LABOUR LAW-II

Course Coordinator
Mr. Jagdish Khobragade Subject: Labour Law –II,
Assistant Professor of Law Class: B.A.LLL.B. (Hons.), VIII
semester

MAHARASHTRA NATIONAL LAW UNIVERSITY, NAGPUR

 Chapter V
Gratuity

• Latin word – Gratuitous

• Gratuity means a lump sum payment made by
an employer as the retrial reward for his past
service when his employment is terminated.
• Retiring benefit-Long and Unblemished
service.
 Chapter V
Gratuity

• Section 53 to Section 58
• Payment of Gratuity, 1972
• Origin
• Objectives of the Act
 Chapter V
Gratuity

• Section 53: Payment of Gratuity

1) 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; or
(d) on termination of his contract period under fixed term employment; or
(e) on happening of any such event as may be notified by the Central Government:
• Provided that in case of working journalist as defined in clause (f) of section 2 of the
Working Journalists and Other Newspaper Employees (Condition of Service) and
Miscellaneous Provisions Act, 1955, the expression "five years" occurring in this sub-section
shall be deemed to be three years:
• Provided further that 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 or expiration of fixed term employment or happening of any such event as may
be notified by the Central Government:
 Chapter V
Gratuity

• Section 53: Payment of Gratuity

• Provided also that in the case of death of the employee, gratuity payable to him
shall be paid to his nominee or, 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 competent authority as may be notified by the appropriate
Government who shall invest the same for the benefit of such minor in such bank
or other financial institution, as may be prescribed by the appropriate
Government, until such minor attains majority.
• (2) For every completed year of service or part thereof in excess of six months, the
employer shall pay gratuity to an employee at the rate of fifteen days' wages or such
number of days as may be notified by the Central Government, based on the rate of
wageslast drawn by the employee concerned:
 Chapter V
Gratuity

• Section 53: Payment of Gratuity

• Provided that in the case of a piece-rated employee, daily wages shall be
computed on the average of the total wages received by him for a period of three
months immediately preceding the termination of his employment, and, for this
purpose, the wages paid for any overtime work shall not be taken into account:
• Provided further that in the case of an employee who is employed in a seasonal
establishment and who is not so employed throughout the year, the employer shall
pay the gratuity at the rate of seven days' wages for each season:
• Provided also that in the case of an employee employed on fixed term
employment or a deceased employee, the employer shall pay gratuity on pro rata
basis.
 Chapter V
Gratuity

• Section 53: Payment of Gratuity

• (3) The amount of gratuity payable to an employee shall not exceed such amount
as may be notified by the Central Government.
• (4) For the purpose of computing the gratuity payable to an employee who is
employed, after his disablement, on reduced wages, his wages for the period
preceding his disablement shall be taken to be the wages received by him during
that period, and his wages for the period subsequent to his disablement shall be
taken to be the wages as so reduced.
• (5) Nothing in this section shall affect the right of an employee to receive better
terms of gratuity under any award or agreement or contract with the employer
 Chapter V
Gratuity

• Section 53: Payment of Gratuity

(6) Notwithstanding anything contained in sub-section (1),—
(a) the gratuity of an employee, whose services have been terminated for any
act, wilful omission or negligence causing any damage or loss to, or destruction of,
property belonging to the employer, shall be forfeited to the extent of the damage or
loss so caused;
(b) the gratuity payable to an employee may be wholly or partially forfeited—
(i) if the services of such employee have been terminated for his riotous
or disorderly conduct or any other act of violence on his part, or
(ii) if the services of such employee have been terminated for any act
which constitutes an offence involving moral turpitude, provided such offence
is committed by him in the course of his employment.
 Chapter V
Gratuity

• Section 53: Payment of Gratuity

• Explanation 1.— For the purposes of this Chapter, employee does not include any
such person who holds a post under the Central Government or a State
Government and is governed by any other Act or by any rules providing for
payment of gratuity.
• Explanation 2.— For the purposes of this section, disablement means such
disablement as incapacitates an employee for the work which he was capable of
performing before the accident or disease, resulting in such disablement.
• Explanation 3.— For the purposes of this section, it is clarified that in the case of a
monthly rated employee, the fifteen days' wages shall be calculated by dividing
the monthly rate of wages last drawn by him by twenty-six and multiplying the
quotient by fifteen.
• Shri Digvijay Woollen Mills Ltd. ... vs Mahendra Prataprai Buch Etc, LNID 1980 SC
273, 1980 AIR 1944, 1981 SCR (1) 64.
• Payment of Gratuity Act, 1972 S. 4(2) 15 days wages as gratuity Mode of ,
calculation Whether monthly wages to be divided by 30 and then multiplied by 15
or whether monthly wages to be divided by 26 and then multiplied by 15.
• In these appeals the question is: How to calculate 15 days wages for the purpose
of payment of gratuity in terms of S. 4(2) of the Payment of Gratuity Act .
• Held: The view of the High Court in following the pattern of fixation of wages by
the method of 26 working days ? appears to be legitimate and reasonable.
Ordinarily, of course, a month is understood to mean 30 days, but the manner of
calculating gratuity payable under the Act to the employees the work for 26 days a
month followed by the Gujarat High Court cannot be called perverse.
• Treating monthly wages as wages for 26 working days is not anything unique or
unknown as is evident from the Supreme Court decision in Delhi Cloth and
General Mills Limited v. Workmen, .
• Bakshish Singh vs Darshan Engineering Works - LNIND 1993 SC 854 (1994) 1 SCC
9(1994) 3 SCC 99AIR 1994 SC 251LNIND 1993 SC 854
• Constitution of India — Arts. 19(1)(g) and 19(6) — Payment of Gratuity Act, 1972—
Sec. 4(1)(b) —Provision of a period of 5 years service as qualifying period in Sec.
4(1)(b) is one of minimum service conditions made available to employees
notwithstanding financial capacity of employer to bear its burden and it is
reasonable restriction on the right of the employer to carry on business and is
constitutionally valid.
• BALBIR KAUR AND ANOTHER V. STEEL AUTHORITY OF INDIA LTD. AND OTHERS - LNIND 2000 SC 828 (2000) 6 SCC
4932000 (4) SCALE 6702000 SCC (L&S) 767AIR 2000 SC 1596JT 2000 (6) SC 281JT 2000 (7) SC 135[2000] 2 LLJ 1[2000]
II LLJ 1LNIND 2000 SC 828

• Service Law—Compassionate employment—Family benefit scheme—Validity of—Consequences thereof on existing

welfare measures—Respondents denying request for compassionate employment on ground of family benefit
scheme—Whether family benefit scheme could be equated with benefit of compassionate appointment—
Constitution of India, art 12—Employees Provident Fund & Miscellaneous Provisions Act 1952—Payment of Gratuity
Act 1972, s 4—The appellants, who were the dependents of the deceased employees, made a request for
compassionate employment which was turned down by the respondents. Aggrieved, the appellants filed a writ
petition before the High Court. The High Court held that after the introduction of the family benefit scheme in terms
of the NJSC tripartite agreement in 1989, the question of compassionate appointment was not to be considered. The
appellants appealed.—The appellants contended that the requirement of compassionate appointment was an
existing constitutional obligation to provide for an egalitarian society.—According to the respondents, however, a
family being unable to obtain regular salary from the management, could avail of the scheme by depositing the lump
sum provision fund and the gratuity amount with the company, in lieu of which, the management would make a
monthly payment equivalent to the basic pay together with dearness allowance last drawn till the normal date of
superannuation of the employment in question. An adaptation of the family benefit scheme was meant to provide
the employees' family an assured or regular monthly income, while the bulk amount deposited by way of the
provident fund and the gratuity with the management remained intact.—Held, allowing the appeals:—The family
benefit scheme cannot in any way be equated with the benefit of compassionate appointments. The sudden jerk in
the family by reason of the death of the bread earner can only be absorbed by some lump sum amount being paid to
the family (see para 13).—There should have been an option available either to have a compassionate appointment
provided, however, the deceased employee's representative was otherwise competent to hold the post or to adapt
the family pension fund by way of a deposit of provident fund and gratuity amounts. Having due regard to the
constitutional philosophy, to decry a compassionate employment opportunity would neither be fair nor reasonable
(see paras 18 and 19).
• The Managing Director (M.D.), ... vs Shri Purushottam S/O
Asaram Raut, (2015) 1 Mah LJ 342(Bom).

An obligation has been cast on employer to determine

amount of gratuity. On Failure on part of employer to
comply with its obligation under Section 7(2), question of
limitation for claiming gratuity would not arise.
• Section 54. Continuous Service
For the purposes of this Chapter,—
(A) 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), lay-off, 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 Code;
• (B) where an employee (not being an employee employed in a seasonal establishment) is not in
continuous service within the meaning of clause (A), 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—
(i) one hundred and ninety days, in the case of any employee employed below the ground in a mine or in
an establishment which works for less than six days in a week; and
(ii) 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— (i) 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
ii) one hundred and twenty days, in any other case.
Explanation.— For the purposes of this clause, the number of days on
which an employee has actually worked under an employer shall include the days on which—
(i) 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;
(ii) he has been on leave with full wages, earned in the previous year;
(iii) he has been absent due to temporary disablement caused by
accident arising out of and in the course of his employment; and
(iv) 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
twenty-six weeks;.
(C) where an employee, employed in a seasonal establishment, is not in
continuous service within the meaning of clause (A), 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 per cent. of the number
of days on which the establishment was in operation during such period.
• NETRAM SAHU VERSUS STATE OF CHHATTISGARH AND ANOTHER LNIND 2018 SC 111
• Employment & Labour Law—Gratuity—Period of Service—Payment of Gratuity Act, 1972,
Section 2A—Application filed for payment of gratuity by Appellant/regularised Daily
Wager before Controlling authority was allowed and same confirmed on appeal—On
petition filed by Respondent/State, orders of Controlling and Appellate authorities were
set aside—Appeal filed by Appellant dismissed, hence this appeal by special leave—
Whether High Court justified in holding that Appellant was not entitled to claim gratuity
from Respondent for services rendered by him.
• Held, State regularized services of Appellant—Appellant became entitled to count his
total period of service for claiming gratuity amount subject to his proving continuous
service under Section 2A—Appellant duly proved same—Date from which services were
regularized was of no significance for calculating total length of service for claiming
gratuity amount once services were regularized by State—Genuine claim of Appellant,
denied by State—Impugned judgment of High Court set aside and orders of Controlling
Authority and Appellate Authority are restored with cost—Appeal allowed.
• Lalappa Lingappa and others Versus Laxmi Vishnu Textile Mills, Sholapur - LNIND 1981 SC 70 (1981)
2 SCC 2381981 (1) SCALE 268AIR 1981 SC 852[1981] 1 LLJ 308[1981] 2 SCR 796LNIND 1981 SC 70
• Payment of Gratuity Act , 1972 S. 2 (c) Explanation I to that section Actually employed Meaning of Continuous
service What is?

Held: Two questions arising for a decision in these appeals are: (1) Whether permanent employees are entitled to
payment of gratuity under S.4(1) for the years in which they remained absent without leave for a number of days
in a year and had actually worked for less than 240 days due to absence without leave and (2) whether the badli
employees are entitled to such gratuity on becoming permanent employees, for the badli period in respect of the
years in which there was no work allotted to them due to their failure to report to duty. It is important to bear in
mind that in Explanation I the Legislature has used the words actually employed ?. If it was contemplated by
Explanation I that it was sufficient that there should be a subsisting contract of employment, then it was not
necessary for the Legislature to have used the words actually employed ?. It is not permissible to attribute
redundancy to the Legislature to defeat the purpose of enacting the Explanation. The expression actually
employed in Explanation I to S.2(c) must in the context in which it occurs, must mean actually worked ?.
• The High Court was right in holding that the permanent employees were not entitled to payment of gratuity for
the years they remained absent without leave and had actually worked for less than 240 days in a year.
• The badli employees are not covered by the substantive part of the definition of continuous service in S.2(c) but
come within Explanation I and, therefore, are not entitled to payment of gratuity for the badli period, i.e., in
respect of the years in which there was no work allotted to them due to their failure to report to duty.
•
Chandrabhaga Machindra Dudhade v. Mahatma Phule Krushi Vidyapeeth, Ahmednagar, 2016 LAB. I. C.
4437 ::2016 (5) ABR 752

(A) Payment of Gratuity Act (39 of 1972) S. 4 , 7 — Payment of Gratuity (Maha- rashtra) Rules (1972),
R 10 — Payment of gratuity — Claim for — Limitation — Act by itself does not prescribe any
limitation for claiming gratuity — Though Rules (1972) prescribe limitation, payment of gratuity
cannot be denied merely on ground of delay since delay caused beyond limitation prescribed by
Rules, can be condoned (Para 16)
(B) Industrial Disputes Act (14 of 1947) S. 2 (J) — Payment of Gratuity Act (39 of 1972), Ss 4, 7 —
Payment of Gratuity (Maharashtra) Rules (1972), R 10 — Gratuity — Claim for — By Employees of
Agriculture University — Provision of payment of Gratuity Act (1972) are applicable to workers in
Agriculture University (Para 21)
(C) Payment of Gratuity Act (39 of 1972) S. 4 , 7 — Gratuity — Claim for — By workers in
AgricultureUniversity — Payment of Gratuity Act becomes applicable to every employee who has
workedcontinuously for five years — Notwithstanding whether, he is a permanent employee or not
— Noexception is created by Payment of Gratuity Act that the Act would not be applicable to
thoseemployees who are not permanent — University was under a legal obligation to pay gratuity to
itsWorkers (Paras 24, 25)
Section 55. Nomination
1) Each employee, who has completed one year of service, shall make, a nomination within such
time, in such form and in such manner, as may be prescribed by the appropriate Government.
(2) An employee may, in his nomination, distribute the amount of gratuity payable to him under
this Chapter amongst more than one nominee.
(3) If an employee has a family at the time of making a nomination, the nomination shall be made
in favour of one or more members of his family, and any nomination made by such employee
in favour of a person who is not a member of his family shall be void.
(4) If at the time of making a nomination the employee has no family, the nomination may be
made in favour of any person or persons but if the employee subsequently acquires a family,
such nomination shall forthwith become invalid and the employee shall make, within such
time as may be prescribed by the appropriate Government, a fresh nomination in favour of
one or more members of his family.
(5) A nomination may, subject to the provisions of sub-sections (3) and (4), be modified by an
employee at any time, after giving to his employer a written intimation in such form and in
such manner as may be prescribed by the appropriate Government, of his intention to do so.
• (6) If a nominee predeceases the employee, the interest of the nominee shall revert
to the employee who shall make a fresh nomination, in the form prescribed by the
appropriate Government, in respect of such interest.
• (7) Every nomination, fresh nomination or alteration of nomination, as the case
may be, shall be sent by the employee to his employer, who shall keep the same in
his safe custody.
Section 56. Determination of amount of gratuity.
(1) A person who is eligible for payment of gratuity under this Chapter or any
person authorized, in writing, to act on his behalf shall send a written application to the employer,
within such time and in such form, as may be prescribed by the appropriate Government, for
payment of such gratuity.
(2) As soon as gratuity becomes payable, the employer shall, whether an application
referred to in sub-section (1) has been made or not, determine the amount of gratuity and give
notice in writing to the person to whom the gratuity is payable and also to the competent
authority specifying the amount of gratuity so determined.
(3) The employer shall arrange to pay the amount of gratuity within thirty days from the date it
becomes payable to the person to whom the gratuity is payable.
(4) If the amount of gratuity payable under sub-section (3) is not paid by the employer within the
period specified in sub-section (3), the employer shall pay, from the date on which the gratuity
becomes payable to the date on which it is paid, simple interest at such rate, not exceeding the
rate notified by the Central Government from time to time for repayment of long term
deposits:
Provided that no such interest shall be payable if the delay in the payment is due to the fault of the
employee and the employer has obtained permission in writing from the competent authority
for the delayed payment on this ground.
• Section 56. Determination of amount of gratuity.

• (5) (a) If there is any dispute as to the amount of gratuity payable to an employee
under this Chapter or as to the admissibility of any claim of, or in relation to, an employee for
payment of gratuity, or as to the person entitled to receive the gratuity, the employer shall
deposit with the competent authority such amount as he admits to be payable by him as
gratuity.
• (b) Where there is a dispute with regard to any matter or matters specified in
• clause (a), the employer or employee or any other person raising the dispute may make an
application to the competent authority in the form prescribed by the appropriate Government
for deciding the dispute.
• (c) The competent authority shall, after due inquiry and after giving the parties to the dispute
a reasonable opportunity of being heard, determine the matter or matters in dispute and if, as
a result of such inquiry any amount is found to be payable to the employee, the competent
authority shall direct the employer to pay such amount or, as the case may be, such amount as
reduced by the amount already deposited by the employer.
• (d) The competent authority shall pay the amount deposited, including the excess amount, if
any, deposited by the employer, to the person entitled thereto.
• (e) As soon as may be after a deposit is made under clause (a), the competent authority shall
pay the amount of the deposit—
• Section 56. Determination of amount of gratuity.
(i) to the applicant where he is the employee; or
(ii) where the applicant is not the employee, to the nominee or, as the case may
be, the guardian of such nominee or heir of the employee if the competent authority
is satisfied that there is no dispute as to the right of the applicant to receive the
amount of gratuity.
(6) For the purpose of conducting an inquiry under sub-section (5), the competent
authority shall have the same powers as are vested in a court, while trying a suit,
under the Code of Civil Procedure, 1908, in respect of the following matters,
namely:—
(a) enforcing the attendance of any person or examining him on oath;
(b) requiring the discovery and production of documents;
(c) receiving evidence on affidavits;
(d) issuing commissions for the examination of witnesses.
(7) Any inquiry under this section shall be a judicial proceeding within the meaning of
section 193, section 228 and for the purpose of section 196 of the Indian Penal Code.
• Section 56. Determination of amount of gratuity.

(8) Any person aggrieved by an order under sub-section (5) may, within sixty days
from the date of the receipt of the order, prefer an appeal to the appropriate
Government or such other authority as may be specified by the appropriate
Government in this behalf:
Provided that the appropriate Government or the appellate authority, as the case may
be, may, if it is satisfied that the appellant was prevented by sufficient cause from
preferring the appeal within the said period of sixty days, extend the said period
by a further period of sixty days:

Provided further that no appeal by an employer shall be admitted unless at the time
of preferring the appeal, the appellant either produces a certificate of the
competent authority to the effect that the appellant has deposited with him an
amount equal to the amount of gratuity required to be deposited under sub-
section (5), or deposits with the appellate authority such amount.
• (9) The appropriate Government or the appellate authority, as the case may be,
may, after giving the parties to the appeal a reasonable opportunity of being
heard, confirm, modify, or reverse the decision of the competent authority.
• Section 57. Compulsory insurance.
((1) With effect from such date as may be notified by the appropriate Government in
this behalf, every employer, other than an employer or an establishment
belonging to, or under the control of, the Central Government or a State
Government, shall, subject to the provisions of sub-section (2), obtain an
insurance in the manner prescribed by the Central Government, for his liability for
payment towards the gratuity under this Chapter, from any insurance company
regulated by the Authority as defined under clause (b) of sub-section (1) of section
2 of the Insurance Regulatory and Development Authority Act, 1999:
Provided that different dates may be appointed for different establishments or class
of establishments or for different areas..
(2) The appropriate Government may, subject to such conditions as may be prescribed
by the Central Government, exempt any employer who had already established an approved
gratuity fund in respect of his employees and who desires to continue such arrangement,
and every employer employing five hundred or more persons who establishes an approved
gratuity fund in the manner prescribed by the Central Government from the provisions of
sub-section (1).
• Section 57. Compulsory insurance.
(1) With effect from such date as may be notified by the appropriate Government in this
behalf, every employer, other than an employer or an establishment belonging to, or
under the control of, the Central Government or a State Government, shall, subject to
the provisions of sub-section (2), obtain an insurance in the manner prescribed by the
Central Government, for his liability for payment towards the gratuity under this
Chapter, from any insurance company regulated by the Authority as defined under
clause (b) of sub-section (1) of section 2 of the Insurance Regulatory and Development
Authority Act, 1999:
Provided that different dates may be appointed for different establishments or class of
establishments or for different areas..
(2) The appropriate Government may, subject to such conditions as may be prescribed by the Central
Government, exempt any employer who had already established an approved gratuity fund in
respect of his employees and who desires to continue such arrangement,
and every employer employing five hundred or more persons who establishes an approved
gratuity fund in the manner prescribed by the Central Government from the provisions of
sub-section (1).
(3) For the purposes of effectively implementing the provisions of this section, every
employer shall within such time as may be prescribed by the Central Government get his
establishment registered with the competent authority in the manner prescribed by the
appropriate Government and no employer shall be registered under the provisions of this
• Section 57. Compulsory insurance.
section unless he has taken an insurance referred to in sub-section (1) or has
established an approved gratuity fund referred to in sub-section (2).
(4) The appropriate Government may provide for the composition of the Board of
Trustees of the approved gratuity fund and for the recovery by the competent
authority of the amount of the gratuity payable to an employee from the insurer
with whom an insurance has been taken under sub-section (1), or as the case may
be, the Board of Trustees of the approved gratuity fund, in such manner as may be
prescribed.
(5) Where an employer fails to make any payment by way of premium in respect of the
insurance referred to in sub-section (1) or by way of contribution to an approved
gratuity fund referred to in sub-section (2), he shall be liable to pay the amount of
gratuity due under this Chapter (including interest, if any, for delayed payments)
forthwith to the competent authority.
Explanation.— In this section, "approved gratuity fund" shall have the same meaning
as assigned to it in sub-section (5) of section 2 of the Income-tax Act, 1961
(5) " approved gratuity fund" means a gratuity fund which has been and continues to be
approved by the 1 Chief Commissioner or Commissioner] in accordance with the rules
contained in Part C of the Fourth Schedule.
Section 58. Competent authority.

(1) The appropriate Government may, by notification, appoint any officer of that
Government having such qualifications and experience as may be prescribed by that
Government to be a competent authority for implementation of any provision of this
Chapter for such area as may be specified in the notification.
(2) Where more than one competent authority has been appointed for any area, the
appropriate Government may, by general or special order, regulate the distribution of
business among them.
(3) Any competent authority may, for the purpose of deciding any matter referred to
him for decision under this Chapter, choose one or more persons possessing special
knowledge of any matter relevant to the matter under reference to assist him in
holding the inquiry relating thereto.
 Chapter III
Employees Provident Fund

• Section 14 to Section 23
• The Employees Provident Fund and
Miscellaneous Provisions Act, 1952
• Origin
• Objectives of the Act
 Chapter III
Employees Provident Fund

Section 14. Appointment of officers of Central Board.

Section 15. Schemes.
1) The Central Government may, by notification—
(a) frame a scheme to be called the Employees' Provident Fund Scheme for
which the provident funds shall be established under this Chapter for employees or
for any class of employees and specify the establishments or class of establishments
to which the said scheme shall apply;
(b) frame a scheme to be called the Employees' Pension Scheme for the purpose
of providing for—
(i) superannuation pension, retiring pension or permanent total
disablement pension to the employees of any establishment or class of
establishments to which this Chapter applies;
(ii) widow or widower's pension, children pension or orphan pension
payable to the beneficiaries of such employees; and
(iii) nominee pension;
 Chapter III
Employees Provident Fund

Section 15. Schemes.

1) The Central Government may, by notification—
(c) frame a scheme to be called the Employees' Deposit Linked Insurance
Scheme for the purpose of providing life insurance benefits to the employees of any
establishment or class of establishments to which this Chapter applies;
(d) frame any other scheme or schemes for the purposes of providing social
security benefits under this Code to self-employed workers or any other class of
persons; and
e) modify any scheme referred to in clauses (a), (b), (c) and (d) by adding thereto, amending or
varying therein, either prospectively or retrospectively.
(2) Subject to the provisions of this Chapter, the schemes referred to in clauses (a), (b)
and (c) of sub-section (1) may provide for all or any of the matters respectively specified in
Part A, Part B and Part C of the Fifth Schedule.
(3) The schemes may provide that all or any of its provisions shall take effect either
prospectively or retrospectively on and from such date as may be specified in that behalf in the
scheme.
 Chapter III
Employees Provident Fund

Section 16. Funds.

(1) The Central Government may, for the purposes of—
(a) the Provident Fund Scheme, establish a Provident Fund where the contributions paid by the
employer to the fund shall be ten per cent. of the wages for the time being payable to each
of the employees (whether employed by him directly or by or through a contactor), and the
employee's contribution shall be equal to the contribution payable by the employer in
respect of him and may, if any employee so desires, be an amount exceeding ten per cent. of
the wages, subject to the condition that the employer shall not be under an obligation to pay
any contribution over and above his contribution payable under this section:
Provided that in its application to any establishment or class of establishments which the Central
Government, after making such inquiry as it deems fit, may, by notification, specify, this
section shall be subject to the modification that for the words "ten per cent." at both the
places where they occur, the words "twelve per cent." shall be substituted:
Provided further that the Central Government, after making such inquiry as it deems fit, may, by
notification, specify rates of employees’ contributions and the period for which such rates
shall apply for any class of employee;
 Chapter III
Employees Provident Fund

Section 16. Funds.

(1) The Central Government may, for the purposes of—
(a) the Provident Fund Scheme, establish a Provident Fund where the contributions paid by the
employer to the fund shall be ten per cent. of the wages for the time being payable to each
of the employees (whether employed by him directly or by or through a contactor), and the
employee's contribution shall be equal to the contribution payable by the employer in
respect of him and may, if any employee so desires, be an amount exceeding ten per cent. of
the wages, subject to the condition that the employer shall not be under an obligation to pay
any contribution over and above his contribution payable under this section:
Provided that in its application to any establishment or class of establishments which the Central
Government, after making such inquiry as it deems fit, may, by notification, specify, this
section shall be subject to the modification that for the words "ten per cent." at both the
places where they occur, the words "twelve per cent." shall be substituted:
Provided further that the Central Government, after making such inquiry as it deems fit, may, by
notification, specify rates of employees’ contributions and the period for which such rates
shall apply for any class of employee;
 Chapter III
Employees Provident Fund

Section 16. Funds.

(1) The Central Government may, for the purposes of—
((b) the Pension Scheme, establish a Pension Fund in the manner specified in
that scheme by that Government into which there shall be paid, from time to time, in respect of
every employee who is a member of the Pension Scheme,—
(i) such sums from the employer's contribution under clause (a) not
exceeding eight and one-third per cent. of the wages or such per cent. of wages
as may be notified by the Central Government;
(ii) such sums payable as contribution to the Pension Fund, as may be
specified in the Pension Scheme, by the employers of the exempted
establishments under section 143 to which the pension scheme applies;
(iii) such sums as the Central Government after due appropriation by Parliament by law in this
behalf, specify;
 Chapter III
Employees Provident Fund

Section 16. Funds.

(1) The Central Government may, for the purposes of—
(c) the Insurance Scheme, establish a Deposit-Linked Insurance Fund in the
manner specified in that scheme by that Government into which there shall be paid
by the employer from time to time in respect of every such employee in relation to
whom he is the employer, such amount, not being more than one per cent. of the
wages or such per cent. of wages as may be notified by the Central Government for
the time being payable in relation to such employee:
Provided that the employer shall pay into the Insurance Fund such further
sums of money, not exceeding one-fourth of the contribution which he is required to
make under this clause, as the Central Government may, from time to time, determine
to meet all the expenses in connection with the administration of the Insurance Scheme
other than the expenses towards the cost of any benefits provided by or under the
Insurance Scheme.
(2) The Provident Fund, the Pension Fund and the Insurance Fund shall vest in, and
be administered by, the Central Board in such manner as may be specified in the respective
schemes.
 Andhra University Etc vs Regional Provident Fund
Commissioner, 1986 AIR 463, 1985 SCR Supl. (3) 582

Employment and Labour Law Applicability of Act Establishment Liability Employees

Provident Funds and Miscellaneous Provisions Act Section 2(g), 1 (3) (a) Notices
issued to printing presses run by two Universities intimating that they liable for
coverage under EPF & MP Act Appellants, two Universities challenged validity of
Notice High upheld more than 20 persons employed, Provisions of Act Scheme
applicable in respect of these Departments Whether, two universities were
establishment and liable to be covered under Act.
Held, Once found establishment factory engaged in industry specified in Schedule I,
Act would get attracted. No difference that establishment run by larger
organisation carrying on other additional activities falling outside Act
Establishments that Departments of Publications, Press would be factories as
defined in Section 2 (g) of Act Printing, one of industries specified in Schedule as
well as more than 20 persons employed in establishments of two Universities not
in dispute All requirements of Section 1(3) (a) of Act fully satisfied, establishments
in question liable for coverage under Act Appeal dismissed.
 Modern Transportation Consultation Services Pvt. Ltd. And Another Versus Central Provident Fund
Commissioner Employees Provident Fund Organisation And Others LNIND 2019 SC 271

Employment & Labour Law—Excluded Employees—Re-Employment—Employees’ Provident Funds and

Miscellaneous Provisions Act, 1952—Employees’ Provident Funds Scheme, 1952—Single Judge, allowed
petition filed by Appellants holding that employees of Railways, who had withdrawn full amount of
provident fund while retiring and who were engaged by them on lump sum honorarium basis, should be
treated as excluded employees" for purpose of Act 1952, however, Division Bench reversed said order,
hence this appeal—
Whether, retired employees of Railways, who had withdrawn all superannuation benefits, including
provident fund accounts, to be treated as excluded employees in terms of Paragraph 2 (f) of Scheme—
Held, stipulation in clause (ii) of Paragraph 2 (f) of Scheme related to entirely different class of employees
with reference to quantum of their pay and exclusion of such class of employees as per clause (ii) could
not lead to any corollary—Order passed by Single Judge, based on irrelevant considerations, rightly
disapproved by Division Bench of High Court—If a person is member of Fund created under Scheme of
1952 and withdraws all his accumulations therein, he may not be obliged to be a member of same Fund
under Scheme of 1952 over again and could be treated as an excluded employees, however, such is not
relaxation granted in relation to an employee who was earlier a member of any other Fund but later on
joins such an establishment where he would be entitled to membership of Fund created under Scheme of
1952—This framework of provisions and stipulations appears to be best serving interest of employees,
while providing them with continued financial security—Appeal dismissed.
Section 17. Contribution in respect of employees and contractors.
(1) The amount of contribution (that is to say, the employer's contribution as well
as the employee's contribution in pursuance of any scheme and the employer's contribution
in pursuance of the Insurance Scheme) and any charge for meeting the cost of administering
the fund paid or payable by an employer in respect of an employee employed by or through
a contractor may be recovered by such employer from the contractor, either by deduction
from any amount payable to the contractor under any contract or as a debt payable by the
contractor.
(2) A contractor from whom the amounts mentioned in sub-section (1) may be recovered in
respect of any employee employed by or through him may recover from such
employee, the employee's contribution under any scheme by deduction from the wages
payable to such employee.
(3) Notwithstanding any contract to the contrary, no contractor shall be entitled to
deduct the employer's contribution or the charges referred to in sub-section (1) from the
wages payable to an employee employed by or through him or otherwise to recover such
contribution or charges from such employee.
Section 18. Fund to be recognised under Act 43 of 1961.
For the purposes of the Income-tax Act, 1961, the Provident Fund shall be deemed
to be a recognised provident fund within the meaning of clause (38) of section 2 of that
Act:
Provided that nothing contained in the said Act shall operate to render ineffective
any provision of the Provident Fund Scheme (under which the Provident Fund is established)
which is repugnant to any of the provisions of that Act or of the rules made there under.

Section 19. Priority of payment of contributions over other debts

Notwithstanding anything contained in any other law for the time being in force,
any amount due under this Chapter shall be the charge on the assets of the establishment to
which it relates and shall be paid in priority in accordance with the provisions of the
Insolvency and Bankruptcy Code, 2016
Section 20. Chapter not to apply to certain establishments.
(1) This Chapter shall not apply—
(a) to any establishment registered under the Co-operative Societies Act, 1912
or under any other law for the time being in force in any State relating to co-operative
societies employing less than fifty persons and working without the aid of power; or
(b) to any other establishment belonging to or under the control of the Central
Government or a State Government and whose employees are entitled to the benefit
of contributory provident fund or old age pension in accordance with any scheme or
rule framed by the Central Government or the State Government governing such
benefits; or
(c) to any other establishment set up under any Central or State or any other
law for the time being in force and whose employees are entitled to the benefits of
contributory provident fund or old age pension in accordance with any scheme or
rule framed under that law governing such benefits; or
(d) to the employees who, immediately before the commencement of this Code,
were receiving benefits of Provident Fund under any Central or State enactment.
Section 20. Chapter not to apply to certain establishments.
((2) If the Central Government is of the opinion that having regard to the financial
position of any class of establishment or other circumstances of the case, it is necessary or
expedient so to do, it may, by notification and subject to such conditions, as may be specified
in the notification, exempt, whether prospectively or retrospectively, that class of
establishments from the operation of this Chapter for such period as may be specified in
the notification.

Section 21. Authorizing certain employers to maintain provident fund accounts.

Section 22. Transfer of accounts.

Section 23. Appeal to Tribunal.

(1) Any person aggrieved by an order passed by any authority in regard to the
following matters may prefer an appeal to the Tribunal constituted by the Central
Government, namely:—
(a) determination and assessment of dues under section 125 relating to Chapter III; and
(b) levy of damages under section 128 relating to Chapter III.
(2) Every appeal under sub-section (1) shall be filed in such form and manner, within
such time and accompanied by such fees as may be prescribed by the Central Government.
(3) No appeal under clause (a) of sub-section (1) by the employer shall be entertained
by the Tribunal unless he has deposited with Social Security Organisation concerned
twenty-five per cent. of the amount due from him as determined by an officer under
section 125.
(4) The Tribunal shall endeavour to decide the appeal within a period of one year from
the date on which the appeal has been preferred.
• Manipal Academy of Higher Education Versus Provident Fund Commissioner - LNIND 2008 SC
650 (2008) 5 SCC 4282008 (4) SCALE 53AIR 2008 SC 1951JT 2008 (4) SC 31[2008] 2 LLJ 666[2008]
5 MLJ 366[2008] MLJ 366LNIND 2008 SC 650
• Employees Provident Funds and Miscellaneous Provisions Act (19 of 1952), Sections 2(b) and 6 -
Amount received on encashment of earned leave - Same not part ofbasic wage under Section
2(b) of Act - Appeals allowed.

Held : The term basic wage which includes all emoluments which are earned by an employee
while on duty or on leave or on holidays with wages in accordance with the terms of the contract
of employment can only mean weekly holidays, national holidays and festival holidays etc . In
many cases the employees do not take leave and encash it at the time of retirement or same is
encashed after his death which can be said to be uncertainties and contingencies. Though
provisions have been made for the employer for such contingencies unless the contingency of
encashing the leave is there, the question of actual payment to the workman does not take
place. In view of the decision of this Court in Bridge and Roof Co. (India) Ltd. v. Union of India
case Bridge and Roof Co. (India) Ltd. v. Union of India case Bridge and Roof Co. (India) Ltd. v.
Union of India case : and TI Cycles of India, Ambattur v. M. K. Gurumani and Others case TI Cycles
of India, Ambattur v. M. K. Gurumani and Others case TI Cycles of India, Ambattur v. M. K.
Gurumani and Others case : : the inevitable conclusion is that basic wage was never intended to
include amounts received for leave encashment.
•
• Otis Elevator Employees ‘ Unions Reg. and Others Versus Union of India and Others LNIND 2003 SC 978
• Employment & Labour Law—Pensionary benefit—Government contribution—Employees’ Provident Funds &
Miscellaneous Provisions Act, 1952 (Act)—Employees’ Provident Funds & Miscellaneous Provisions
(Amendment) Act, 1996 (1996 Act)—Employees’ Pension Scheme, 1995 (1995 Scheme)—
Several employees union made challenge to 1996 Act and 1995 Scheme, as unreasonable, arbitrary and
discriminatory inasmuch as existing benefits from Provident Fund have been depleted to great extent—Such
challenge was made in HCs of Madras, Kerala and Karnataka in batch of cases—Some of the employers have
also filed petitions or appeals as their applications for grant of exemption from operation of pension scheme
have been rejected by respective Regional Provident Fund Commissioners or by concerned Governments—
Three HCs were of uniform view that scheme framed by Government was reasonable—Whether HCs justified
in holding that 1996 Act and 1995 Scheme was reasonable and not discriminatory.
• Held, in event member obtains scheme certificate he retains his membership and remains covered for
pensionary benefit to family in case of his death—As such, every member and all family members dependent
upon member were entitled for either pensionary or withdrawal benefit and no one was left with no benefit at
all—Report while referring to certain difficulties in working of scheme during initial growing period had noticed
operational limitations—Panel of actuaries on being satisfied endorsed valuation result and Government
announced raise of 4% in pension payment—At any rate these difficulties do not constitute legal challenge to
validity of scheme—Government makes its contribution on annual basis by crediting its contribution to public
account as per statutory provision—Deposit in public account was investment and earns interest at rate
decided by Government at relevant time—It was incorrect to say that Government contribution was notional
only—Order of HCs were upheld—Petitions dismissed.
• Otis Elevator Employees ‘ Unions Reg. and Others Versus Union of India and Others LNIND
2003 SC 978
• HELD: The present Special Leave Petition challenged the validity of an amendment in
the Employees Provident Funds and Miscellaneous Provisions Act, 1952, made in 1996 (by
Act 25 of 1996) and the consequent pension scheme put into effect from November 1995.
The Supreme Court dismissed it It said it was broadly in agreement with the view of the High
Courts of Madras, Kerala and Karnataka which upheld in their orders under appeal the
impugned scheme as reasonable. [ Para 11 ]
• The Supreme Court dealt with the contentions advanced in support of the challenge to the
scheme. Firstly it noted that the E.P.F. Act was a social welfare legislation. Unless it was
patently arbitrary, the Supreme Court would not monitor implementation of such policy.
[ Para 17 ]
• Secondly, it could not be stated that each and every employee must get back not only what
he himself, the employer and the Government together contributed, the Supreme Court said.
It was not possible to hold the scheme provided for exorbitant contribution with negligible
return. Since the Respondents had taken steps to remove certain anomalies pointed out by
the Petitioners, the grievance of discrimination and arbitrariness attracting the wrath of
E.P.F. Act could not be sustained, it was said. [ Para 18 ]
• Thirdly the opinion survey report, contrary to what the Petitioners stated, noted that the
scheme would lead to an inter-generational transfer between those who toiled (sic)
yesterday for what we attained today. [ Para 19 ]
• Otis Elevator Employees ‘ Unions Reg. and Others Versus Union of India and Others LNIND
2003 SC 978
• Fourthly there was the allegation that the benefit under the scheme was not commensurate
with the contribution quantum collected and that the surplus taken over by the new fund
deprived the outgoing members of the ceased scheme. The Supreme Court observed the
corpus with its liability had been merged with the pension fund. The amount of actual
surplus had already been allowed as additional pension relief to the respective Family
Pension Scheme pensioners. [ Para 20 ]
• Fifthly, every member and dependent members of his family were entitled to either
pensionary or withdrawal benefit and no one was left with no benefit as alleged, the
Supreme Court said. [ Para 22 ]
• Similarly the other contentions of the Petitioners were held not sustainable in the face of
material on record. [ Paras 23 to 30]
• In the result the cases and petitions were dismissed except the petitions which claimed
exemption from the scheme and which were remitted to the concerned authorities for fresh
disposal. [ Paras 41 and 42 ]