Gratuity claims survive insolvency and remain enforceable outside the resolution process, with statutory interest upheld.

Gratuity remained a statutory employee entitlement and was not to be diluted by the corporate insolvency resolution process. The Court held that gratuity, like provident fund and pension fund amounts, falls outside the liquidation estate, and the absence of a separately maintained gratuity fund did not defeat the claim. It further noted that the Payment of Gratuity Act, 1972 has overriding effect, so the existence of a resolution plan did not bar recovery. The controlling authority also had jurisdiction to determine the gratuity claim and award interest, as the company had not ceased to exist by liquidation. The writ petition therefore failed and the gratuity order was sustained.

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Issues: Whether the writ petition challenging the gratuity order was liable to be dismissed in view of the treatment of gratuity dues under the Insolvency and Bankruptcy Code, 2016 and the Payment of Gratuity Act, 1972, and whether the controlling authority had jurisdiction to direct payment of gratuity with interest.

Analysis: The dispute centred on whether gratuity dues of an employee, after the corporate debtor had undergone corporate insolvency resolution proceedings, could be treated as part of the resolution distribution or had to be paid in full as excluded dues. The Court accepted that gratuity is a statutory entitlement of an employee, distinct from liquidation estate assets, and that sums due towards provident fund, pension fund and gratuity fund are excluded from the liquidation estate under the insolvency framework. It further held that the absence of a separately maintained gratuity fund did not defeat the employee's entitlement. The Court also noted that the Payment of Gratuity Act, 1972 has overriding effect and that the employee's claim was not barred merely because a resolution plan existed. On jurisdiction, the Court held that the gratuity authority could decide the claim as the matter related to an employee's gratuity entitlement under the gratuity statute and the company had not ceased to exist by liquidation.

Conclusion: The writ petition failed on merits. The gratuity order was upheld and the direction for payment of gratuity with interest was sustained.

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