Jet Airways Insolvency : Supreme Court Affirms NCLAT Order Directing Successful Bidder To Clear PF, Gratuity Dues Of Employees

The Supreme Court on Monday refused to interfere with the order of the National Company Law Appellate Tribunal which directed the Jalan Fritsch consortium, the successful resolution applicant for Jet Airways Ltd, to clear the gratuity and provident fund dues of the employees.

A bench comprising Chief Justice of India DY Chandrachud, Justice PS Narasimha and Justice JB Pardiwala dismissed the appeal filed by Jalan Fritsch consortium.

Senior Advocate Saurabh Kirpal, appearing for the consortium, argued that PF and gratuity dues were not part of the approved resolution plan and stated that the liability has to be capped at Rs 475 Crores. If resolution plan is amended to add other dues, it will upset the entire resolution process, he said.

"The law is resolution plan cannot be modified or taken back. It has a sanctity. When a person is making the bid for a company, you have to provide for certain liabilities. The workers dues is frozen at a cap of Rs 52 crores", Kirpal said stressing that the NCLAT order to add gratuity and PF dues will create an additional burden of Rs 200 crores.

CJI Chandrachud however pointed out that the PF Act is very clear about the priority charge. In response, Kirpal stated that there is no provision in the Payment of Gratuity Act which gives priority charge for gratuity dues, unlike Section 11 of the PF Act. So, the NCLAT is wrong in equating PF with the gratuity dues, the senior counsel stated, while adding that the larger dues are of gratuity.

"Anybody who steps in knows that it will be subject to the overriding dues of labour", the CJI observed. Pointing out that the NCLAT has relied on the Supreme Court's order in State Tax Officer (1) vs Rainbow Papers Limited, the CJI said, "we will not interfere".

Though Kirpal tried to persuade the bench by saying the 'waterfall mechanism' for distribution of assets, also has overriding power as Section 53 of the Insolvency and Bankruptcy Code starts with a non-obstante clause, the bench expressed disinclination to interfere.

"The problem will be I will have to put in extra Rs 200 crores and this company will not be revived. The resolution plan will fail", Kirpal said.

"No Mr.Kirpal, We will not interfere. There has to be finality", CJI said.

Case : JALAN FRITSCH CONSORTIUM  Versus REGIONAL PROVIDENT FUND COMMISSIONER AND ANR | C.A. No. 407/2023