Critically examine the role of NCLAT in safeguarding employee interests in corporate insolvency cases, with suitable case examples.
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The NCLAT, constituted under Section 410 of the Companies Act, 2013, is the appellate authority over NCLT orders in insolvency matters [2]. Through a purposive reading of the IBC, 2016, it has emerged as the main judicial shield for workmen's dues — yet its protection remains partial and slow.
Protective role
- Statutory trust upheld: Section 36(4)(a)(iii), IBC excludes provident, pension and gratuity fund dues from the liquidation estate [1]. In the Jet Airways liquidation (June 2026), NCLAT dismissed appeals by SBI and lenders, holding the exclusion is due-centric, not contingent on the debtor maintaining separate identifiable funds [2].
- Discipline over resolution plans: NCLAT (2022) directed the Jalan-Kalrock Consortium to pay full PF and gratuity, since a plan contravening the EPF Act, 1952 [4] and Payment of Gratuity Act, 1972 [5] violates Section 30(2)(e) [1].
- Settled precedent: the Supreme Court affirmed this position in 2023, reinforcing that welfare deductions were never the employer's money [3].
- Waterfall clarity: it has held workmen's dues for 24 months rank pari passu with secured creditors under Section 53 [1].
Limitations
- Relief is largely declaratory; actual payment depends on the liquidator and realisable assets.
- Delay dilutes remedy — Jet Airways staff, jobless since 2019, awaited finality till 2026 amid repeated appeals to NCLAT and the Supreme Court.
- Only PF, pension and gratuity are carved out; other employee claims remain operational-creditor dues, ranking low in the waterfall [1].
- Adjudication is case-by-case; NCLAT has no rule-making power, and tribunal vacancies and pendency slow disposal.
NCLAT has thus converted a statutory exclusion into an enforceable worker protection, without which employee savings would have been absorbed into creditor recovery. Sustaining this gain needs time-bound disposal, filling of tribunal vacancies, and a legislative clarification of employee dues in liquidation — aligning the insolvency framework with the Directive Principles' promise of a living wage and worker security.
Sources
- 1The Insolvency and Bankruptcy Code, 2016 (No. 31 of 2016), IBBISections 36(4)(a)(iii), 30(2)(e) and 53 waterfall
- 2National Company Law Appellate Tribunal — JudgmentsNCLAT's constitution under Section 410, Companies Act 2013; Jet Airways PF/gratuity ruling
- 3Supreme Court of India — Judgments2023 affirmation of NCLAT's order on Jet Airways ex-employees' dues
- 4Employees' Provident Funds and Miscellaneous Provisions Act, 1952, India Codestatutory PF obligation surviving insolvency
- 5Payment of Gratuity Act, 1972, India Codestatutory gratuity obligation