Times News NetworkMumbai: In a significant ruling with implications for insolvency cases across sectors, the National Company Law Appellate Tribunal (NCLAT) on Tuesday held that workmen are entitled to receive their full provident fund and gratuity dues even if their employer hadn’t maintained separate provident fund and gratuity accounts. In its order, the appellate tribunal upheld the rights of hundreds of former Jet Airways employees to receive these statutory dues outside the airline’s liquidation estate, while dismissing appeals filed by State Bank of India (SBI) and other financial creditors.The dispute arose after Jet Airways entered liquidation following the collapse of the Jalan-Fritsch consortium’s resolution plan in Nov 2024. The staffers argued that their provident fund and gratuity dues should not form part of the liquidation estate under Section 36(4)(a)(iii) of the Insolvency and Bankruptcy Code (IBC), while lenders contended that such protection applied only if separate provident fund or gratuity funds physically existed on the liquidation commencement date.Rejecting the lenders’ argument, the NCLAT held that statutory provident fund and gratuity dues are payable in full even if no segregated fund exists. It upheld the National Company Law Tribunal’s Feb 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 order said.The tribunal, however, declined the employees’ request to keep a recovery certificate issued by the deputy labour commissioner for salary dues from Jan to March 2019 outside the liquidation estate. It ruled that these salary claims must be dealt with under the IBC’s waterfall mechanism applicable to workmen’s dues. The NCLAT also held that because 1,656 days of the insolvency process were consumed by litigation, that period should be excluded while calculating the 24-month look-back period for workmen’s dues.
