The National Company Law Appellate Tribunal (NCLAT) on Tuesday has ruled that workmen and employees are entitled to receive their full provident fund and gratuity dues even if the employer had not maintained separate accounts for these payments, according to a report in The Times of India.
The ruling came in the Jet Airways insolvency case, with the appellate tribunal upholding the rights of former employees to receive their statutory dues outside the airline's liquidation estate. The NCLAT dismissed appeals filed by State Bank of India and other financial creditors against an earlier order of the National Company Law Tribunal.
Jet Airways went into liquidation after the Jalan-Fritsch consortium's resolution plan collapsed in November 2024. Former employees had argued that their provident fund and gratuity dues should be excluded from the liquidation estate under Section 36(4)(a)(iii) of the Insolvency and Bankruptcy Code. Lenders, however, contended that such protection would apply only if separate provident fund or gratuity funds existed on the liquidation commencement date.
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Rejecting the lenders' stand, the NCLAT held that statutory dues towards provident fund and gratuity are payable in full even where no segregated fund exists. It upheld the NCLT's February order directing the liquidator to pay these dues outside the liquidation estate.
"The liquidator is liable to pay the provident fund and gratuity dues to the workmen and employees as are payable to them in terms of provisions of Employees' Provident Funds and Miscellaneous Provisions Act, 1952 and Payment of Gratuity Act, 1972 and such dues shall not form part of the liquidation estate," the tribunal said in its order, as reported by The Times Of India.
The appellate tribunal, however, declined the employees' plea to keep a recovery certificate issued by the deputy labour commissioner for salary dues from January to March 2019 outside the liquidation estate. It said these salary claims would have to be dealt with under the IBC's waterfall mechanism for workmen's dues.
The NCLAT also ruled that 1,656 days spent in litigation during the insolvency process should be excluded while calculating the 24-month look-back period for workmen's dues.
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