NCLT Mumbai Rejects 100 Jet Lite Employees' Bid To Claim Dues In Jet Airways Liquidation

The Mumbai Bench of the National Company Law Tribunal has dismissed an application filed by 100 former employees of Jet Lite (India) Ltd. seeking to have their employment dues admitted in the liquidation of Jet Airways (India) Ltd.

The tribunal held that merely being seconded to the parent company did not make Jet Airways their employer or give them an enforceable claim against it.

A bench of Judicial Member Sushil Mahadeorao Kochey and Technical Member Prabhat Kumar held that employees of a subsidiary cannot have their claims admitted in the liquidation of the holding company merely on the basis of operational integration or secondment.

The tribunal observed, "This Tribunal is also unable to accept the contention that the claims of employees of a subsidiary company can be admitted in the liquidation of the holding company merely on the basis of operational integration or secondment. For a claim, there has to be an obligation of corporate debtor towards the claimant, however in the absence of any such obligation to the applicants on part of corporate debtor, the claim of Applicants even do not fall within the definition of 'claim' as provided in section 3(6) of IBC because the Applicants had no right to payment from the Corporate Debtor."

The application was filed by one Jet Lite employee on behalf of himself and 99 others. They contended that they had been seconded to Jet Airways in 2008. According to them, they worked exclusively under its supervision and control until the airline ceased operations in April 2019.

They sought admission of unpaid salary, gratuity, leave encashment and other employment dues in the liquidation process.

The employees argued that although they were originally appointed by Jet Lite, Jet Airways had become their real employer because it exercised effective control over their work. They relied on the secondment orders, salary credits from Jet Airways into their bank accounts, authorisation letters and experience certificates issued by Jet Airways.

They also argued that Jet Lite and Jet Airways functioned as a single integrated enterprise with common management, common directors, shared human resource systems, common operational control, unified branding and substantial financial and operational interdependence.

The liquidator opposed the application. It contended that the applicants continued to be employees of Jet Lite, a separate legal entity, and therefore had no claim against Jet Airways in liquidation. The liquidator also relied on salary records, payroll documents, Form 16s and employee benefit records maintained by Jet Lite to show that the employment relationship had never shifted to Jet Airways.

After examining the secondment letters, the tribunal found that they expressly preserved all existing terms and conditions of employment with Jet Lite. It held that the documents did not transfer the applicants' employment to Jet Airways.

The tribunal observed, "Thus, the very documents relied upon by the Applicants demonstrate continuation of their original employment with Respondent No. 3 and do not evidence transfer of employment to Respondent No. 2."

The tribunal further noted that the employees had not produced any termination letters issued by Jet Lite. Nor had they produced fresh appointment letters from Jet Airways establishing that their employment had been transferred.

It also rejected the contention that salary payments by Jet Airways and supervision during the period of secondment, by themselves, created a contract of employment between the applicants and Jet Airways.

The tribunal observed, "The fact that salaries have been credited from the account of Respondent No. 2 on few occassions, or that the Applicants worked under the supervision and operational control of Respondent No. 2 during the period of secondment, cannot by itself create a contract of employment between the Applicants and the Corporate Debtor, and such arrangements are not uncommon within a group structure and do not, in the absence of clear evidence of transfer of employment, result in substitution of the original employer."

Addressing the employees' reliance on operational integration, the tribunal held that a claim could be admitted in the liquidation only if the corporate debtor owed a legal obligation to the claimant.

It found that Jet Airways owed no such obligation to the applicants. Consequently, they had no right to payment from the corporate debtor and no enforceable claim against it.

The tribunal also observed that many of the applicants appeared to be drawing salaries exceeding ₹20,000 a month.

Their designations also suggested supervisory, administrative, or managerial responsibilities. It therefore observed that they may not qualify as "workmen" under the Industrial Disputes Act.

Holding that the applicants had failed to establish that they became employees or workmen of Jet Airways, the tribunal upheld the liquidator's decision declining to admit their claims. It accordingly dismissed the application.

For Applicant: Advocate Sowmya Saikumar

For Respondent: Advocates Malhar Latakia, Vasudha Jain, I. Agarwal