension up to maximum of 2 children.

Nature of Payment of Pension-

1. Pension maybe given on monthly basis or on annual basis.

2. Some times pension is given for many years in lump sum it is known as commuted pension.

3. The pension given to employees may be commuted as per the choice of employer and employee. If the pension is given for many years in lump sum then after those years if the employee is alive then pension will be given to employees after that time period also.

Employee’s Deposit Linked Insurance (Sec 6C)

1. Every employer upon whom EPF Act is applicable must pay insurance premium to the Central Board of Trustees.

2. The CBT shall maintain an insurance fund out of which some amount is given to the employee on his accidents or illness. Similarly if the employee expires than amount is given to family of employee.

3. The Deposit Link Insurance is a benefit provided by employer to employees compulsorily under this law.

4. The insurance premium paid by employer will be ¼ of the total contribution in Provident Fund.

Calculation of Amount Due from Employer (Sec 7)

1. PF Department has Provident Fund Commissioners and they may calculate money due from employer.


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2. For calculation of money the audited P&L A/c and Balance Sheet of the employer is verified. It is assumed that P&L A/c and Balance Sheet are correct and can be relied upon.

Inquiry Officer-

Under EPF Act, enquiry officers are appointed and these enquiry officers have the power of court. The enquiry officers will carry out the inquiry and investigations so that EPF contribution can be calculated.

Inquiry Officers may order the employers to produce documents and books of accounts at the same time these officers may issue order to the employer for payment of PF contribution, pensions and deposit link insurance premium.

Own Provident Fund of Employer-

Authorizing Employer to maintain PF Account (Sec 16A)

1. IF the employer has 100 or more employees and the employer and majority of employees makes an application to the PF Commissioner then the employer is authorizes to maintain his own Provident Fund.

2. Employer will create a trust and the trust will maintain the fund as per the terms and conditions of PF Commissioner and Central Government.

3. Permission will be given to employer only if he has not committed any default in payment of provident fund in last 3 years.

4. The EPF Trust will manage contribution and when the employee retires then trust will make the payment to employee.

Transfer of Accounts (Sec 17A)

If an employer has Provident Fund and his employee leaves the employment and joins new employment then in the new employment if he has a new provident fund then the provident fund balance of employee will be transferred to new employment if the employee


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desires. However if the employee does not want to transfer the PF balance with new employer then amount will be withdrawn and in the new employment a new PF A/c will be started from beginning.

Following are the circumstances

1. If PF A/c is applicable to both the establishments then if the employee desires then PF will be transferred.

2. If the law is applicable to earlier establishment and not on subsequent establishment then also PF will be transferred to new establishment if the employee desires.

APPELLATE TRIBUNAL (Sec 7D)

1. The Central Government constitutes EPF Appellate Tribunal. This tribunal is framed to provide for dispute solving mechanism so that disputes under EPF Act can be resolved without wastage of time.

2. Every tribunal has a Presiding Officer who is qualified to be a high court judge or district judge.

3. The tribunal will work with all the powers of court given under Indian Penal Code (IPC).

4. It has power to decide upon any of the dispute relating to EPF Act.

5. The Presiding Officer of tribunal will have the power to pass such orders which are necessary.

6. The Presiding Officer shall hold the office for maximum 5 years.

Definitions (Sec.2)

Appropriate Government-

Government which has power to make rules and regulations regarding the EPF Act.


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Following are the appropriate Government

1. For establishment working in area of Central Government, then Central Government is appropriate Govt.

2. For working is area of State Government, then State Government is the appropriate Govt.

Inspectors (Sec 13)

Inspectors are being appointed by appropriate government for the purpose of Act and Scheme. Inspectors are required to collect the information from employers from whom any amount is due.

He is to make copies of, or take extract from any book, register or other document maintained in relation to the employer or establishment, where he has reason to believe that any offence has been committed.

Penalties for Non-Payment (Sec 14)

1. Employer will be penalized if he is found that knowingly or by making false statement he was avoiding payment.

2. Such penalty is in the form of imprisonment for a term extending to one year or of fine extending to Rs. 5000 or both.

Basic Wages-

1. Cash value of any food possession.

2. Other payments made in form of cash (eg. D.A., HRA, bonus, commission, etc.)

3. any present from employer.

Employer- means

1. In relation to establishment, the owner or occupier of the factory including the agent of such owner of occupier.

2. The legal representative of the deceased owner or occupier.


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Employee –

Means any person who is employed for wages in any kind of work, manual or otherwise, in or in connection with work of an establishment, and who gets his wages directly or indirectly from employer.


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Negotiable Instruments Act, 1881Negotiable Instruments Act, 1881Negotiable Instruments Act, 1881


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“Promissory Note”

• Instrument in writing• Containing unconditional undertaking• Signed by the maker• To pay a certain sum of money• To a person / order / bearer

Section 4


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Bill of Exchange• Written instrument• Unconditional order• Signed by the maker• Directing a person to pay a certain sum of

money• To certain person / order / bearer

Section 5 ……….. Contd ……


4

Bill of ExchangeFollowing are not considered as

“uncertainties” or ”conditions in” Bill of Exchange and does not make it “conditional”

• Time to pay• Lapse of period if mentioned• Occurrence of any specified event,• Installments expressed• Interest clause


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Cheque• Cheque is a bill of exchange• Drawn on a particular / specified

Banker• Not expressed to be payable

otherwise than on demandContd. …….

Section 6


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Cheque in Electronic Form• Cheque which is the exact mirror

image of a paper cheque• Generated, written and signed in a

secure system ensuring minimum required safety standards

• Using digital signature and asymmetric crypto system

Section 6 – Explanation I(a)


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Cheque - Truncated• Cheque truncated during the course of a

clearing cycle either by the clearing house or by the bank whether paying or collecting

• Immediately on generation of an electric image for transmission, substituting the further physical movement of the cheque in clearing

Section 6 – Explanation I (b)


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Drawer - Drawee

• Drawer is the maker of the Bill of Exchange or Cheque

• Drawee is the person thereby directed to pay

Section 7


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Drawee in case of need

• In bill of exchange if additional name of drawee is given that is called drawee in case of need. However this is not applicable to cheque.


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Acceptor

• After the drawee of a bill signs his consent upon the bill and delivers the same or gives notice of such signing to the holder he is called the acceptor.


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Acceptor for honor

• Non accepted bill when “noted and protested” but then subsequently accepted by the person for honor of the drawee, such person is called acceptor for honor.


12

Payee

• Person named in the instrument• To whom or to whose order the

money is directed to be paid


13

HolderHolder is the one who by the fact that

he is holding• Promissory note, bill of exchange or

cheque• In his own name• Entitled for the amount


14

Holder in due course• For consideration becomes the possessor

of pro-note, bill of exchange or cheque• The instrument must be payable to the

bearer• Possession must be before the amount

becomes payable• Possession must be without having

sufficient cause to believe that any defect existed in the title of the person from whom he derived the title

Section 9


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Right of holder in due course

• Holder in due course gets the right thereon of earlier holder

Section 53


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Payment in due course• Payment in accordance with the apparent

tenor of the instrument• In good faith and without negligence• To a person in possession of the

instrument• Under circumstances which do not afford

reasonable ground for believing that he is not entitled to receive payment

Section 10


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Negotiable instrument

• Negotiable Instrument means a-- Promissory note

-- Bill of Exchange-- Cheque payable either to

order or to bearerSection13


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Negotiation*** When a Promissory Note, Bill of

Exchange or Cheque is transferred to any person

so as to constitute that person the holder thereof

it is called negotiationSection 14


19

Ambiguous Instrument• When the instrument is such

that it can be construed either as promissory note or bill of exchange the holder may at his discretion elect to treat it either way

Section 17


20

Amount in words and figures

• When amount written in words and figures differ, then amount written in WORDS shall be treated as correct

Section 18


21

Instrument payable on demand

• A promissory note or bill of exchange in which no time for payment is specified is instrument payable on demand

• A cheque is always instrument payable on demand

Section 19


22

Bill payable at sight / after sight

• Bill payable to drawee at sight –payable on presentation / on demand

• Bill payable after sight – payable after some time as indicated in the bill (This is not applicable to cheque)

Section 21


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Sight bill payable on demand to bearer - prohibition

• Sight bill payable to bearer on demand, without endorsement from the holder, can not be drawn by any one except the Central Government.

• This is as per section 31 of the R. B. I. Act, 1934. Such bill amounts to a bank note and only the Govt. can issue bank note as per the said Act.


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Maturity date of bill• Date at which payment of bill is due

• For bills other than payable on demand there are three grace days for payment

Section 22


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Holiday on payable date

• If the maturity date of payment of bill is holiday, then the due date of payment is next day of holiday

Section 25


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Capacity and binding effect of making a bill

• Any person capable of making a contract can make a bill

• A person may bind himself and be bound by making, drawing, accepting, indorsing, delivery and negotiation of a promissory note, bill of exchange or cheque

Section 26


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Drawer’s liability to holder

• Drawer of a bill of exchange or cheque is bound in case of dishonor by the drawee or acceptor to compensate the holder, provided due notice of dishonor is given

Section 30


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Liability of drawee

• If the drawee is duly required to pay but commits default in payment, then the drawee must pay loss or damage caused by such default

Section 31


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Liability of holder in due course

• Every prior party to a negotiable instrument is liable thereon to a holder in due course until the instrument is duly satisfied

Section 36


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Negotiation

• Negotiation of the bill may be by actual delivery or by constructive delivery

Section 46


31

Negotiationby endorsement and delivery

• A promissory note, bill of exchange or a cheque payable to order is negotiable by the holder by endorsement and delivery

Section 48


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Endorsement in “blank” and ”full”

• If the endorser signs his name only, the endorsement is said to be “in blank”

• If the endorser adds a direction to pay the amount mentioned in the instrument to, or to the order of, a specified person the endorsement is said to be “in full”

Section 16


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Effect of endorsement

• Endorsement followed by delivery of the bill transfers to the endorsee the property therein with right of future negotiation.

• However by express words further negotiation can be restricted

Section 50


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Who can negotiate a bill

• Every sole maker, drawer, payee or endorsee may negotiate a bill, provided the negotiability of such instrument has not been restricted

Section 51


35

Bill obtained wrongly

• No remedy is available if the negotiable instrument is obtained by unlawful means or for unlawful consideration

Section 51


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Bill turning void

• Material alteration makes the bill void (illegal), unless it was made to carryout the common intention of the original parties

Section 87


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Dishonor of bill - how• Dishonor of the bill may be by non-

acceptanceSection 91

• Dishonor of the bill may be by non-payment

Section 92


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Notice of dishonorby the holder

• When promissory note, bill of exchange or cheque is dishonored by non-acceptance or non-payment

the holder thereofmust give a notice of dishonor

to all other parties to whom the holder seeks to make liable

Section 93


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On receiving notice of dishonor

• Party receiving the notice of dishonor must transmit the notice to earlier party (in chain of negotiation)

Section 94


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Noting of dishonor• Dishonor of a promissory note or bill

of exchange may be got noted by the holder from NOTARY

• Such noting must contain date of dishonor and the reason of dishonor, if given

Section 99


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Protest

• Certificate given by the Notary for noting the dishonor of the negotiable bill is called protest

Section 100


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Effect of protest

• For protested bill Courts will presume the fact of dishonor, until the contrary is proved

Section 119


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Presumptions about Negotiable Instruments

Until contrary is proved, presumptions are

1. It has consideration2. Date is as shown/seen on the instrument3. Time of acceptance – within reasonable time4. Order of endorsement – as seen apparently on

the instrument5. Stamp – properly paid, in case of lost instrument6. Holder is in due course

Section 118


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General crossingWhen cheque bears across its face1. Addition of words ”and company” or its

short form or2. Two parallel lines or3. Lines with words ”and company” or its

short form or words ”not negotiable”

Section 123


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Special Crossing

• When across the face of the cheque BANK’S name is written it is called Special Crossing

Section 124


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Crossing after issueCheque can be crossed in three ways after issue

1. Initially “General Crossing” – Holder may cross it specially

2. Initially “General or Special Crossing” – Holder may add words “Not Negotiable”

3. Banker’s “General or Special Crossing” – Banker may again cross specially to another banker for collection as his agent

Section 125


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Crossing to more than one banker

• If the cheque bears special crossing to more than one Banker, the Banker on whom cheque is drawn shall refuse payment

Section 127


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Payment in due courseWhen the Banker on whom the cheque

is drawn,- has paid the cheque in due course- the paying Banker shall be entitled to the right and position as if they have paid to the true owner thereof

Section128


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Liability of paying bankerIf paying banker pays1. General crossed cheque not to the

banker or2. Specially crossed cheque not to the

specified banker is liable to the true owner for loss

Section 129


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Protection to collecting banker

A banker who receives the payment of a cheque, crossed specially or generally,

- for customer in good faith, without negligence- shall not be liable to the true owner of the cheque- in case the title of the cheque is proved defective- only for the reason that he has received the

payment

Section 131


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Collection of DRAFT• Provisions of Section 123 to 131 stated

above (about crossing and collection) apply to DRAFTS as if the draft is a cheque

• Explanation – protection under Section 131 is available even if bank gives credit before collection of the cheque

Section 131A


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Bill in foreign country• In absence of contract a bill made in the

foreign country is governed by,- For all essential matters law of the place

where it is made- For respective liabilities of acceptor and

endorser by the law of the place where the instrument is made payable

Section 134


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Dishonor of cheque –Offence (Section 138)

Where any cheque drawn by a person on his account with bank

- for payment to another person for discharge of any liability or debt, in whole or part

- is returned unpaid for the reason1. money in the account is less to honor the cheque

or2. it exceeds the amount arranged to be paid from

that account by an agreement made with the bank or

3. the payment of the cheque is stopped by the drawer of the cheque ……… contd.


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Such person, drawer of cheque whose cheque is returned unpaid,

- shall be deemed to have committed offence and, without provisions to other provision of law,

- shall be punished with imprisonment for a term which may extend to one year or fine up to twice the amount of the cheque or both ………. Contd.


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These provisions apply only if1. Cheque is presented within six months

from its date of drawing2. Payee gives notice in writing about

dishonor of cheque within 30 days from receipt of information of dishonor from the bank and demands payment within 15 days

3. The drawer does not make payment as demanded


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Presumption about holders possession

• Unless contrary is proved it shall be always presumed that the holder of the cheque has received the same for the discharge of any debt or liability in full or part

Section 139


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Cognizance of offence u/s 138

• No cognizance of offence u/s 138 can be taken by the Court unless complaint in writing is filed within one month from date of notice demanding payment

Section 142


THE PAYMENT OF GRATUITY ACT 1972 · THE PAYMENT OF GRATUITY ACT 1972 . GRATUITY ~~ GIFT . MEANING ....

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