CIRP cannot be initiated for LTC and Leave Encashment dues which fall within the ambit of service benefits/welfare benefits – Kishore K. Lonkar Vs. Hindustan Antibiotics Ltd. – NCLAT New Delhi

The Adjudicating Authority dismissed an application u/s 9 of IBC holding that it is the very case of the petitioner that the amount is due towards “gratuity”, “leave encashment”, and “LTC”, on account of superannuation that amounts to “service benefits” and not services and will not qualify under the definition “Operational Debt”. NCLAT upheld the decision of the AA holding that the Section 5(21) of IBC includes any ‘Claim’ in respect of the provision of Goods and Services including ‘employment’. It is not the case of the Appellant that the amounts claimed are due towards any emoluments/salary for the services rendered by him to the ‘Corporate Debtor’, while he was in service. Though ‘service benefits’ like ‘LTC’ accrue, on account of the service rendered during the period of employment, the scope and objective of the Code is simply not just for recovery of ‘dues’ but Resolution of the Companies meant for ‘maximisation of the value of assets’, to promote entrepreneurship, availability of credit and balance all interest of the stakeholders. Employees and workmen do constitute a major part of the stakeholders.

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