The National Company Law Appellate Tribunal (NCLAT) has dismissed SBI’s appeal challenging the priority payment of provident fund (PF) and gratuity dues to Jet Airways employees, providing a major relief to the airline’s former staff as the company undergoes liquidation, according to a report by CNBC-TV18.
The appellate tribunal upheld NCLT’s previous ruling that employees’ statutory PF and gratuity dues must be paid in priority and do not form part of the liquidation estate under the Insolvency and Bankruptcy Code (IBC). In the meantime, a detailed NCLAT order is awaited.
Employees have claimed that their total dues, including provident fund and gratuity exceed ₹275 crore, CNBC-TV18 reported.
This development comes after the State Bank of India (SBI) challenged a NCLT order that ruled in favour of the Jet Airways employees before the NCLAT.
In February, the National Company Law Tribunal’s (NCLT) Mumbai bench had directed the liquidator of the defunct airline to pay provident fund and gratuity dues to workmen and employees in full, according to media reports.
What did NCLT ruled earlier?
The tribunal stated earlier that that such statutory dues do not form part of the liquidation estate under IBC.
“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 NCLT said.
How it all began: Workmen seek PF, gratuity exclusion
Two interlocutory applications were filed by 296 former Jet Airways workmen, who were also former members of JAMEWA. These applications had sought exclusion of provident fund, gratuity, and certain salary dues from the liquidation estate, according to a report by the Times of India.
They argued these statutory dues must be paid in full outside the Section 53 waterfall mechanism under the Insolvency and Bankruptcy Code (IBC).
The tribunal rejected objections raised by SBI and the liquidator, stating that employees’ entitlement to PF and gratuity does not depend on whether the corporate debtor had maintained separate funds.
It also relied on binding precedents of the NCLT and Supreme Court to rule that these dues must be paid in full even if no dedicated fund was maintained, the news publication reported.
Jet Airways liquidation process
Jet Airways has been under liquidation after the Supreme Court ordered the airline to be wound up in November 2024. The decision came after a prolonged deadlock between lenders and the Jalan-Kalrock Consortium over the implementation of a revival plan, according to CNBC-TV18.
The court ruled that the resolution plan was unviable after the consortium failed to infuse committed funds and clear employee dues, leaving liquidation as the only viable option for creditors.
Following the order, asset monetisation had been a key part of efforts to recover value for creditors, as per the news report.
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