Group Gratuity Schemes provided by LIC and other Fund Management Institutions are subscribed by many Employers to meet the gratuity obligation towards their employees. An interesting question that arose recently is whether an employee-on-superannuation is entitled to receive the entire amount accumulated under the Policy enrolled by his employer, or is he just entitled to the statutory amount prescribed under the Payment of Gratuity Act.
The question has multi-dimensional issues since Section 4(5) of the Payment of Gratuity Act enables an employer to provide and its employees to have, benefits better than those provided under the Act. But most Group Gratuity Schemes are entered by the Employer alone with the Insurer, and they are normally not tri-parte agreements including the union/employees. Besides these Schemes are formulated in such a fashion that premium payable by the employer is linked to its statutory obligation. Therefore, even if on papers the matured amount is higher than the statutory due, the insurer need not transfer the excess amount matured to the insured/employer. Similarly, if the employer defaults payment of premiums, the insurer has no obligation to disburse gratuity due to the employees.
Therefore, what concludes from the above discussion is that employees are not party to Group Gratuity Schemes enrolled by Employers. Therefore, as rational consequence, the employees are entitled not entitled to the entire amount matured under policy, but only to what is statutorily due to them. [See Mathew Korah v. Kaduthuruthy Urban Corporative Bank, 2013(4)KHC 497; Nedupuzha Service Cooperative Bank v. Rugmini, 2011 (2) KHC 880; Retnavalli v. Ambalapadu Service Cooperative Bank, 2005 KHC 988]