High Court Sanctions One-Time Ex-Gratia Welfare Payment to Company Paid Staff from Official Liquidator’s Common Pool Fund
- REEDLAW
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REEDLAW Legal News Network reports:Â In a significant ruling addressing welfare considerations in liquidation administration, the High Court sanctioned a one-time ex-gratia payment to long-serving Company Paid Staff engaged with the office of the Official Liquidator, recognising the absence of statutory pensionary benefits and the availability of surplus funds, while ensuring that the interests of creditors and stakeholders remained unaffected and that no precedent or right of regularisation was created.
The Gujarat High Court, through a Single-Judge Bench of Justice Mauna M. Bhatt, examined a Liquidator’s Report concerning the welfare of Company Paid Staff and observed that, where such personnel had rendered long years of service without any statutory terminal or pensionary benefits, a limited ex-gratia payment could be sanctioned from the Common Pool Fund as a matter of equity and fairness. Justice Mauna M. Bhatt noted that the fund carried adequate surplus and that the proposed payment neither diluted creditor interests nor altered the legal framework governing liquidation, while expressly clarifying that the measure would not operate as a precedent nor confer any right of regularisation.
The Court considered a report filed by the Official Liquidator seeking permission to sanction and safeguard a one-time ex-gratia welfare payment for certain Company Paid Staff engaged by the Official Liquidator with prior approval of the High Court and paid from the Common Pool Fund. It was noted that such staff constituted a distinct category, separate from Central Government employees appointed against sanctioned posts, and had rendered long, continuous service extending up to two decades or more. The Court took note of submissions that, with the transfer of winding-up jurisdiction under the Insolvency and Bankruptcy Code, 2016, the office of the Official Liquidator was likely to be phased out, leaving these Company Paid Staff without any statutory pensionary or terminal benefits other than gratuity and leave encashment.
The Official Liquidator had placed on record representations highlighting the absence of social security cover and post-retirement safeguards for Company Paid Staff, particularly in light of impending institutional restructuring. It was also brought to the Court’s notice that other High Courts had, in comparable circumstances, permitted limited ex-gratia disbursements as a welfare measure. The Ministry concerned had clarified that such staff were not Government servants and that any approved welfare measure could be met only from the Common Pool Fund. The Court further noted that the Common Pool Fund maintained a substantial surplus and that the proposed disbursement would not prejudice the interests of creditors or stakeholders in ongoing liquidation proceedings.
Upon evaluating the length and quality of service rendered, the absence of statutory retirement benefits, and the robust financial position of the Common Pool Fund, the Court was satisfied that a limited, one-time ex-gratia payment was justified on equitable considerations. The Court approved the proposal strictly as a welfare measure, directed that the sanctioned amounts be set apart and invested in separate term deposits under supervisory control, and ordered that disbursement be made only upon superannuation, death, or closure of the office, whichever occurred first. It was further clarified that no benefit would accrue to any individual facing suspension or disciplinary proceedings, and that the grant was confined to the identified staff alone, without creating any precedent, right of regularisation, or future financial claim.
Ms. Bhomi M. Thakore, Advocate, represented the Applicant/Official Liquidator.
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