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This research paper examines the legal, financial, and ethical implications of employee termination during the corporate insolvency resolution process (cirp) in india, using the jet airways case as a primary example. It analyzes the contradictions between employee rights and the creditor-centric insolvency and bankruptcy code, 2016 (ibc), highlighting the need for a more balanced approach to protect employee interests during insolvency procedures. The paper explores relevant case law, including the bhushan steel and essar steel cases, and advocates for legislative changes to ensure a fairer and more equitable resolution process for employees.
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Submitted by Nirbhay Raj Subject Insolvency and Bankruptcy Course BBA LLB (Hons), Batch 2020 - 2025
Abstract II Due to Jet Airways unexpected grounding in 2019, important issues about employee rights, job security, and the larger effects of insolvency were addressed. The Jet Airways case 1 serves as a primary example to explore the effects of terminating employees throughout the Corporate Insolvency Resolution Process (CIRP). It evaluates the contradictions and inconsistencies between the protection of employees' rights and the Insolvency and Bankruptcy Code, 2016 (IBC), 2 which is creditor-centric. This study illustrates the complicated problems regarding employee dues, priority in insolvency procedures, and Committee of Creditors judgements by closely examining court precedents and empirical data from former Jet Airways workers. The research paper’s main finding is that the CIRP framework urgently needs to strike a more equitable balance between employee safeguards and creditor interests. It seeks to make a meaningful contribution to the legal conversation by advocating for prospective legislative changes that might better protect the financial security and dignity of employees throughout corporate insolvency procedures. Keywords: CIRP, Employee and insolvency, Jet airway case Research Questions
Their study identifies variances in legal frameworks and practises and investigates how these variables affect employees' outcomes and experiences. Research Methodology The research methodology for this study focuses on a thorough evaluation of secondary sources, including scholarly papers, legal texts, case law, and policy documents to analyse and synthesise the available knowledge on employee termination during the Corporate Insolvency Resolution Process (CIRP) Introduction The Insolvency and Bankruptcy Code, 2016 (IBC), 8 which governs the Corporate Insolvency Resolution Process (CIRP), has established itself as a pillar of India's current corporate insolvency landscape. Within this context, it is now of utmost importance to consider how employees are treated throughout insolvency procedures. One of India's most prominent insolvency cases began in 2019 when Jet Airways abruptly halted operations, this research begins an extended examination of the many repercussions of employee termination during CIRP. Corporate Insolvency Resolution Process : With an emphasis on safeguarding the interests of creditors and stakeholders, CIRP seeks to alleviate financial hardship in corporations by facilitating the rebirth of viable firms or their orderly liquidation. Employee termination during CIRP : It relates to the situation where businesses that are having financial problems terminate the employment of their employees during CIRP, which can have a big impact on the affected employees. (^8) The Insolvency and Bankruptcy Code, Act (36), 2016
Analysis The IBC, which provides the regulatory framework for the resolution of financially challenged firms, was used to initiate Jet Airways' bankruptcy proceedings. Employee termination became a difficult topic during the CIRP, eliciting various legal issues. The judgement in the said case has laid down important ratio decendi and obiter which act as a powerful precedent. According to Section 53(1)(b ), 9 the labourers are entitled to obtain their dues from the Corporate Debtor for a period of 24 months, up to the minimum liquidation value contemplated by Section 32(2)(b)^10 read with Section 53(1)^11. Failure to pay the full provident fund and gratuity is a breach of Section 30(2)(e).^12 Sunil Kumar Jain & Ors. vs. Sundaresh Bhatt & Ors^13 The Supreme Court has explicitly said in this case that. that only wages and salaries of craftsmen and employees who really worked during CIRP are to be included in the CIRP Costs. As a result, we do not see any fault in not include the aforementioned claim of salary any salaries of the craftsmen and employees after the beginning date of insolvency. Bhushan Steel case^14 Another important instance, the collapse of Bhushan Steel, sheds light on the challenges of dealing with employee claims. The National Company Law Appellate Tribunal (NCLAT) found in this case that employee claims should be given the same priority as financial creditors. This judgement underlined the importance of preserving employee rights during the CIRP process. Essar Steel Case The landmark judgement in the Essar Steel case^15 is a critical reference point in the legal discourse around insolvency processes and employee rights. In this decision, the Supreme Court upheld the idea that financial creditors' claims, including employee dues, must be fulfilled during the bankruptcy resolution process. This case demonstrated the need of (^9) Section 53(1)(b) of the Insolvency and Bankruptcy Code, Act (36), 2016 (^10) Section 32(2)(b) of the Insolvency and Bankruptcy Code, Act (36), 2016 (^11) Section 53(1) of the Insolvency and Bankruptcy Code, Act (36), 2016 (^12) Section 30(2)(e) of the Insolvency and Bankruptcy Code, Act (36), 2016 (^13) Sunil Kumar Jain & Ors. vs. Sundaresh Bhatt & Ors. (2022) SCC OnLine SC 467 (^14) CBI Vs M/S Bhushan Power And Steel Limited & Ors, (2021) SCC Online Del 4085
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