The Supreme Court on Wednesday asked the Jalan-Kalrock consortium, the new owners of cash-strapped Jet Airways, how much have they paid towards dues on account of provident fund and gratuity to the former employees of the troubled airline.
The top court made the query while commencing the hearing on a batch of petitions, including the one filed by the Jet Aircraft Maintenance Engineers Welfare Association, against the October 21, 2022 order of the insolvency appellate tribunal NCLAT.
“Tell us, how much you have paid to the workmen (of Jet Airways) towards the provident fund and gratuity dues,” a bench comprising Chief Justice D Y Chandrachud and Justices J B Pardiwala and Manoj Misra asked senior advocate Mukul Rohatgi, appearing for the consortium whose resolution plan to take over the ailing firm was approved.
“We have not received even one per cent control over the entity,” Rohatgi responded, adding that the consortium was committed to the terms of the approved resolution plan.
The consortium, according to lawyers, has to pay over Rs 200 crore towards PF and gratuity dues to the former employees.
Rohatgi said every stakeholder is needed to accept “haircuts” for ensuring that the company remains a “going concern” and moreover, the workmen are operational creditors and not financial creditors like banks.
At the outset, Solicitor General Tushar Mehta, appearing for the SBI-led banks which had lent money to Jet Airways, said the financial institutions have to recover Rs 7,800 crore. He said they are also incurring expenses on maintaining aircraft.
Out of the five petitions, the bench decided to first hear the plea of the workmen against the National Company Law Appellate Tribunal’s (NCLAT) decision and would resume hearing on Thursday.
The NCLAT had on October 21, 2022 directed the Jalan-Kalrock consortium to pay the unpaid provident fund and gratuity dues of employees of the carrier. It had also 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 consortium to take steps for making the payment.
Lawyers Vikas Mehta, Mayan Prasad and Anshula Grover represented 110 workmen of Jet Airways and raised the issue of whether workmen are entitled to provident fund and gratuity during the corporate insolvency resolution process.
They said the top court needed to decide the question whether the resolution plan can provide for transfer of liability to pay statutory PF and gratuity dues to another entity.
“It is relevant to note that the implementation of the Resolution Plan was dependent on Conditions Precedents which were to be met within a maximum period of 270 days. The payment of workmen had to be made within 175 days from the Effective Date. Till date, even after 30 months from the Approval (of resolution plan) order dated June 22, 2021, no payment has been made to the workmen…,” the workmen said in their plea.
The resolution plan transferred salary, PF and gratuity dues of 3,400 employees for the period after insolvency commencement date (ICD) to a wholly owned subsidiary of Jet Airways, AGSL, the plea said.
“The salary and other benefits of the employees after ICD and till September 2020 were Rs 715 Crores. The Resolution Plan stated that this amount was not payable,” it alleged.
The NCLAT held the employees were entitled to payment of the entire provident fund and gratuity dues only till the ICD as these dues did not form part of the liquidation estate of the corporate debtor, the workmen’s plea said.
“However, the provident fund and gratuity dues of the workmen and employees during the Corporate Insolvency Resolution Process (CIRP) were not allowed,” it said.
The top court had on January 30, 2023 upheld an NCLAT order for payment of the provident fund and gratuity dues to the airline’s former employees. It had rejected the plea of the consortium.
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The consortium had 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 has been 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 the order of the tribunal’s Mumbai bench, which had on June 22, 2021 approved the bid of the Jalan-Fritsch consortium.
