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Indian Supreme Court: Workers’ Salaries Paid First During Liquidation Process

Last month, the Supreme Court of India clarified that the employees’ salaries can be included in the corporate insolvency resolution process (CIRP) costs, given that they work during the liquidation process. Additionally, their salaries shall be paid in full first according to Section 53(1)(a) of the Insolvency and Bankruptcy Code (IBC). 

The rational was that if the provident fund, gratuity fund and pension fund have been kept out of the liquidation estate assets under the same lawemployees’ salaries should also be kept outside the liquidation process and the liquidator shall not have any claim over such funds. 

Under the new decision, employees should submit their claims to the liquidator who must made decision in accordance with law based on the evidence produced. “This helps the workmen/ employee as salaries/ wages would now get precedence over other debts of the company,” noted SC lawyer Shikhil Suri. 

Published on: May 4, 2022

Authors: Dilpreet Singh, Rohit Dhawan

Topics: Employment Law, India

Dilpreet Singh

Chief Advisor, India, HR Policy Association

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Rohit Dhawan

Resource Manager, HR Policy in India, HR Policy Association

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