NCLAT Orders Full Provident Fund and Gratuity Payments for Former Jet Airways Staff
The National Company Law Appellate Tribunal (NCLAT) on Tuesday ruled that former Jet Airways employees in Mumbai are entitled to receive their full provident fund and gratuity dues outside of the airline's liquidation estate. The decision dismissed appeals filed by the State Bank of India (SBI) and other financial creditors who sought to block the payments.
The ruling upholds a February order by the National Company Law Tribunal (NCLT), which directed the liquidator to pay these statutory dues to the workmen. This development follows Jet Airways entering liquidation in November 2024 after the collapse of the Jalan-Fritsch consortium’s resolution plan.
The legal dispute centered on whether the employees' retirement benefits could be shielded during liquidation. The former staffers 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 (IBC).
In contrast, SBI and other financial lenders contended that such protection only applied if the company had physically maintained separate, segregated provident fund or gratuity accounts on the date the liquidation commenced.
Rejecting the lenders' arguments, the NCLAT held that statutory provident fund and gratuity dues must be paid in full, even if the employer failed to maintain separate accounts for them.
The appellate tribunal stated in its order that the liquidator remains liable to pay these dues to the workmen and employees as prescribed under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, and the Payment of Gratuity Act, 1972. The tribunal clarified that these statutory dues do not form part of the liquidation estate.
The landmark ruling is expected to set a significant precedent for insolvency cases across multiple sectors in India. It establishes that employee statutory dues must be safeguarded and paid in full during liquidation, regardless of whether an employer maintained segregated accounts.
