Employees can enforce their rights in the event of non-payment of salaries and wages by their employers. Employees have priority rights of recovery in the event of default by the employers. Get in touch to learn how our team of licensed Insolvency Professionalscan help.
The person must be an employee of the company against which his payment is pending.
He must owe an operational debt against the defaulter company.
The minimum amount of salary due to the person must be one lakh rupees.
If an individual or an employee has to take money from any debtor and the debtor of the company makes default as non-payment of the debt, or even on interest or any part of the debt, non-payment of the instalment due or if the company becomes insolvent then that specific individual or employee can take action against the debtor or an insolvent company by filling an application before the NCLT.
Employees of a company have an option to launch corporate insolvency resolution process against their ex-employer or the debtor company and compel him/her to pay their dues. For this, employees have to firstly send a demand notice to the company stating that they have not been paid yet.
If the company does not pay the debt within ten days of sending the notice, then the employees can start the insolvency resolution process against the employer company , provided that there are no pre-existing disputes. This resolution process can be started by filing an application with the adjudicating authority which is the National Company Law Tribunal or NCLT in this case.
The employees don’t have any inherent power to revise the resolution plan but once he/she becomes an operational creditor and a part of the committee of creditors, they can pursue revisions in the resolution plan provided that there is no financial creditor. Further, this revised resolution plan has to be sent before the Committee of creditors by the insolvent professional. Now, this committee of creditors have to pass the revised resolution plan with 66% minimum voting. Finally, after passing the plan by the committee, this revised resolution plan will be taken before the court for the final approval.
There are certain elements which need to be fulfilled by a person to file a petition in NCLT for the recovery of the unpaid salaries, and they are:
1. The person should be an employee of a company against which he is filing a case.
2. He should be categorised as an operational creditor under Section 5(20) of the IBC.
3. He must owe an operational debt against the defaulter company.
4. The minimum amount of salary due to the person must be one lakh rupees.
5. The maximum value of the salary must not be more than one crore rupees.
There is no government scheme guaranteeing payment of employee entitlements in resolution or liquidation proceedings.
However, in the corporate insolvency resolution process, the dues of employees and workmen are required to be paid on liquidation value in priority to any financial creditor (secured and unsecured) and paid in any event before the expiry of 30 days after the approval of the resolution plan by the Adjudicating Authority.
There are liabilities on bidder for failure to implement resolution plan. In liquidation process, it is the obligation of liquidator to distribute proceeds of sale of liquidation estate in accordance with the priorities mentioned in section 53 of the Code.