NCLAT Rules in Favour of Jet Airways Employees: Full PF, Gratuity Dues Upheld

In a significant victory for thousands of former Jet Airways employees, the National Company Law Appellate Tribunal (NCLAT) on Tuesday upheld an order directing the airline's liquidator to pay provident fund (PF) and gratuity dues in full. The tribunal dismissed appeals filed by the State Bank of India (SBI) and seven other financial creditors.

The NCLAT also rejected the banks' plea that these dues should be part of the liquidation estate, where they would be subject to competing claims under the Insolvency and Bankruptcy Code (IBC). The appellate tribunal affirmed that PF, gratuity, and pension fund dues are excluded from the liquidation estate under Section 36(4) of the IBC, which treats them as assets held in trust for employees.

Banks had argued that such exclusion required the existence of a separate fund at the time of liquidation, which was not the case. However, the NCLAT found no merit in this argument, stating that the statutory obligation to maintain such funds does not cease with insolvency.

Upholding the National Company Law Tribunal’s (NCLT) February 4 order, the NCLAT also ruled that May 20, 2020, would be the effective date for calculating the 24 months' worth of workmen's dues under the IBC. SBI had sought to include the litigation period, which would have reduced the priority payment to workmen.

Jet Airways, which operated its last commercial flight on April 17, 2019, has around 11,800 workmen and other employees involved in liquidation proceedings. Employee groups estimate the outstanding PF and gratuity dues at approximately ₹265 crore.

Narayan Hariharan, former senior vice president at Jet Airways and a member of the Jet Airways Officers and Staff Association, expressed relief. “We are very elated with the NCLAT order, which upholds workers’ rights. It has been a very long legal battle for us, and we hope that justice prevails,” he said.

The airline was admitted into corporate insolvency in 2019, and in November 2024, the Supreme Court ordered its liquidation after the Jalan-Kalrock Consortium failed to implement the resolution plan. The NCLAT’s decision ensures that employees’ statutory dues are prioritized over other claims.