NCLT Mumbai Bench Directs Full Payment of PF and Gratuity to Jet Airways Employees
The National Company Law Tribunal (NCLT), Mumbai Bench-I, has issued a significant ruling on Wednesday, directing the liquidator of the defunct Jet Airways to make complete payments of provident fund and gratuity dues to the airline's workmen and employees. This decision marks a crucial development in the long-standing legal battle over employee rights during corporate insolvency proceedings.
Statutory Dues Excluded from Liquidation Estate
The tribunal explicitly stated that such statutory dues do not form part of the liquidation estate under the Insolvency and Bankruptcy Code (IBC). In its detailed order, the NCLT clarified that the liquidator is legally obligated to pay provident fund and gratuity dues to employees as per the provisions of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 and the Payment of Gratuity Act, 1972.
"These dues shall not form part of the liquidation estate," the tribunal emphasized, establishing a clear precedent for similar cases in the future. This ruling ensures that employees' statutory benefits receive priority treatment outside the standard waterfall mechanism outlined in IBC Section 53.
Legal Applications and Tribunal's Reasoning
The case reached the tribunal through two separate interlocutory applications:
- The first application was filed by former workmen through the Jet Aircraft Maintenance Engineers' Welfare Association
- The second application was submitted by S Gopalkrishnan, a Jet senior executive who served as workers' representative and member of the Stakeholders' Consultation Committee
These applications specifically sought the exclusion of provident fund, gratuity, and certain salary dues from the liquidation estate. The applicants argued that these statutory liabilities must be paid in full independently of the standard distribution process under IBC regulations.
The NCLT rejected objections raised by State Bank of India (SBI) and the liquidator, making it clear that employees' entitlement to provident fund and gratuity does not depend on whether the corporate debtor had maintained separate funds. Relying on binding precedents from both the NCLT and Supreme Court, the tribunal ruled that such dues are payable in full even if no dedicated fund had been created by the company.
Employee Relief and Separate Liquidation Order
Narayan Hariharan, former senior Vice President of Jet Airways, expressed profound relief at the decision. "This is a moment of deep relief for Jet Airways employees who endured over six years of uncertainty, hardship and hope," he stated. "The legal battle was long and emotionally draining, but the courts stood by the workers at every stage. The NCLT's ruling that gratuity and provident fund are outside the liquidation estate is not just a legal victory, it is a recognition of the dignity, sacrifice and rights of employees who never gave up."
In a related but separate order passed on Tuesday, the NCLT addressed an application filed by SBI on behalf of assenting financial creditors. The tribunal permitted the liquidator to proceed with distribution of liquidation proceeds from the sale of Jet Airways' assets, including the valuable Bandra-Kurla Complex property. This permission was granted pending final adjudication of the employees' claims, with the tribunal noting that the mere pendency of employees' applications cannot stall the liquidation process indefinitely.
This dual approach allows both employee rights protection and continuation of the liquidation process, balancing competing interests in the complex insolvency proceedings. The ruling sets an important precedent for how statutory employee benefits should be treated in corporate insolvency cases across India's legal landscape.
