Authority: National Company Law Appellate Tribunal Principal Bench, New Delhi

Order Date: 17.07.2026

Case Overview

The appeal was filed by Subir Mukherjee, former director and ex-employee of Duncans Industries Limited (Corporate Debtor), challenging the Order dated 04.09.2024 passed by the National Company Law Tribunal, Kolkata Bench in I.A. No. 868 of 2021. The appellant sought direction to treat his claims for gratuity and leave encashment dues as part of Corporate Insolvency Resolution Process (CIRP) costs, which would entitle him to priority payment.

The corporate debtor was admitted to CIRP on 05.03.2020. The appellant, who had served the company for over 25 years, superannuated on 30.04.2021 during the CIRP. He initially submitted a claim for ₹83,58,444 on 12.03.2020, which was partially admitted by the Resolution Professional to ₹44,16,729. After superannuation, the corporate debtor's officials computed his final settlement at ₹55,92,893 via email dated 09.08.2021, but payment was not released. The Resolution Professional later revised and admitted the gratuity component to ₹52,82,114 but refused disbursement, contending it must be dealt with under the resolution plan.

The appellant argued that gratuity constitutes a statutory right that should be honored immediately and not deferred until resolution plan implementation. He cited Sunil Kumar Jain Vs Sundaresh Bhatt (2022) and Stesalit Limited Vs Union of India (2025) to support his position that statutory dues require priority payment. The respondent Resolution Professional argued that gratuity and leave encashment do not qualify as CIRP costs under Section 5(13) of the Insolvency and Bankruptcy Code, 2016, and must be handled through the resolution plan's waterfall mechanism under Section 53.

The Tribunal analyzed Section 5(13) which defines insolvency resolution process costs narrowly to include: interim finance costs, resolution professional fees, costs of running the business as going concern, government expenses for facilitating the process, and other Board-specified costs. The court concluded that gratuity obligations are not expenses actually incurred by the resolution professional during the process but rather terminal benefits accruing to employees.

Final Outcome

The NCLAT dismissed the appeal, upholding the NCLT's order that the appellant's gratuity and leave encashment claims cannot be treated as CIRP costs and must be dealt with under the resolution plan. The resolution plan, approved on 18.10.2024, provides for payment of gratuity to the extent of ₹25 crores, through which the appellant's admitted claim would be satisfied by the Successful Resolution Applicant.

Topics: Insolvency Proceedings, Employee Benefits, Statutory Dues