Retired Employees' Gratuity Rights Protected; Gratuity Trust Fund Not for Creditor Payments Under I&B Code Section 53

The NCLAT addressed the appeal by retired employees of a corporate debtor under liquidation, focusing on whether the Gratuity Trust Fund could be used to pay creditors under Section 53 of the I&B Code. The Tribunal upheld that the Gratuity Trust Fund was not an asset of the Corporate Debtor and emphasized employees' rights to their gratuity. It allowed employees to pursue grievances with the appropriate authority, highlighting the need for further adjudication on the fund's management. The appeal and related applications were disposed of, underscoring the protection of employees' gratuity rights during liquidation.

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The National Company Law Appellate Tribunal in this case considered the appeal filed by retired employees of Nicco Corporation Limited, a Corporate Debtor undergoing liquidation under the Insolvency and Bankruptcy Code, 2016. The main issue was whether the gratuity of the employees, held in the Gratuity Trust Fund, could be used to pay off creditors as per Section 53 of the I&B Code.The Appellants argued that the gratuity belonging to the employees/workers could not be disbursed to creditors and that the Liquidator was deviating from this principle. The Liquidator, Mr. Vinod Kothari, contended that the Gratuity Trust Fund was not considered an asset of the Corporate Debtor and had not been used to pay any creditors. The Liquidator provided details of the fund and stated that there was a shortage of Rs.5.70 Crore in the fund, but did not clarify how this shortage occurred or who was responsible for making up the deficit.The Tribunal appreciated the Liquidator's stance that the Gratuity Trust Fund was not treated as a Corporate Debtor asset but noted the fund's shortage. The Tribunal held that decisions or observations on the Gratuity Trust Fund in previous orders were not binding and left the matter open for determination by the appropriate authority or court. The Tribunal emphasized that while creditors were entitled to their share under Section 53, employees also had the right to withdraw their gratuity. Therefore, the Tribunal allowed employees to address their grievances before the competent authority or court. The Tribunal disposed of the appeal and related applications, stating that the issue of the Gratuity Trust Fund required further adjudication.In conclusion, the Tribunal recognized the importance of protecting employees' gratuity rights during the liquidation process and emphasized the need for a proper resolution of the Gratuity Trust Fund issue by the competent authority or court.

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