NCLAT upholds full PF, gratuity payments for Jet Airways employees

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 (PF) and gratuity dues even if their employer did not maintain separate provident fund and gratuity accounts. The 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 November 2024. Employees argued that their provident fund and gratuity dues should not be included in the liquidation estate under Section 36(4)(a)(iii) of the Insolvency and Bankruptcy Code (IBC). The lenders, however, contended that this protection applied only if separate provident fund or gratuity funds existed on the date the liquidation process began.

Rejecting the lenders' argument, the NCLAT ruled that statutory provident fund and gratuity dues must be paid in full even if no separate fund exists. It upheld the National Company Law Tribunal's (NCLT) 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... and such dues shall not form part of the liquidation estate," the tribunal said.


However, the tribunal rejected the employees' request to keep a recovery certificate issued by the Deputy Labour Commissioner for salary dues from January to March 2019 outside the liquidation estate. It ruled that these salary claims would be dealt with under the IBC's waterfall mechanism applicable to workmen's dues. The NCLAT also held that the 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.