(1) Gratuity shall be payable to an employee—
(a) on his superannuation;
(b) on his retirement, resignation, retrenchment, discharge or dismissal from service after completion of a minimum period of five years of continuous service;
(c) on his death or total disablement due to accident or disease.
Explanation.—For the purpose of this section, total disablement means such disablement, whether of temporary or permanent nature, as incapacitates an employee for all work which he was capable of performing at the time of accident resulting in such disablement.
(2) In case of death of an employee, the gratuity shall be payable to the nominee of the employee or in the absence of a nominee to the family of the employee.
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(3) In the cases referred to in clauses (a), (b) and (c) of sub-section (1), the employer shall pay gratuity to each of his employees at the rate of fifteen days' wages based on the last drawn wages for every completed year of service or part thereof in excess of six months:
Provided that the maximum amount of gratuity payable to an employee shall not exceed fifteen months' wages:
Provided further that nothing in this section shall affect the right of any better terms of gratuity or retirement benefits under any award or agreement or contract with the employer:
Provided also that in the case of voluntary retirement or resignation from service in any particular year, not more than five per cent of the total number of employees in the factory, plantation, establishment or undertaking shall be entitled to payment of gratuity and if the number of employees who voluntarily retire or resign from service exceeds five per cent of the total number of employees, the eligibility of an employee for payment of gratuity shall be determined on the basis of the length of the service of the employee in the factory, plantation, establishment or undertaking:
Provided further that an employee who voluntarily retires or resigns from service shall be eligible to claim gratuity only if one month's notice in writing of his intention so to retire or resign had been given to the employer.