Calcutta High Court Upholds Employee’s Right to Full Gratuity Despite CIRP Approval; Declares Gratuity Outside Liquidation Estate Under IBC

The Calcutta High Court upheld the employee’s right to receive full gratuity despite the approval of the Resolution Plan under CIRP, holding that gratuity does not form part of the liquidation estate under the Insolvency and Bankruptcy Code.

Bombay High Court Single-judge Bench of Justice Shampa Dutt (Paul), while addressing a petition, held that gratuity dues are statutorily protected under the Payment of Gratuity Act, 1972 and cannot be overridden by the Insolvency and Bankruptcy Code, 2016. Such dues, being excluded from the liquidation estate under Section 36(4)(a)(iii) of the IBC, must be paid in full regardless of resolution plan approvals or the existence of a dedicated gratuity fund.

In WPA 532 of 2025, the Calcutta High Court dismissed a writ petition filed by M/s Stesalit Limited, challenging the order dated 11.11.2024 passed by the Assistant Labour Commissioner (Central) & Controlling Authority under the Payment of Gratuity Act, 1972. The authority had directed the petitioner to pay a gratuity amounting to ₹2,11,154 with 10% simple interest to Respondent No. 4, an ex-employee, from the date of resignation (03.12.2014) until actual payment. The petition was filed under Article 226 of the Constitution without availing the statutory appellate remedy, and the Court held that there was no infirmity or jurisdictional error in the impugned order.

The petitioner contended that the respondent’s gratuity claim had already been admitted during the Corporate Insolvency Resolution Process (CIRP) and ₹38,808.43 had been awarded under the approved resolution plan. It was further argued that pursuing a separate claim under the Gratuity Act amounted to forum shopping and violated the overriding provisions of the Insolvency and Bankruptcy Code (IBC), 2016. However, the Court affirmed that the Payment of Gratuity Act has an overriding effect under Section 14 and that gratuity dues are distinct from the liquidation estate under Section 36(4) of the IBC. Citing authoritative decisions including Jet Aircraft Maintenance Engineers Welfare Association and Others v. Ashish Chhawchharia Resolution Professional of Jet Airways (India) Ltd. and Others, REEDLAW 2022 NCLAT Del 10550, the Court reiterated that gratuity dues are excluded assets and cannot be distributed under the waterfall mechanism in Section 53 of the IBC.

The High Court further endorsed the Controlling Authority’s findings that all employees—not just “workmen”—are entitled to gratuity under the Act, and the absence of a dedicated gratuity fund does not relieve the employer of its statutory obligations. It held that the corporate debtor, even post-resolution, was required to discharge these dues. Moreover, the acquisition of the company under CIRP by a new management (River Rail) did not absolve it from liability, especially in view of the caveat emptor principle, which mandates due diligence by the resolution applicant. Since the company was not in liquidation and continued to operate, the authority’s jurisdiction under the Payment of Gratuity Act remained intact.

The Court concluded that the controlling authority rightly exercised jurisdiction and that its order did not suffer from any legal infirmity. Accordingly, the writ petition was dismissed, all interim orders stood vacated, and connected applications were disposed of. The petitioner was directed to comply with the order and pay the gratuity with interest to the respondent within the prescribed time.

Mr. Jishnu Chowdhury, Sr. Advocate with Mr. Divyakant Lahoti, Ms. Shrinalli Kajaria, Mr. Vijay Kumar, Ms. Pramena Bisht, Mr. Madhus Jhaver, and Mr. Siddharth Tripathi, Advocates, represented the Appellant.

Mr. Subhash Chandra Sarkar, Advocate, appeared for the Respondents.

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