Section 12 of Payment of Gratuity Act 1972 - Protection of Action Taken in Good Faith

Section 12 of the Payment of Gratuity Act, 1972 protected the controlling authority and other persons from suits or other legal proceedings for acts done, or intended to be done, in good faith under the Act, its rules or orders. The gratuity law is now governed by the Code on Social Security, 2020, which contains a broader good-faith protection in Section 147.

Current legal position: The Code on Social Security, 2020 was brought into force from 21 November 2025. The Payment of Gratuity Act, 1972 was one of the enactments repealed through Section 164 of the Code, subject to the statutory savings and transitional provisions. For current matters, the gratuity provisions in Chapter V of the Code and the applicable rules and notifications should therefore be checked.

Text of Section 12 of the Payment of Gratuity Act 1972

12. Protection of action taken in good faith. No suit or other legal proceeding shall lie against the controlling authority or any other person in respect of anything which is in good faith done or intended to be done under this Act or any rule or order made thereunder.

Meaning and Scope of Section 12

Section 12 was a statutory protection for persons performing functions under the Payment of Gratuity Act. Its purpose was to prevent legal proceedings merely because an authority or other protected person had performed, or intended to perform, a statutory function in good faith.

The expression "good faith" is important. Section 12 did not create a general immunity for every act of an authority or official. The protection was linked to an act done or intended to be done in good faith under the Act, or under a rule or order made under it.

  • The protection applied to the controlling authority and any other person falling within the provision.
  • The protected conduct had to relate to the Payment of Gratuity Act, a rule made under it, or an order made under it.
  • The section covered an act actually done as well as an act intended to be done.
  • Good faith was an essential condition for claiming the statutory protection.
  • The provision protected against a suit or other legal proceeding within its statutory scope.

Who Was the Controlling Authority?

Under Section 3 of the Payment of Gratuity Act, 1972, the appropriate Government could appoint an officer to be a controlling authority responsible for administration of the Act and could specify the area within which that authority would exercise jurisdiction. Section 12 expressly protected such a controlling authority when acting in good faith within the statutory framework.

Read Section 3 - Controlling Authority

Current Provision - Section 147 of the Code on Social Security 2020

Following implementation of the Code on Social Security, 2020, the corresponding general protection is contained in Section 147 - Protection of action taken in good faith. The provision is wider in its express list of protected bodies and persons.

Section 147 provides protection against a suit, prosecution or other legal proceeding for anything done or intended to be done in good faith in pursuance of the Code, or rules, regulations or schemes made or framed under it. The protected categories include the Central Government, State Government, a Social Security Organisation, a competent authority, officers or staff of a Social Security Organisation, and other persons or authorities discharging functions or exercising powers under the Code.

Difference from the Former Section 12

The former Section 12 specifically referred to the controlling authority or any other person and protected good-faith action under the Payment of Gratuity Act, its rules or orders. Section 147 of the Code on Social Security operates across the Code and expressly covers a wider group of governments, organisations, authorities, officers and other persons exercising powers or discharging functions under the Code.

Legacy matters: Section 12 remains relevant when researching proceedings, rights, liabilities, actions or events arising under the former Payment of Gratuity Act. The repeal and savings provisions in Section 164 of the Code on Social Security, 2020 should be considered when determining the treatment of an earlier matter.

Related Provisions of the Payment of Gratuity Act 1972

Section 12 formed part of the enforcement and protective framework of the former Act. Related provisions include Section 11 - Cognizance of offences, Section 13 - Protection of gratuity, Section 14 - Act to override other enactments, and Section 15 - Power to make rules.

Official Legal Resources

For the authoritative current text and implementation material, refer to the Ministry of Labour and Employment resources for the Code on Social Security, 2020, the 21 November 2025 commencement notification, and the Ministry's Labour Codes rules and notifications page.

This page explains the statutory provision for general legal information. The applicability of repeal, savings, transitional provisions, rules and notifications may depend on the date and facts of a particular matter.