Balance-sheet entry alone cannot create a gratuity agreement without proof of an enforceable employer contract.

A gratuity claim above the statutory ceiling under the Payment of Gratuity Act depends on proof of an award, agreement, or contract with the employer. A mere balance-sheet entry describing gratuity payable to directors did not, by itself, create an enforceable liability or amount to such an agreement, particularly where no independent contract, board resolution, or other supporting document was produced. The petitioners' admission that no gratuity agreement existed, together with the circumstances that they were founder-promoters controlling the company and that the balance sheet was prepared under their control, further weakened the claim. On the facts proved, the gratuity claim was not maintainable.

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Issues: Whether an entry in the company's balance sheet could amount to an agreement or contract for payment of better gratuity under Section 4(5) of the Payment of Gratuity Act, 1972, and whether the petitioners could claim gratuity as employees of the company on that basis.

Analysis: The right to gratuity above the statutory ceiling was held to depend on proof of an award, agreement, or contract with the employer. A mere balance-sheet entry describing gratuity payable to directors did not, by itself, create the underlying liability or amount to an enforceable agreement, especially when no independent contract, board resolution, or other supporting document was produced. The petitioners' own admission that there was no gratuity agreement, together with the surrounding circumstances showing that they were founder-promoters in control of the company and that the balance sheet was prepared under their control before the share transfer, weakened the claim further. The Court also held that the entries in the balance sheet, the resignation letters, the group gratuity policy, and the cited precedents did not establish a legal entitlement to gratuity in the absence of a proved agreement.

Conclusion: The balance-sheet entry did not constitute an agreement or contract under Section 4(5), and the gratuity claim was not maintainable on the facts proved.

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