Tribunal Emphasizes Timely Distribution Under Section 53 of Insolvency and Bankruptcy Code Despite Pending Claims
In a significant decision on February 3, 2026, the National Company Law Tribunal (NCLT) Mumbai Bench directed the Liquidator of Jet Airways (India) Ltd. to proceed with the distribution of liquidation proceeds. This directive comes amidst ongoing disputes over the exclusion and priority of statutory dues such as provident fund and gratuity. The Tribunal underscored the importance of adhering to the "waterfall mechanism" under Section 53 of the Insolvency and Bankruptcy Code, 2016, barring any restraining order from higher authorities.
The case, filed by the State Bank of India against Mr. Satish Kumar Gupta, the Liquidator of Jet Airways, sought immediate distribution of proceeds from asset sales, including the prominent Bandra-Kurla Complex (BKC) property in Mumbai. The Tribunal acknowledged the prolonged insolvency proceedings dating back to 2019 and highlighted the need for timely value realization, which is a fundamental objective of the Code.
The Tribunal's decision addressed the concerns raised by various stakeholders, including former workmen, who had filed applications seeking the exclusion of provident fund and gratuity dues from the liquidation estate. Despite these pending claims, the Tribunal maintained that the mere pendency could not impede the Liquidator's statutory duty to distribute the proceeds unless specifically restrained by a higher judicial authority.
The Stakeholders' Consultation Committee had reached a consensus in its 17th meeting, agreeing that distribution should not be indefinitely delayed due to differing interpretations of the distribution modalities. The Tribunal emphasized that the Liquidator's role is to act in accordance with the statutory framework, ensuring that the interests of all stakeholders, including workmen, employees, and financial creditors, are balanced.
This ruling is seen as a critical step in the liquidation process of Jet Airways, aiming to resolve long-standing financial disputes and distribute the available funds among creditors and stakeholders in a structured manner.
Bottom Line:
Insolvency and Bankruptcy Code - Distribution of liquidation proceeds to stakeholders cannot be indefinitely delayed due to pending adjudication of claims for priority or exclusion of dues from the liquidation estate.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Sections 36(4)(a)(iii), 53, 60(5); Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 Regulation 42
State Bank of India v. Mr. Satish Kumar Gupta, (NCLT)(Mumbai Bench) : Law Finder Doc id # 2850066
