Gratuity Act: RBE No.46/1986 – Application to Casual Labour

No.E(LL)85 AT/GRA/1-1, dated 26.02.1986

Sub:   Payment of Gratuity Act, 1972 and the Rules framed thereunder – Application to casual labour on Railways.

1.     Reference this Department’s letters No.E(LL)76 AT/GRA/1-4, dated 07.05.1977 and No.E(LL)75 AT/GKA/1-3, dated 02.12.1978 in which the Railways were advised that only such casual labour as are employed in factory establishments on the Railways would come under the scope of the Payment of Gratuity Act, 1972 and not those casual labour who are employed either in the Open Line or in the Projects, on Railways. The matter has been further considered keeping in view the judgment of the Supreme Court of India in the case of State of Punjab v. Labour Court Jullundur (AIR 1979 SC 1981) and Kerala High Court in the case of M.P. Sankara Piliai v. Southern Railway No.4543/1976 and in consultation with the Legal Advisers of the Department of Railways and the Ministry of Labour. This Department has been advised that the provisions of Payment of Gratuity Act, 1972 are applicable to all casual labour employed on Railways, whether on Open Line, Project or in Factory establishments. Accordingly, the Railway Administrations should take necessary steps to comply with the provisions of the Act and in the event of casual labour demitting service on superannuation, retirement, including retrenchment, resignation, death or disablement, payment of gratuity, as may be due in, accordance with the provisions of the Payment of Gratuity Act, 1972 should be made to the casual labour, whether on daily rates or on monthly rates of wages. Calculation of gratuity in such cases should be made in accordance with the clarification issued by the Ministry of Labour vide their letter No.S-70024/12/ 84-SS, IV dated 30.05.1985 (copy enclosed).

2.     The amount of gratuity paid should be booked to a separate sub-detailed head of account 1180 General Charges – Establishment under the appropriate main works (Cap/ DRF/ DF) or Revenue Head Classification under Demand No.13 – Abstract ‘L’, Minor Head 700 – Gratuities and special contribution to PF.

3.     In respect of casual labour who continue to be in employment and/or who have been or/are proposed to be appointed to regular service in a Railway post (permanent or temporary), further instructions will follow for regulating the payment of such gratuity under the Payment of Gratuity Act, 1972.

4.     Necessary not additional funds required for this purpose should be specifically incorporated under the relevant demands/ Grants in the Budget/ Revised Estimates for the current/ next year.

5.     This issues with the concurrence of the Finance Directorate of the Department of Railways and has the approval of the President.

Government of India Ministry of Labour

No.S-70024/12/ 84-SS, IV dated 30.5.1985

To

All the State Governments/Union Territory Administrations.

Sub:     The Payment of Gratuity Act, 1972 – Calculation of the amount of gratuity payable under the Act.

Sir,

1.     I am directed, to say that the Supreme Court had in its judgment in the case of M/s Digvijay Woollen Mills Limited v. Mahindra Prataprai Buch and others held that for the purpose of sub-section (2) of section 4 of the Payment of Gratuity Act, the amount of gratuity in respect of monthly rated employees has to be calculated by dividing the monthly wages by 26 and multiplying by 15. The Supreme Court has also held in the case of Jeewan Lal Limited v. E. Govindan and others that 20 months wages specified under sub-section (3) of section 4 of the Payment of Gratuity Act means wages for 600 days, i.e. 20 months multiplied by 30. In this connection, a copy each of the two judgments are enclosed (Annexure I and 11) for ready reference.

2.     This Ministry has been advised that the Supreme Court has interpreted the law, as it is, and it will be applicable to all cases of payment of gratuity under the Payment of Gratuity Act, 1972. This may kindly be brought to the notice of all concerned for information and necessary, action.

Download Railway Board Circular RBE No.46/1986 

Forward reference ⇒ RBE No.