NCLAT Upholds Full PF, Gratuity Payout For Former Jet Airways Employees

In a significant relief for former Jet Airways employees, the National Company Law Appellate Tribunal (NCLAT) has upheld an earlier ruling directing the airline’s liquidator to pay provident fund (PF) and gratuity dues in full.

The tribunal also dismissed appeals filed by the State Bank of India (SBI) and seven other financial creditors challenging the priority of employee dues.

The appellate tribunal affirmed the February 4 order of the National Company Law Tribunal (NCLT), which designated May 20, 2020, as the cut-off date for calculating 24 months of workmen’s dues that are entitled to priority under the Insolvency and Bankruptcy Code (IBC).

The lenders had argued that PF, gratuity, and pension liabilities should be included in the liquidation estate and distributed among all creditors.

They further claimed that such protections would apply only if dedicated provident fund and gratuity trusts existed at the start of liquidation proceedings.

Rejecting these contentions, the NCLAT held that statutory employee dues remain outside the liquidation estate and cannot be used to satisfy competing claims from financial creditors.

The ruling ensures that workers’ social security benefits are protected under insolvency law.

The banks had also sought inclusion of time spent in litigation while determining the 24-month window for workmen’s dues. If accepted, this would have reduced employees’ priority entitlement under the insolvency framework.

The decision is expected to benefit around 11,800 former employees of Jet Airways, with outstanding PF and gratuity liabilities estimated at approximately ₹265 crore.

Welcoming the verdict, former Jet Airways senior vice president Dr. Narayan Hariharan described it as a “landmark decision” that brings long-awaited relief after more than seven years of legal proceedings.

He noted that employees had consistently raised the issue, which eventually reached the Supreme Court and led to liquidation proceedings.

Hariharan also criticised the prolonged litigation initiated by lenders, including SBI’s objection regarding the absence of a gratuity fund under the Payment of Gratuity Act, which he said delayed payments to employees.

He urged that insolvency cases involving employee social security rights be handled more efficiently in the future. He also acknowledged the efforts of legal representatives and employee association members who pursued the case over several years.

Jet Airways ceased operations on April 17, 2019, entered insolvency proceedings thereafter, and was ordered into liquidation by the Supreme Court in November 2024 after the resolution plan failed.