Big Relief for Jet Airways Employees as NCLAT Rejects SBI Appeal on PF and Gratuity Payments
A significant relief to all the former Jet Airways employees after the National Company Law Appellate Tribunal (NCLAT) dismissed the State Bank of India’s (SBI) appeal against the priority payment of provident fund (PF) and gratuity dues. The ruling was in favour of all the employees as the liquidation process continues for all the employees.
The tribunal has upheld the National Company Law Tribunal (NCLT) decision, which stated that the statutory PF and gratuity payments must be cleared before other claims. However, a detailed NCLAT order is still awaited.
Why the NCLAT Decision Matters
The ruling reinforces an important principle under the Insolvency and Bankruptcy Code (IBC). With the new law, it has now become confirmed that provident fund and gratuity dues are protected by law and do not form part of a company’s liquidation estate.
This means these statutory employee benefits cannot be treated like ordinary assets that are distributed among creditors during liquidation. Instead, these employee benefits must be paid separately and in full, which offers employees greater protection even when a company is being wound up. According to former Jet Airways employees, their outstanding dues, including provident fund and gratuity, exceed ₹275 crore.
What the NCLT Had Ruled Earlier
Earlier this year, the NCLT’s Mumbai bench directed the airline liquidator to pay the provident and gratuity dues owed to employees and workmen in full. The tribunal then stated that these payments are governed by the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, and the Payment of Gratuity Act, 1972. According to the statutory obligation, they remain outside the liquidation estate under the IBC.
The tribunal also rejected arguments which were made by SBI and the liquidator that these dues should depend on whether separate provident fund or gratuity accounts had been maintained. The court relied on previous Supreme Court rulings and concluded that employees are entitled to full payment irrespective of the existence of dedicated funds.
How the Dispute Began
The legal battle began after 296 former Jet Airways employees, who were also members of the Jet Airways Management and Employees Welfare Association (JAMEWA), filed applications as they were seeking to exclude provident fund, gratuity, and certain salary dues from the liquidation estate.
They argued that these statutory payments should not be distributed through the IBC’s Section 53 waterfall mechanism, which determines the order of payments to creditors during liquidation.
Jet Airways Liquidation Continues
Jet Airways has entered liquidation as the Supreme Court ordered the airline to be wound up in November 2024. This decision came after the failure of the Jalan-Kalrock Consortium to implement the approved revival plan, infuse committed funds, and settle employee dues.
As the Jet Airways revival effort collapses, liquidation became the only available path. The airline’s assets are now being monetised to maximise recoveries for creditors, while the latest NCLAT ruling ensured that employees’ statutory provident fund and gratuity dues remain protected.
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