Gratuity payments are classified as excluded dues and therefore, remain outside the scope of asset distribution among creditors under the waterfall mechanism in Section 53 of the IBC
The Calcutta High Court ruled that gratuity obligations are not included in the corporate debtor’s liquidation estate as defined under the Insolvency and Bankruptcy Code, 2016 (IBC), and are instead statutorily protected by the Payment of Gratuity Act, 1972.
The court determined that gratuity payments, regardless of the settlement plan, must be made in full and fall outside the waterfall process under Section 53 of the IBC. It further noted that Section 14 of the Payment of Gratuity Act has a superseding effect, guaranteeing that workers’ legal rights…
