🔥 Trending Jet Airways Liquidation: NCLAT Rules on PF and Gratuity Payments

The latest development in the Jet Airways liquidation case, as of late 2024, is a significant ruling by the National Company Law Appellate Tribunal (NCLAT) concerning the provident fund (PF) and gratuity dues of former employees ¹²⁴.

NCLAT Upholds Full PF and Gratuity Dues for Employees

The NCLAT has upheld the right of Jet Airways' former employees to receive their full provident fund and gratuity dues, ruling that these statutory payments must be made outside the airline's liquidation estate ²⁴⁵. This decision came after the NCLAT dismissed appeals filed by State Bank of India (SBI) and other financial creditors ⁴⁷.

Key Aspects of the Ruling:

• Priority of Employee Dues: The NCLAT's decision reinforces the principle that provident fund and gratuity dues are not part of the corporate debtor's liquidation estate and thus should be paid in full, regardless of the company's financial distress or liquidation status ²⁵⁸.
• Rejection of Lender's Argument: SBI and other creditors had argued that the exclusion of PF and gratuity from the liquidation estate should only apply if Jet Airways had maintained separate and identifiable funds for these purposes, which the airline had not ⁶. The NCLAT rejected this argument, stating that the absence of separate funds does not negate the employees' right to these statutory payments ⁵⁸.
• Exclusion of Litigation Period: The appellate tribunal also ruled that the 1,656 days spent in litigation during Jet Airways' prolonged corporate insolvency resolution process (CIRP) must be excluded when calculating the 24 months preceding the liquidation commencement date for other "workman dues" ³⁵. This distinction is important for how other employee-related claims are treated.
• Impact Beyond Jet Airways: This judgment is significant not only for Jet Airways employees but also sets a precedent for future insolvency cases in India. It clarifies that statutory PF and gratuity dues are protected even when a corporate debtor has not maintained separate accounts for these funds, thereby strengthening employee protections under the Insolvency and Bankruptcy Code (IBC) ⁸.

Background of the Case

The case stems from the liquidation of Jet Airways, which began after the resolution plan submitted by the Jalan-Fritsch consortium collapsed in November 2024 ¹. The airline had entered into a corporate insolvency resolution process, and the treatment of employee dues, particularly PF and gratuity, became a contentious issue between the employees and the financial creditors ²⁷.

The NCLAT's ruling provides a major relief to thousands of former Jet Airways employees who have been awaiting their rightful dues ⁴⁷.