NCLAT: Gratuity Dues Must Be Paid From Employees’ Allocated Payouts, Not As Separate Entitlement Under Resolution Plan
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi comprising Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member), has held that employees of a corporate debtor cannot claim gratuity dues in addition to the payouts specifically allocated to them in a Resolution Plan. The Tribunal clarified that the unpaid gratuity must be settled from within the amounts earmarked for employees under the plan and not as an additional entitlement.
The appeal was filed by an authorised representative of employees of M/s Vadraj Cement Ltd. challenging the order of the NCLT, Mumbai dated 01.04.2025, which had approved the Resolution Plan of Nuvoco Vistas Corporation Ltd. The grievance raised was against an email dated 24.04.2025 sent by the Resolution Professional (RP), which indicated that gratuity dues would be deducted from the employee payout of ₹6,30,10,916/-. The appellant argued that gratuity dues were to be paid separately and in addition to the said amount.
Counsel for the appellant relied upon a note in Form-H of the Compliance Certificate, which stated that “employee dues do not include gratuity dues which shall be paid in full in accordance with the Resolution Plan approved by the CoC of the CD.” It was contended that the RP’s email was inconsistent with the approved plan and contrary to the adjudicating authority’s order. On the other hand, the RP and the Successful Resolution Applicant (SRA) submitted that the plan itself did not provide for any separate allocation towards gratuity apart from the employee payout of ₹6,30,10,916/-. They pointed out that provident fund dues of ₹10,51,00,841/- were admitted and paid in full, while the employee claims, including gratuity, were limited to the ₹6.30 crore allocation. The email of 24.04.2025, they argued, was entirely consistent with the plan.
The NCLAT examined Clause 13.1.2 of the Resolution Plan, which expressly provided that employees of the corporate debtor would be paid “an amount of upto ₹6,30,10,916 on a pro-rata basis, in full and final satisfaction of all their claims including employee claim amount and any claims in relation to unpaid dues of provident funds, pension fund or gratuity funds of the employees.” The Bench observed that while the employees’ claims were admitted at over ₹63 crore, only ₹6.30 crore had been earmarked in the plan, which included gratuity dues.
The Tribunal further referred to Clause 13.1.4, which stated that in case of any additional liability arising by way of provident fund, pension fund or gratuity payments pursuant to court orders, such excess would be paid out of the total payment allocated to secured financial creditors. However, in this case, the unpaid gratuity dues of ₹2,86,32,757/- fell well within the ₹6.30 crore earmarked for employees. Thus, the arrangement in the RP’s email was consistent with the plan.
The Bench rejected the appellant’s reliance on the note in Form-H, clarifying that Form-H merely contained a compliance certificate summarising the plan, and could not override the specific clauses of the Resolution Plan approved by the CoC and the NCLT. The Tribunal also noted that 100% of provident fund dues were paid, and that the liquidation value available to employees was “Nil”, but despite this, the plan provided a payout, which included gratuity.
Holding that there was no inconsistency or illegality in the adjudicating authority’s order, the NCLAT concluded: “The payout to the employees is as per the approved Resolution Plan. We do not find any substance in submissions of the Appellant, so as to interfere with the order approving the Resolution Plan. There is no merit in the Appeal. The Appeal is dismissed.” Accordingly, the appeal was dismissed, and the approval of the Resolution Plan was upheld.
Appearance
For Appellant: Ms. Anju Jain and Mr. Hitesh Sachar, Advocates.
For Respondents: Mr. Arun Kathpalia Sr. Advocate with Ms. Astha Mehta, Mr. Gaurav Mathur, Ms. Prerana Mohapatra, Ms. Prina Sharma and Ms. Diksha Gupta, Advocates for R1 and R2. Mr. Viraj Parikh, Mr. Vivek Shetty, Mr. Akhilesh Menezez, Mr. Nishant Upadhyay, Mr. Navneet R and Ms. Alankrita Sinha, Advocates for R4.
Cause Title: Jadeja Ravirajsinh Juvansinh V. Nuvoco Vistas Corporation Ltd. & Ors
Case No: Company Appeal (AT) (Insolvency) No.733 of 2025
Coram: Justice Ashok Bhushan [Chairperson], Mr. Barun Mitra [Technical Member]
