The National Company Law Tribunal (NCLT) of Chandigarh Bench held that Gratuity is not payable when the Corporate Debtor does not create agratuity fund.
The applicant is seeking direction against Resolution Professional to release the amount due towards Gratuity, Leave Encashment and salary during the CIRP of the corporate debtor. The applicant has worked in the corporate debtor as AGM of Accounts and Finance for 7 years.
The HR Department of the corporate debtor served the applicant a notice for termination of services vides email dated 19.04.2019. The applicant replied to the email of the respondent and requested full and final clearance of pending dues viz. Gratuity, Leave Encashment and pending salary
It was stated that the respondent-Resolution Professional sent a reply dated 18.05.2019 to the applicant stating that only the current month’s salary would be dispersed and the rest of the dues would be dispersed as per available cash flow. Further, the applicant applied vide CA No. 411/2019 challenging his termination which was dismissed by this Adjudicating Authority on 11.12.2019 with the liberty to prefer any claim about any of his employment dues.
It was further submitted that the applicant has not filed any claim in Form D of Schedule to the Insolvency Regulations, 2016. As per the books of accounts of the corporate debtor, there is no Gratuity fund created by the company and there are no funds available for payment of Gratuity in respect of services rendered by the applicant during the period beforethe commencement of CIRP.
There is no record of Leave encashment and the applicant has not furnished any details concerningthe number of leaves, or period of leave encashment and there is no fund created by the corporate debtor concerning leave encashment.
The respondent contended that had there been any gratuity fund of the corporate debtor as contemplated u/s 36(4)(a)(iii) of IBC or section 4A of the Payment of Gratuity Act, 1972, only then the issue of inclusion or non-inclusion in liquidation estate would arise.
It was observed that no fund has been created by the corporate debtor for payment of gratuity to the employees.The issue at hand is whether Gratuity is payable when no Gratuity fund is created. Further viewed that the provident fund, the pension fund and the gratuity fund, do not come within the purview of liquidation estate‘ for distribution of assets under Section 53 of the Code.
The NCLT bench consisting of Mr Harnam Singh Thakur, member (judicial) and Mr Subrata Kumar Dash, member (technical) has held that “the Resolution Professional cannot be directed to make payment of gratuity to the applicant as there is no gratuity fund created by the corporate debtor. As regards the salary and leave encashment during the period of CIRP, the same pertains to the amounts payable to an employee for services rendered during the CIRP. “ The application was allowed.
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