SC Upholds NCLAT Order on Payment of Dues to Former Employees of Jet Airways

In a setback to the Jalan-Fritsch consortium, the new owners of the cash-strapped Jet Airways, the Supreme Court on Monday upheld an NCLAT order directing the payment of the provident fund and gratuity dues of the airline’s former employees.

A bench of Chief Justice DY Chandrachud and justices PS Narasimha and JB Pardiwala said, “Anyone stepping in would know that there are overriding labour dues. Unpaid labour dues always take precedence. Somewhere, there has to be finality. Sorry, we will not interfere.”

The top court refused to entertain a plea moved by the consortium and upheld the National Company Law Appellate Tribunal’s (NCLAT) order.

At the outset, senior advocate Saurabh Kirpal, who appeared in the court on behalf of the consortium, said they will now have to put in an additional amount of more than Rs 200 crore and it would be difficult to revive the airline.

He said once approved, the resolution plan cannot be modified or taken back.

Senior advocate Siddharth Bhatnagar and advocate Swarnendu Chatterjee appeared in the court on behalf of the Association of Aggrieved Workmen of Jet Airways (AAWJA), comprising 270 former employees of the airline who had resigned on or after the carrier’s insolvency commencement date.

The former employees had filed a caveat before the top court, anticipating the move of the consortium.

“This order is not only a path-breaking one, but also a ray of hope for all such workmen and employees who are entangled in these types of litigations,” Chatterjee told reporters after the hearing of the matter.

The appeal against the NCLAT order was filed on behalf of the consortium of Murari Lal Jalan and Florian Fritsch, the successful resolution applicants for Jet Airways (India) Limited.

The consortium has claimed that the information memorandum provided to it did not disclose any liabilities of the corporate debtor (Jet Airways) towards the provident fund and gratuity dues in full.

On October 21 last year, the NCLAT had directed the consortium to pay the provident fund and gratuity dues of the employees of the airline.

It had directed the former resolution professional to “compute the payments to be made to workmen and employees within one month from today” and communicate the same to the Jalan-Fritsch consortium to take steps for the payment.

Allowing a batch of petitions filed by the associations of workmen, aircraft maintenance engineers, the Officers and Staff Association and others, a two-member NCLAT bench had asked the new owners of the carrier to pay the provident fund dues as admitted by the resolution professional.

The appellate tribunal had also said the workmen were entitled to the payment of their gratuity dues as on the insolvency commencement date, after adjusting any amount towards gratuity paid under the resolution plan.

Jalan-Fritsch won the bid through an insolvency resolution process for Jet Airways, which had stopped operations in early 2019 due to a financial crisis. The airline is now preparing to restart its services.

According to the NCLAT order, full gratuity and provident fund have to be paid to all workmen and employees who have resigned or retired. The calculation should be done till June 20, 2019, the date of admission to insolvency.

Over and above the gratuity and provident fund, the entire due amount of Rs 113 crore, as mentioned in Form H (draft plan), has to be paid to the workmen.

“Employees shall also be entitled to the gratuity, which fell due up to the insolvency commencement date,” the NCLAT had said, adding “The employees are also entitled to the payment of their full provident fund, unpaid up to the date of insolvency commencement.”

The NCLAT order had come on a batch of petitions challenging orders of the tribunal’s Mumbai bench, which had on June 22, 2021 approved the bids of the Jalan-Fritsch consortium.

Five appeals were filed by the workmen and employees of Jet Airways and three by its operational creditors before the NCLAT.

On January 10, in signs of increasing differences, the consortium had asked the airline monitoring committee’s authorised representative, Ashish Chhawcharia, not to issue any communication on behalf of the grounded carrier without the approval of all the members of the committee.

The consortium had written to Chhawcharia amid the continuing uncertainty over the fate of Jet Airways, which shuttered operations in April 2019.

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