Supreme Court Refuses To Interfere With NCLAT Order Protecting Jet Airways Workmen's PF Gratuity Dues

The Supreme Court on Monday, 31 August, declined to interfere with the National Company Law Appellate Tribunal's (NCLAT) 30 June order which held that provident fund, gratuity and pension dues payable to Jet Airways' workmen do not form part of the liquidation estate, even where segregated funds were not available on the liquidation commencement date.

A Bench of Chief Justice Surya Kant with Justices Joymalya Bagchi and V. Mohana refused to interfere with the order, while leaving the questions of law raised by the financial creditors open for consideration in an appropriate future case. The Court said:

“Even though there are arguable points raised in this appeal which ordinarily would require this Court to decide and the peculiar factual circumstances of the case, we are not inclined to interfere with the impugned order. The questions of law are left open to be examined in the appropriate case.”

During the hearing, Solicitor General Tushar Mehta, appearing for State Bank of India, urged the Bench to examine the questions of law arising from the NCLAT's order, particularly the interplay between the liquidation provisions of the Insolvency and Bankruptcy Code (IBC) and the treatment of workmen's dues.

The Solicitor General said that “there is a question of law which reoccurs every time.” He sought time to explain the legal issue, stating:

“Would your Lordships give me only three minutes to point out what is the interrelation between Section 53, 36 of the IBC and Companies Act?”

The Bench, however, questioned the practical significance of examining the issue in the present case, particularly in view of the amounts involved and the circumstances surrounding Jet Airways' liquidation. It asked, “How does that help at all in this case? That is the only question.”

The Solicitor General responded that the issue was not merely about the amount involved but concerned a recurring question of law. He submitted that the issue concerned the treatment of pension and gratuity dues after the corporate insolvency resolution process transitioned into liquidation. He said, “Earlier, this order, with the SRA process, the exercise was going on, the pension dues were protected by this Court. Just because now it has changed, it is liquidation.”

Further, he sought to distinguish the corporate insolvency resolution process from liquidation, stating, “Not under CIRP, it goes into the liquidation process, Section 36 triggers...”

The Solicitor General also offered to ensure that the dues identified by the National Company Law Tribunal (NCLT) would be secured rather than distributed, while requesting the Bench to examine the larger legal question.

He submitted that “so far as these dues, as per NCLT, is concerned, I'll secure them. It would be placed before your Lordships, or in a separate account. I'm not distributing that. Let it be. But please examine this question.”

The Bench then raised an issue concerning the statutory treatment of provident fund dues and whether the expression “provident fund” under the insolvency framework could apply where the employer had not actually deposited the relevant amounts into a fund. It observed:

“The Companies Act provision provides that a workman's dues would be provident fund. Provident fund is defined under the Provident Fund Act, so as to mean that a fund created by the employer where, periodically, the employer deposits the amount, then that becomes the purpose, and that corpus is the fund. But in this case, nothing was deposited by the employer. So the fund as understood under Section 53, read with Section 36, and the definition of the Provident Fund Act does not exist.”

The judges then considered the implications of treating such amounts as assets of the corporate debtor, particularly where non payment of provident fund dues may itself constitute an offence. They held:

“If a corporate debtor has committed a crime, and is proceeds of crime in its hand, because non payment of provident fund is an offence, is an offence, to that extent, the asset will it not be set apart?”

The Bench nevertheless indicated that it was not inclined to interfere with the NCLAT's order given the peculiar circumstances of the case.

Background

The Supreme Court was hearing State Bank of India's special leave petition against the NCLAT's 30 June 2026 order, which held that provident fund, gratuity and pension dues payable to Jet Airways' workmen must be paid as these amounts do not form part of the liquidation estate, even where no segregated funds were available on the liquidation commencement date.

The NCLAT also directed the liquidator to exclude the 1,656 day period beyond the statutory 330 day limit for the corporate insolvency resolution process while calculating the 24 month look back period under the IBC.

The appellate tribunal consequently dismissed appeals filed by State Bank of India and other financial creditors, while partly allowing the appeals preferred by the workmen.