Retiral and welfare dues do not by themselves justify CIRP; gratuity-interest disputes must go before the competent forum.

Unpaid claims for gratuity, leave travel concession and leave encashment were held not to constitute a sufficient basis for initiating CIRP under the Insolvency and Bankruptcy Code, even though employment-related claims may be dealt with in the insolvency process under the regulations. The Tribunal distinguished retiral and welfare dues from operational debt for the purpose of insolvency initiation and treated non-payment of such benefits as insufficient, by itself, to trigger the Code. The separate dispute over interest on gratuity, where the principal amount had already been paid, was held to fall outside insolvency jurisdiction and to lie before the competent forum under the gratuity law.

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Issues: (i) whether claims for gratuity, leave travel concession and leave encashment constituted operational debt so as to justify initiation of corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016; (ii) whether the dispute concerning gratuity interest could be pursued within insolvency proceedings.

Issue (i): Whether claims for gratuity, leave travel concession and leave encashment constituted operational debt so as to justify initiation of corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016.

Analysis: Operational debt under section 5(21) covers claims arising from goods or services, including employment, but the Code is a resolution mechanism and not a mere debt recovery forum. The Tribunal distinguished between service claims and welfare claims of employees, observing that amounts such as gratuity, leave encashment and other retiral benefits do not, by themselves, justify commencement of CIRP merely because they remain unpaid. Such claims may be pursued in the insolvency process in the manner provided by the regulations, but non-payment of these benefits does not convert the dispute into a basis for insolvency initiation.

Conclusion: The claims were not accepted as a sufficient ground for initiating CIRP, and the finding was against the appellant.

Issue (ii): Whether the dispute concerning gratuity interest could be pursued within insolvency proceedings.

Analysis: The principal gratuity had already been paid, and the remaining controversy related only to interest. The Tribunal held that such a question falls outside the domain of the Insolvency and Bankruptcy Code and lies within the forum competent under the gratuity legislation.

Conclusion: The dispute over gratuity interest was held to be outside the jurisdiction of the insolvency forum, against the appellant.

Final Conclusion: The appeal was found to be without merit because the claimed retiral and welfare dues did not warrant insolvency action and the residual gratuity-interest issue was not entertainable under the Code.

Ratio Decidendi: Unpaid employee retiral or welfare benefits do not, without more, constitute a proper basis for initiating corporate insolvency resolution process, and disputes outside the Code's insolvency framework must be pursued before the competent statutory forum.

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