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TMI Blog2025 (2) TMI 1117X X X X Extracts X X X X X X X X Extracts X X X X ..... Somesh Bagchi) [2018 (7) TMI 2362 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] as well SBI v. Moser Baer Karamchari Union (Moser Baer - NCLAT) [2019 (8) TMI 915 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] wherein the Appellate Tribunal had held that gratuity does not form a part of the liquidation estate. In Moser Baer - NCLT, the Court further directed the liquidator that in cases there is any deficiency to the provident, pension or the gratuity funds; the liquidator shall ensure that the fund is available in these accounts, "even if their employer has not diverted the requisite amount" - This order was impugned by the State Bank of India - a secured creditor of Moser Baer in SBI v. Moser Baer Karamchari Union, where the limited question that came before the NCLAT was whether the gratuity dues formed a part of the liquidation estate. Holding the answer in negative, the NCLAT decided not to interfere with the order of the NCLT. In the present case, there is no such fund maintained by the company. Herein, the company never closed down nor did it go into liquidation. The dues for the welfare of the workers is not permissible to be included in the liquidation es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect from 18.09.2002 and thereafter, had resigned on 03.12.2014. 4. The respondent no. 4 in his written notes has raised the issue of maintainability of the writ petition on the following grounds:- i. That if the petitioner be aggrieved with the order of the Controlling Authority it had the remedy before the Regional Labor Commissioner, the Appellate Authority. ii. That without exhausting all the avenues the petitioner has come to this Writ Court to avoid the deposit of the Award amount. The petitioner in a circuitous manner is challenging Section 10 of the Payment of Gratuity Act 1972. iii. That the Respondent no. 4 was working as Management Staff as such there cannot be any Industrial Dispute as he belongs to Supervisory staff as such this cannot come under Group III determination. 5. On the other hand the petitioner's case is that the present petition under Article 226 of the Constitution of India, has been filed by the Petitioner aggrieved by the Order dated 11.11.2024 passed by the Respondent No. 3 i.e. Controlling Authority & Assistant Labour Commissioner (Central) Kolkata (without preferring an appeal) as the controlling authority has wrongly and arbitrarily allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in Jet Aircraft Maintenance Engineers Welfare Association and followed by the Hon'ble NCLAT in Hindustan Newsprint Limited (Supra). 19. Based on the above discussion, we are of the view that the Application claiming gratuity dues as per the provisions of the Payment of Gratuity Act, 1972 against the Corporate Debtor/Respondent No. 1 to the extent of admitted claims deserves to be paid." 7. In appeal, the NCLAT appellate tribunal held that:- PF, Pension Fund and Gratuity Fund does not come within the meaning of Assets of Corporate Debtor for distribution under S. 53 IBC. 8. In IDBI Bank Limited vs Lanco Infratech Limited, the NCLT Hyderabad Bench-1, on 04.05.2023, held:- "2. According to the applicants, this Tribunal vide order in IA.No.96/2019 dated 01.10.2019 while allowing the said IA directed the Liquidator to make necessary arrangements for payment of gratuity to the applicants as per their eligibility and the said amount shall not be treated as part of the liquidation estate. Aggrieved by the said order the Liquidator had preferred an Appeal before Hon'ble NCLAT, which has been allowed. However, the Civil Appeal No.2520/2020 preferred by the Petitioners a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r employee from the provident fund, the pension fund and the gratuity fund; In other words, any amount due to the workers from the pension fund, provident fund, and the gratuity fund will not form a part of the liquidation estate of the corporate debtor and will not be used for recovery in liquidation. iv. Since in many instances, liquidation results in the complete closure of the business of the ailing debtor, which results in the termination of the employment of the workers. In legal parlance, this discharge of workers amounts to their retrenchment i.e. the termination of service of workers by the employer for any reason other than punishment inflicted by way of disciplinary action. Naturally to protect the workers, funds such as pension fund, provident fund, and the gratuity fund are kept out of the liquidation distribution and to be used solely for the benefit of the workers. v. This question was even dealt with by the National Company Law Appellate Tribunal (NCLAT) in Somesh Bagchi v. Nicco Corpn. Ltd. (Somesh Bagchi) as well SBI v. Moser Baer Karamchari Union (Moser Baer - NCLAT) wherein the Appellate Tribunal had held that gratuity does not form a part of the liquidation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the labour legislation, payment of gratuity act and applies to all employees. 17. Thus the findings of the controlling authority on the said issue which is as follows requires no interference:- "VII. Additionally, the Payment of Gratuity Act, 1972, uses the term "employee" instead of "workman," reflecting a broader definition that includes both workers and supervisory personnel. Under Section 36 (4) of the Code, gratuity dues are distinct; they are not simply part of the debtor's assets but represent the earned entitlements of employees. In contrast, "workmen's dues" as defined in Section 53 represent a form of retrenchment compensation, acknowledging the workers' deemed termination upon liquidation. This compensation equates to 24 months of service benefits for the workers but is separate from the gratuity dues already accrued to employees, which stand as thirdparty assets outside the corporate debtor's estate." 18. The order challenged is dated 11.11.2024. 19. There has been no appeal filed on the ground that the order has been passed without jurisdiction. 20. The relevant findings of the controlling authority are as follows:- "IX. Even if the issue of fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintaining a separate Fund or not. XIII. It was held in Jet Aircraft Maintenance Engineers Welfare Association Vs. Ashish Chhawchharia RP of Jet Airways (India) Ltd. & Ors. - NCLAT New Delhi that "Due to their exclusion from the liquidation estate under Section 36(4)(b)(iii), the workers and employees are entitled to the full amount of the provident fund and gratuity." A three judge bench of the Hon'ble Supreme Court of India, by way of its order in Jalan Fritsch Consortium v Regional Provident Fund Commissioner and Another [Civil Appeal Number 407 of 2023], upheld the judgment of the National Company Law Appellate Tribunal (NCLAT) in the matter of Jet Aircraft Maintenance Engineers Welfare Association v Ashish Chhawchharia, Resolution Professional of Jet Airways (India) Limited and Others [Company Appeal (AT) (Insolvency) Number 752 of 2021], whereby Jalan Fritsch consortium (Successful Applicant) was directed to disburse gratuity and employees' provident fund dues of the workmen of Jet Airways (India) Limited (Jet Airways) in entirety. In light of the above arguments and cited case law, I find that River Rail, as the entity that assumed control of the corporate de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than this Act." This clause is designed to ensure that the provisions of the Gratuity Act prevail over any conflicting legislation, thereby protecting the statutory rights of employees. Accordingly, River Rail cannot evade its liability for gratuity payments under the guise of other statutes, as the Gratuity Act takes precedence. In view of above, I hold that present management shall pay gratuity to the applicant." 21. The controlling authority finally directed as follows:- "ORDER I hereby direct respondent to pay the amount of gratuity amounting to Rs. 2,11,154/- (Rupees Two Lakh Eleven Thousand One Hundred Fifty Four only) along with simple interest @ 10% per annum as specified by the Central Government in the Gazette of India Notification vide SO No.847(E), dated 01.10.1987 under sub-section (3A) of Section 7 of the PG Act, 1972 w.e.f. 03/12/2014 till the actual payment of gratuity to Sh. Arun Roy within 30 days from the receipt of this order under intimation to this Controlling Authority. Given under my hand and seal on this 11th day of November 2024." 22. In view ..... X X X X Extracts X X X X X X X X Extracts X X X X
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