Explanation:

Penalties-
Failure to comply with the Payment of Gratuity Act 1972 entails certain penalties (Sec. 9)[xxvi], which are the following:

• (i) For avoiding any payment knowingly makes any false statement or representation shall be punishable with imprisonment upto 6 months or fine upto Rs. 10,000.00 or both.

• (ii) Failure to comply with any provision of the Act or Rules Shall be punishable with imprisonment upto 1 year but will not be less than 3 months or with fine, which will not be less than Rs. 10,000.00 but may extend upto Rs. 20,000.00 or with both.

• (iii) Any offense relating to non-payment of gratuity under the Act Employer shall be punishable with imprisonment for a term which shall not be less than 6 months but may extend to 2 years, unless the court for reasons recorded decides for a lesser term of imprisonment or fine.

Hence option 2nd is correct.