Gratuity Dues Of Workers Do Not Form Part Of ‘Liquidation Estate’ Of Corporate Debtor, Must Be Paid In Full: Calcutta High Court

The Calcutta High Court bench of Justice Shampa Dutt (Paul) has held that gratuity dues are statutorily protected under the Payment of Gratuity Act, 1972, and do not form part of the liquidation estate of the Corporate Debtor under the Insolvency and Bankruptcy Code, 2016 (IBC). The court held that gratuity payments are outside the waterfall mechanism under Section 53 of the IBC and must be paid in full, irrespective of the resolution plan. It further observed that Section 14 of the Payment of Gratuity Act has an overriding effect, ensuring that employees’ statutory rights are upheld even in insolvency proceedings.

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