NCLAT Delhi - RP Not Liable For Payments Made To 103 Employees Responsible For Preserving And Managing Operations Of Jet Airways

The Appellate Tribunal dismissed the appeal of the Jet Aircraft Maintenance Engineers Welfare Association, which sought payment for all workmen and employees of Jet Airways, against whom the Corporate Insolvency Resolution Process (CIRP) proceedings were initiated on June 20, 2019.

Background Facts

Through the order dated June 20, 2019, Corporate Insolvency Resolution Process (CIRP) proceedings were initiated against Jet Airways (India) Ltd. (Corporate Debtor). Subsequently, workmen, employees, and other stakeholders filed claims.

The Interim Resolution Professional (IRP) created an Asset Preservation Team to ensure compliance on behalf of the Corporate Debtor. This team included 103 employees who requested a lump sum payment for their work due to uncertainties. The Committee of Creditors (CoC) approved this payment, but the 103 employees later left the team.

The Resolution Professional (RP) published the third List of Creditors, which showed the claims of the 103 employees and several management personnel as NIL, even though their claims were included in the second list.

Consequently, the Appellant filed MA No. 3387 of 2019, seeking orders for the RP to state settlements with the 98 employees listed, explain the payments made, and clarify if claims would be settled during the CIRP. The Appellant also requested that the RP be held personally liable for any illegal payments and to cease further payments to these employees.

The Appellant contended that these 103 employees were paid a lump sum payment by virtue of the Resolution Plan, therefore, all employees and workmen of Corporate Debtor are entitled to payment. The Appellant argued that giving a lump sum payment to only 103 employees is arbitrary and unreasonable.

Through an order dated September 26, 2023, the NCLT Mumbai (Adjudicating Authority) rejected the Appellant's appeal (MA No. 3387 of 2019), holding it devoid of merit. Feeling aggrieved, the Appellant filed an appeal before the Appellate Tribunal.

NCLAT Verdict

The Appellant Tribunal referred to paragraphs 15 to 20 and 23 of the reply affidavit of the respondent, which briefly mentioned that - The 103 employees were paid a lump sum amount because they were identified as essential personnel needed to preserve the assets and manage the operations of Jet Airways during the Corporate Insolvency Resolution Process (CIRP). Further, this decision was discussed and approved by the CoC on July 19, 2019, as part of the budget for operation costs.

The Appellate Tribunal held that the prayers made by the Appellant have been clearly and categorically explained in the reply affidavit of the Respondent filed in this appeal, as well as before the Adjudicating Authority. Therefore, there is no basis for holding the Resolution Professional personally liable for any payments made to the 103 employees.

Consequently, the Appellate Tribunal dismissed the appeal and upheld the decision of the Adjudicating Authority dated September 26, 2023.

Case Title: Jet Aircraft Maintenance Engineers Welfare Association Versus Mr. Ashish Chhawchharia

Case No.: Company Appeal (AT) (Insolvency) No.1705 of 2023 & I.A. No. 6137 of 2023

Counsel for the Petitioner: Mr. Vikas Mehta, Ms. Anshula Grover, Mr. Mayan Prasad, Mr. Kartik Pandey, Ms. Nitika Grover, Advocates.

Counsel for the Respondent: Mr. Arun Kathpalia, Sr. Advocate with Mr. Raghav Chadha, Mr. Dhiraj Kumar Totala, Mr. Nishant Upadhyay, Mr. Ankit Pal and Mr. Ajay Raj, Advocates

Date of Judgment: 19th July, 2024

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