THE PAYMENT OF GRATUITY ACT 1972 BUSINESS LAW
THE PAYMENT OF GRATUITY ACT 1972 MEANING GRATUITY ~ ~ GIFT A Lump sum payment paid by employer to his employee at the time of retirement or when he leaves the establishment EXTENT AND APPLICABILITY APPLIES TO: Except Jammu & Kashmir extend to the whole of India 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
Summary of Employee s Provident Fund And Miscellaneous provisions Act, 1952 For CA-IPCC Students 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. 2
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. CentralGovernment Central Board of Trustees EMPLOYER EMPLOYEE Provident fund Executive Committee Investment INCOME 3
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 Provident Fund (i) (ii) (iii) (iv) The employers contribution in Provident Fund must be at least 10% of salary income of employees however the contribution may be more. The employer s contribution depends upon the will of employer. The employee s contribution must be at least equal to employer s contribution however it may be more. The contributions may be different hence employee and employer may contribute different amounts. In EPF Salary means = Basic salary+ Dearness Allowance 4
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 5
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. 6
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. 7
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 8
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. 9
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. 10
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. 11
Negotiable Instruments Act, 1881 1
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 2
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 3
Bill of Exchange Following 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 4
Cheque Cheque is a bill of exchange Drawn on a particular / specified Banker Not expressed to be payable otherwise than on demand Section 6 Contd.. 5
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) 6
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) 7
Drawer - Drawee Drawer is the maker of the Bill of Exchange or Cheque Drawee is the person thereby directed to pay Section 7 8
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. 9
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. 10
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. 11
Payee Person named in the instrument To whom or to whose order the money is directed to be paid 12
Holder Holder 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 13
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 14
Right of holder in due course Holder in due course gets the right thereon of earlier holder Section 53 15
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 16
Negotiable instrument Negotiable Instrument means a -- Promissory note -- Bill of Exchange -- Cheque payable either to order or to bearer Section13 17
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 negotiation Section 14 18
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 19
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 20
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 21
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 22
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. 23
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 24
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 25
Capacity and binding effect fb.com/sipoysatish CACWACS.WORDPRESS.COM SIPOY SATISH 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 26
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 27
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 28
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 29
Negotiation Negotiation of the bill may be by actual delivery or by constructive delivery Section 46 30
Negotiation by 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 31
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 32
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 33
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 34
Bill obtained wrongly No remedy is available if the negotiable instrument is obtained by unlawful means or for unlawful consideration Section 51 35
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 36
Dishonor of bill - how Dishonor of the bill may be by nonacceptance Section 91 Dishonor of the bill may be by nonpayment Section 92 37
Notice of dishonor fb.com/sipoysatish CACWACS.WORDPRESS.COM SIPOY SATISH by the holder When promissory note, bill of exchange or cheque is dishonored by non-acceptance or non-payment the holder thereof must give a notice of dishonor to all other parties to whom the holder seeks to make liable Section 93 38
On receiving notice of dishonor Party receiving the notice of dishonor must transmit the notice to earlier party (in chain of negotiation) Section 94 39
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 40
Protest Certificate given by the Notary for noting the dishonor of the negotiable bill is called protest Section 100 41
Effect of protest For protested bill Courts will presume the fact of dishonor, until the contrary is proved Section 119 42
Presumptions about Negotiable fb.com/sipoysatish CACWACS.WORDPRESS.COM SIPOY SATISH Instruments Until contrary is proved, presumptions are 1. It has consideration 2. Date is as shown/seen on the instrument 3. Time of acceptance within reasonable time 4. Order of endorsement as seen apparently on the instrument 5. Stamp properly paid, in case of lost instrument 6. Holder is in due course Section 118 43
General crossing When cheque bears across its face 1. Addition of words and company or its short form or 2. Two parallel lines or 3. Lines with words and company or its short form or words not negotiable Section 123 44
Special Crossing When across the face of the cheque BANK S name is written it is called Special Crossing Section 124 45
Crossing after issue Cheque 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 46
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 47
Payment in due course When 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 48
Liability of paying banker If paying banker pays 1. General crossed cheque not to the banker or 2. Specially crossed cheque not to the specified banker is liable to the true owner for loss Section 129 49
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 50
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 51
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 52
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 reason 1. money in the account is less to honor the cheque or 2. 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. 53
Dishonor of cheque Offence (Section 138) 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. 54
Dishonor of cheque Offence (Section 138) These provisions apply only if 1. Cheque is presented within six months from its date of drawing 2. 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 55
Presumption about holders fb.com/sipoysatish CACWACS.WORDPRESS.COM SIPOY SATISH 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 56
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 57