In an employee friendly move, a Parliamentary Panel has pitched for faster and enhanced payment of workmen dues and employee wages in the corporate insolvency process.

Not only has the Joint Committee on the Insolvency and Bankruptcy Code 2015 recommended enhanced payments to employees, it has also modified the order of priority of distribution of sale proceeds of liquidation assets, giving a better deal to employees.

In its report, tabled in Parliament on Thursday, the Joint Committee has suggested that workmen dues to the extent of twenty-four months preceding liquidation commencement date be considered, instead of twelve months provided in the current Bill.

Simply put, the coverage period of workmen dues to be settled is sought to be expanded to 24 months.

As regards the order of priority of payment of debts in case of insolvency, the Panel has suggested that unpaid employee dues may be placed ahead of debts owed to secured creditors—although both would rank equally among them.

The Joint Committee has in its report observed that workmen are the nerve centre of any company.

In the event of any company becoming insolvent or bankrupt, the workmen tend to get affected adversely and, therefore priority has to be given to their outstanding dues, the Panel noted.


In another employee friendly move, the Joint Committee has also recommended that all sums due to any workman or employee from the provident fund, the pension fund and the gratuity fund should not be included in the liquidation estate assets and estate of the bankrupt.

The Panel was of the view that provident fund, pension fund and the gratuity fund provide the social safety net to the workmen and employees and hence need to be secured in the event of liquidation of a company or bankruptcy of partnership firm.


In another significant recommendation, this Parliamentary Panel has suggested that the Insolvency and Bankruptcy code should have specific provisions to deal with cross border insolvency.

The Insolvency Code should also apply on the foreign assets of a personal guarantor to a debtor company, the Joint Committee has suggested.

The aspect of including personal guarantors is being seen as recommendation flowing out of experiences faced by Indian lenders with ‘wilful defaulter’ Vijay Mallya’s failed airline business Kingfisher Airlines Ltd.

While the Bankruptcy Law Reforms Committee had in its report confined its recommendations to domestic insolvency issues, the Joint Committee however felt that time was ripe for the proposed Insolvency Code to cover even cross border insolvency.

Given that many corporate transactions and businesses today involve an international and cross border element, the implication of cross border insolvency cannot be ignored too long if India is to have comprehensive and long lasting insolvency law as the Code aims to achieve, the Joint Committee said.

“Not incorporating this (cross border insolvency) will lead to an incomplete Code”, the Committee noted.

On the insistence of the Joint Committee, the Finance Ministry had suggested an enabling mechanism to the Panel to cover situations of cross border insolvency. After deliberations, the Joint Committee has suggested that Centre be empowered to enter into agreements with foreign Governments for enforcing the provisions of Insolvency and Bankruptcy Code.

The Joint Committee has suggested that Centre may be empowered to direct, by notification, the application of Insolvency and Bankruptcy code on assets or property (of a corporate debtor or debtor) situated outside India.

This may be done only in case of countries with which reciprocal arrangements are in place, the Panel has said.