Statutory gratuity ceiling applies where the scheme adopts the Act, barring selective reliance on better terms.

An employee covered by the employer's gratuity scheme could not claim gratuity above the statutory ceiling by relying on Section 4(5) of the Payment of Gratuity Act, 1972. The Trust Deed and Rules stated that gratuity for covered employees would be calculated in accordance with the Act, which meant both the statutory method of computation and the ceiling under Section 4(3). Section 4(5) applies only where an award, agreement, or contract independently grants better gratuity terms. A general reference to payment under the Act does not permit selective use of the statutory rate while ignoring the cap, so the higher claim was not maintainable.

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Issues: Whether an employee covered by the employer's gratuity scheme could claim gratuity above the statutory ceiling by invoking Section 4(5) of the Payment of Gratuity Act, 1972.

Analysis: The Trust Deed and Rules provided that, for employees covered by the Act, gratuity would be calculated in accordance with the provisions of the Act. The scheme did not create a separate better term of gratuity for such employees; rather, it divided employees into those covered by the Act and those not covered. Section 4(5) applies only where an award, agreement, or contract independently grants better terms of gratuity. A general reference to payment in accordance with the Act necessarily includes both the method of calculation under Section 4(2) and the ceiling under Section 4(3). The scheme therefore did not permit selective reliance on the rate under the Act while ignoring the statutory cap.

Conclusion: The claim for gratuity above the statutory ceiling was not maintainable, and the employee was restricted to gratuity payable under the Act.

Ratio Decidendi: Where a service scheme provides that gratuity for covered employees shall be calculated in accordance with the Act, the statutory ceiling under Section 4(3) applies unless the contract or scheme separately grants better terms within the meaning of Section 4(5).

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