- NCLAT upheld order to pay Jet Airways employees' full PF and gratuity dues, dismissing SBI appeals
- NCLAT ruled employee statutory dues remain outside liquidation estate, protecting their priority
- Jet Airways ceased operations in April 2019; Supreme Court ordered liquidation in November 2024
In a major relief for former Jet Airways employees, the National Company Law Appellate Tribunal (NCLAT) upheld an earlier order directing the airline's liquidator to pay provident fund (PF) and gratuity dues in full, while dismissing appeals filed by the State Bank of India (SBI) and seven other financial creditors.
The appellate tribunal also upheld a February 4 order of the National Company Law Tribunal (NCLT), directing that May 20, 2020, be treated as the effective date for calculating the 24 months' worth of workmen's dues entitled to priority under the Insolvency and Bankruptcy Code (IBC).
The lenders had argued that provident fund, gratuity, and pension fund dues should form part of the liquidation estate and be distributed among all creditors under the IBC. They also contended that such dues could be excluded only if dedicated provident fund and gratuity funds existed at the commencement of liquidation.
Rejecting the argument, the NCLAT ruled that employees' statutory dues would remain outside the liquidation estate, protecting them from competing creditor claims.
The banks had also sought to include the period spent in litigation while calculating the 24-month window for workmen's dues. Had that plea been accepted, employees would have lost their priority status for payment under the IBC.
The ruling is expected to benefit around 11,800 workmen, apart from other former Jet Airways employees, whose claims are part of the liquidation proceedings. Employee groups estimate the airline's outstanding PF and gratuity dues at around Rs 265 crore.
Welcoming the judgment, Dr Narayan Hariharan, former senior vice president of Jet Airways and advisor to the Staff and Officers Association of Jet Airways, called it a "landmark decision" that brings long-awaited relief to employees after more than seven years of litigation.
"We had consistently raised this issue, and the matter ultimately reached the Supreme Court, which ordered liquidation. Subsequently, the NCLT directed that employees' gratuity dues be protected and paid," he said.
Hariharan said SBI's appeal, filed on the ground that Jet Airways had not established a gratuity fund as required under the Payment of Gratuity Act, further prolonged the legal battle and delayed payments to employees.
"It is unfortunate that employees' social security rights were subjected to such a long and complex legal process. With the NCLAT now settling the matter, we hope the payments are released to employees without any further delay," he said.
He also urged the government to draw lessons from the case and put in place mechanisms to ensure insolvency proceedings involving employees' statutory and social security rights are resolved expeditiously. Dr Hariharan acknowledged the efforts of advocate Ronita Bhattacharya, the legal team and former Jet Airways Senior General Manager S. Gopalkrishnan for pursuing the matter over the past seven years.
The airline operated its last commercial flight on April 17, 2019, before entering the corporate insolvency resolution process. In November 2024, the Supreme Court ordered Jet Airways' liquidation after holding that the Jalan-Kalrock Consortium had failed to implement the approved resolution plan.
