Employees using insolvency law to recover unpaid salaries

Arvind Gawda, a resident of Pune, has taken his employer Zeel Global Projects Private Limited  to the National Company Law Tribunal (NCLT) and started a bankruptcy proceeding against it for non-payment of salary amounting to Rs 1.5 lakh. The NCLT has admitted the case as Zeel Gobal Projects has admitted to non-payment of salary due to its 'inability to make the payment on account of paucity of funds'.

The new bankruptcy law is proving to be a 'recovery' tool for many operational creditors including the employees, who are taking companies to the National Company Law Tribunal (NCLT) to recover their unpaid salaries. There are close to 10 cases out of 450 corporate bankruptcy cases filed so far have been filed by employees or groups of employers. The cases have been filed for recovery of unpaid salary of as low as Rs 1.5 lakh. The Insolvency and Bankruptcy Code allows a creditor to start insolvency proceeding against a corporate debtor for a default as low as Rs 1 lakh. The low threshold for starting insolvency procedures has allowed some employees to drag their employers to NCLT to recover their unpaid salaries.

In one case, Nitin Gupta, an employee of Applied Electro Magnetics Pvt Ltd, a Delhi-based company, started insolvency proceeding against the company, for non-payment of full salary. The complainant has said in its insolvency application that he joined the company in 2008, but the company has not been paying the full salary from start and now it owes him Rs 46.77 lakh. Nitin Gupta has also sought an 18 per cent annual interest on the dues. Applied Electro Magnetics has admitted to non-payment of salary to the complainant, but it disputes the amount due as claimed by the complainant. It has admitted to a due of Rs 28.84 lakh.

In another case, a group of employees have started insolvency proceeding against Phadnis Properties, a Pune-based real estate and infrastructure company. The employees have said in their application that the company owes them a total amount of around Rs 73 lakh in unpaid salaries.
Under the insolvency law, employees can use the law to recover unpaid salary dues by starting insolvency proceeding against the employer. The employees are kept in the category of operational creditors.