Dues for Workers’ Welfare Can’t Be Part of Liquidation Estate; Must Be Fully Used for Workers’ Payment | HC

Case Details: Stesalit Ltd. v. Union of India - [2025] 172 taxmann.com 33 (HC-Calcutta)

Judiciary and Counsel Details

• Shampa Dutt (Paul), J.
• Jishnu Chowdhury, Sr. Adv., Divyakant Lahoti, Ms Shrinalli Kajaria, Vijay Kumar, Ms Pramena Bisht, Madhus Jhaver, Siddharth Tripathi for the Petitioner.
• Subhash Chandra Sarkar, for the Respondent.

Facts of the Case

In the instant case, the petitioner company, which had been taken over by new management under the CIRP, remained active. Thereafter, respondent No. 4, an ex-employee of the petitioner company, resigned and filed an application under the provisions of the Payment of Gratuity Act, 1972. The controlling authority allowed the application and directed the petitioner to pay gratuity with interest to the ex-employee of the petitioner company.

The petitioner had filed a writ petition, arguing that the controlling authority had wrongly allowed the ex-employee’s claim without considering that the company was now under the CIRP, governed by the Insolvency and Bankruptcy Code, 2016.

It was noted that Respondent No. 4’s gratuity claim had been considered. Although the entire claim was admitted, only Rs. 38,808.43 was approved under the CIRP. Further, the CIRP is a recovery mechanism for creditors, unlike liquidation, which is a way to end a company’s life.

High Court Held

The High Court observed that the dues for workers’ welfare were not permissible to be included in the liquidation estate and were to be utilized only for the full payment of such workers’ dues.

Further, the High Court observed that since no specific fund had been maintained for such a purpose by the company, the entire dues of workers would not come under ‘liquidation assets’, and a worker would be entitled to his total dues from the company’s assets, with such claim being above claims of other creditors.

The High Court held that where the company had never closed down, as the petitioner company had been taken over by new management under the CIRP and remained active, the jurisdiction of the concerned authority had never been ousted and, controlling authority had the jurisdiction to decide issue of gratuity, as company had never closed down.