'Best Diwali gift in more than 3 yrs': Former Jet Airways staff hail NCLAT order on unpaid gratuity

Former Jet Airways staff have welcomed the decision on payment of their gratuity by the country’s top company tribunal.  The National Company Law Appellate Tribunal (NCLAT) in a landmark ruling on Friday held that the resolution plan of the Jalan-Kalrock Consortium went against the Employees Provident Fund (EPF) Act, 1952. 

The NCLAT bench observed that the resolution plan initiated on June 22, 2019, had failed to provide for the payment of provident funds and gratuity to the airline staff. The plan was cleared by a two-member Mumbai bench of the National Company Law Tribunal (NCLT), which directed the Jalan-Kalrock consortium to get the requisite approvals and licenses to restart the airline in 90 days. 

The NCLT order led to a bunch of appeals being filed by employee representatives challenging it. Subsequently, NCLAT began its hearing on the appeals in July this year. 

“This is the best Diwali gift that I could have expected ever since the airline ceased operations in April 2019," said an employee with nearly 30 years of service with the carrier. 

Welcoming the decision, President of All India Jet Airways Officers Association, Kiran Pawaskar, told Business Today, “This is the first time in the aviation industry that terminal benefits have been made payable." He referred to similar cases with companies engaged in ground handling where workers were never paid any outstanding dues.

Expressing his satisfaction at the verdict, a former vice president of the carrier and one of the key figures in the fight for the clearance of all outstanding dues, Dr Narayan Hariharan said, "The tenets and principles of the social security law were upheld by the court...Terminal benefits are the final hopes for an employee at the end of service and the right to receive the same after a long fight does bring in confidence to the worker when the employer walks away in debt.”

The NCLAT order also said that non-payment of full provident fund and gratuity was violative of Section 30(2)(e) of the Insolvency and Bankruptcy Code (IBC), 2016. Therefore, to save the resolution plan, the above payments had to be made.

 A significant order

The judgment indicates that nearly Rs 247.8 crore of gratuity claims are payable by the Jalan-Kalrock Consortium on account of having been admitted by the resolution professional. The NCLAT has directed the chairperson of the monitoring committee, the erstwhile resolution professional, to calculate the payments to be made to workmen and employees within one month from October 21, and then communicate the same to the successful resolution applicant to facilitate them.

Additionally, holding the amount of Rs 15,000 allotted as payment under the resolution plan as untenable, the tribunal said that an amount of Rs 24,40,65,594 towards damages under Section 14B of Employees’ Provident Funds & Miscellaneous Provisions Act, 1952, as per the order dated October 10, 2018, would have to be paid to the office of the Regional Provident Fund Commissioner, Mumbai.

NCLAT also issued directions to successful resolution applicants to make a payment of Rs 113 crore to workmen under the Resolution Plan, as 24 months’ wages they were entitled to receive under Section 30 and Section 53 of IBC. 

Senior partner at the New Delhi-based law firm Arbiters Law Firm, Anu Mehta, called the NCLT order a landmark event in service and labour jurisprudence, which would create a new benchmark to surpass standards of labour welfare legislation globally. 

“NCLT has directed the Jalan-Kalrock Consortium to pay the entire claim of the Regional Provident Fund Commissioner for meeting the claims of employees towards gratuity and PF. The so-called resolution trampling the statutory claims of workmen and employees being in contravention of law was not acceptable to the bench,” observed Mehta.  

“They have sent a clear message through the present judgment that development and growth must be all-inclusive and certainly not at the cost of workers and employees. A clear precedent has been set for the international community to emulate India in its commitment to the welfare of workmen,” she added.

The judgment held all workmen and employees whose gratuity was due before the insolvency commencement date was entitled to it. However, employees were not eligible to receive any outstanding wages on account of falling below the Corporate Insolvency Resolution Process (CIRP) costs.

 NCLAT further clarified that gratuity claims arising after the insolvency commencement date for employees absorbed in Airjet Ground Services Ltd (AGSL) – constituted for providing third-party ground handling services – would not be payable as the employment of such individuals had continued.