Ritika Sathe, a CNC machine operator in Pune, was owed ₹1,60,000 in salary when the shutters came down. Her colleague Devraj Menon, a deputy manager in accounts, was owed ₹3,90,000. When the National Company Law Tribunal finally ordered liquidation, Ritika's entire arrear sat in the second-highest tier of the payout queue. Devraj's entire arrear sat near the bottom. Neither of them had done anything different. The law simply treats the two of them differently, and almost nobody tells you that before the queue forms.
This page explains where each rupee you are owed actually stands, what sits completely outside the queue, and how to lodge your claim. It is current to 9 August 2026, which matters here more than usual: the rules for filing an employee claim changed twice in mid 2026, and most of what you will find elsewhere online is now wrong.
The short version. Money already lying in your provident fund, pension fund or gratuity fund is not part of the liquidation estate at all, under section 36(4)(a)(iii) of the Insolvency and Bankruptcy Code, 2016. Your unpaid salary is different. If you are a “workman”, 24 months of dues counted back from the liquidation order rank very high. If you are an “employee” who is not a workman, only 12 months rank, and lower down. Rank is not the same as money.
Three things moved in a single fortnight, and they all touch employee claims.
Any article that tells you to file “Form E of Schedule II within thirty days” is describing the law as it stood before June 2026. The correct current position is set out further down.
When a company is liquidated, section 53(1) of the Code fixes a strict order of payment for the sale proceeds. It opens with the words “Notwithstanding anything to the contrary contained in any law enacted by the Parliament or any State Legislature for the time being in force”, which is the Code's way of saying that this order beats almost everything else.
| Tier | Section 53(1) says | What that means for you |
|---|---|---|
| 1 | Insolvency resolution process costs and liquidation costs, paid in full | Wages for work you actually did while the company ran as a going concern during the resolution process can land here. This is the best place to be. |
| 2 | Workmen's dues for the 24 months preceding the liquidation commencement date, ranking equally with secured creditors who gave up their security | If you are a workman, this is your tier. You stand shoulder to shoulder with banks that relinquished their charge. |
| 3 | Wages and any unpaid dues owed to employees other than workmen for the 12 months preceding the liquidation commencement date | Managers, administrative and most supervisory staff. Half the look-back, and one full rung lower. |
| 4 | Financial debts owed to unsecured creditors | Lenders without security. |
| 5 | Central and State Government dues for two years, ranking equally with secured creditors for shortfalls after enforcing security | Tax and statutory dues. |
| 6 | Any remaining debts and dues | Where your older arrears fall once they drop out of the 24 or 12 month window. |
| 7 | Preference shareholders | |
| 8 | Equity shareholders or partners |
Two mechanical points decide real money here.
The clock runs back from the liquidation order, not from your last payslip. “Liquidation commencement date” is defined in section 5(17) as the date on which liquidation proceedings commence under section 33 or section 59. That is usually the day the Tribunal passes the liquidation order. It is not the day the company stopped paying you, and it is not the day the insolvency process was admitted.
Return to Ritika and Devraj. Their plant stopped paying on 1 September 2024 and shut on 20 January 2025. Insolvency was admitted on 12 February 2025. Liquidation was ordered on 6 March 2026. Counting back 24 months from 6 March 2026 reaches 6 March 2024, so every rupee of Ritika's ₹1,60,000 sits inside tier 2. Counting back 12 months reaches 6 March 2025, which is after Devraj's arrears had already accrued. His whole ₹3,90,000 falls out of tier 3 and lands in tier 6, behind every bank in the room. A resolution process that drags on can quietly push an employee's arrears out of the protected window.
Your employer cannot contract you into a worse position. The 2026 amendment inserted Illustrations into section 53(2), and the very first one is about workmen. It says that where workmen and secured creditors have an arrangement that all debt owed to the secured creditors shall be cleared before any debt owed to the workmen, “such a contractual arrangement shall be disregarded”. A second illustration confirms that an arrangement purely between two secured creditors is not disregarded. Parliament aimed that first illustration at you.
This is the single most valuable thing on this page, and it is the part most people get wrong.
Section 36 of the Code tells the liquidator to build a “liquidation estate” out of the company's assets. Section 36(4) then lists what must be kept out. Clause (a)(iii) excludes, in the enacted words, “all sums due to any workman or employee from the provident fund, the pension fund and the gratuity fund”.
Read that carefully. Those sums “shall not be included in the liquidation estate assets and shall not be used for recovery in the liquidation”. They are not tier 1. They are not tier 2. They are outside the table above entirely. A liquidator who tries to sweep your provident fund balance into the pot to pay a bank is acting outside the statute.
The Supreme Court confirmed this in Sunil Kumar Jain v. Sundaresh Bhatt, Civil Appeal No. 5910 of 2019, decided on 19 April 2022 by a Bench of M. R. Shah and Aniruddha Bose JJ. The Court held that section 36(4) gives outright protection to provident fund, gratuity fund and pension fund dues, that these are not liquidation estate assets, and that the concerned employees are to receive these amounts from those funds with the liquidator having no claim over them. In the same judgment the Court held that wages and salaries for the resolution process period are payable in full as process costs under section 53(1)(a), but only where it is established both that the resolution professional ran the company as a going concern and that those particular workmen or employees actually worked during that period.
Now the honest limit. Section 36(4)(a)(iii) protects money that is in a fund. It does not conjure a fund into existence. If your employer never constituted an approved gratuity fund, or deducted provident fund from your salary and never deposited it, there is no ring-fenced pot for the carve-out to protect. What you have then is a debt, and debts go through the waterfall or through the recovery route described below. Check before you assume: your provident fund passbook at https://passbook.epfindia.gov.in will show you month by month whether contributions were actually credited.
Twenty-four months against twelve months is a large difference, so the definition matters.
Section 3(36) of the Code says “workman” has the same meaning as in clause (s) of section 2 of the Industrial Disputes Act, 1947. The Explanation to section 53 adds that “workmen's dues” carries the meaning given in section 326 of the Companies Act, 2013. Section 326 defines workmen's dues to include all wages or salary, accrued holiday remuneration, compensation for death or disablement, and sums due to a workman from the provident fund, pension fund, gratuity fund or any other welfare fund maintained by the company. Note the width of that: for a workman, the protected head is not just basic salary.
There is a wrinkle nobody warns you about. The Industrial Disputes Act, 1947 was repealed by section 104 of the Industrial Relations Code, 2020, which was brought into force on 21 November 2025 by notification S.O. 5320(E) of that date, when India's four labour codes went live. The Insolvency Code has not been amended to update the cross-reference. The re-enacted concept in the Industrial Relations Code is “worker”, defined in section 2(zr) as a person employed to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work, but not a person employed mainly in a managerial or administrative capacity, and not a person in a supervisory capacity drawing wages exceeding ₹18,000 a month, or such amount as the Central Government may notify from time to time.
The practical test has not really changed. If your job is on the shop floor, in the workshop, on the machines, in the stores, in clerical work or in technical or operational work, you are arguing for the 24 month tier. If you sit mainly in a managerial or administrative chair, or you supervise and earn above the notified line, expect to be placed in the 12 month tier. Where you land is worth contesting in writing at the time you file your claim, because the liquidator's classification is what drives the payout.
People say “the company went into insolvency” for two quite different situations.
| Corporate insolvency resolution process | Liquidation | |
|---|---|---|
| Aim | Keep the company alive under a new owner | Sell the assets and dissolve the company |
| Who runs it | An interim resolution professional, then a resolution professional | A liquidator |
| Your salary during the process | Can be a process cost payable in full, but only if the company ran as a going concern and you actually worked | Not applicable, the company has stopped |
| Your arrears | A claim to be admitted and dealt with under the approved resolution plan | Paid, if at all, in the section 53 order |
| Where you file | With the interim resolution professional or resolution professional | With the liquidator |
If a resolution plan is approved, your recovery is whatever the plan gives your class, and section 31 makes the approved plan binding. If the plan fails or none is approved, the Tribunal orders liquidation under section 33 and the waterfall takes over. Filing early matters in both rooms, and a claim you filed during the resolution process is not thrown away when liquidation begins.
In a resolution process. Regulation 9 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 governs claims by workmen and employees. Since 2 June 2026 it requires you to submit your claim with proof to the interim resolution professional in person, by post or by electronic means, in the form notified by the Board through circular. IBBI Circular No. IBBI/CIRP/94/2026 dated 2 June 2026 specifies that form. For a workman or an employee it is Form D. Where an authorised representative files one claim for many workmen or employees together, it is Form E.
In a liquidation. Regulation 19 of the IBBI (Liquidation Process) Regulations, 2016 is the matching provision. IBBI Circular No. IBBI/LIQ/96/2026 dated 2 June 2026 does something helpful here: instead of prescribing separate liquidation forms for claims, it states that stakeholders may use the corresponding claim forms notified under the CIRP Regulations, and that references in those forms to the resolution professional may be understood as references to the liquidator. In plain terms, the same Form D.
The deadlines, which are now much tighter.
What to attach. Regulation 19(3) lets you prove your dues individually or collectively using records in an information utility, or a contract of employment for the period claimed, evidence of a notice demanding payment together with proof that it was not paid, and any court or tribunal order on the non-payment.
Three practical points that save people. First, regulation 19(2) allows an authorised representative to file a single claim for numerous workmen or employees, which is how a union or a works committee should approach a large plant. Second, regulation 19(4) permits the liquidator to admit a workman's or employee's claim from the company's own books of account even where that person has not filed, so if you missed the window, write anyway and point to the books. Third, state your case for being classified as a workman in the claim itself, with your designation, your actual duties and your wage, rather than leaving it to the liquidator to guess.
Public announcements naming the professional and the last date are published on the IBBI website at https://ibbi.gov.in and in newspapers at the company's locations. Tribunal orders are listed at https://nclt.gov.in.
This is a separate fight from the insolvency claim, and you should run both. Money that never reached the EPFO is not “in the fund”, so the section 36(4) carve-out cannot rescue it.
First, get the statute right, because this corner of the law is only half migrated and a lot of people get it wrong in your favour and against you. Notification S.O. 5319(E) dated 21 November 2025 brought sections 17 to 141 of the Code on Social Security, 2020 into force, together with most of the repeal list in section 164(1). Most, not all. Item 6 of that list, the Payment of Gratuity Act, 1972, was repealed. Item 3, the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, was left out of the notification and remains in force. Gratuity has moved fully to the Code. Provident fund currently sits across two overlapping statutes. Nobody can tell you your PF claim died with the old Act, because the old Act is still standing.
Gratuity has its own machinery. Section 53 of the Code on Social Security makes gratuity payable after five years of continuous service, and section 56 requires the employer to determine and pay it within 30 days of it becoming due, with simple interest for delay, and gives a competent authority the power to decide disputes. Our separate guide on taking an unpaid gratuity claim to the controlling authority walks through that route, and appealing an EPF assessment or damages order covers the provident fund side.
Your employer is a private company and is not covered by the Right to Information Act, 2005. The EPFO is. That is a genuine opening, because the EPFO holds the remittance history, the inspection notes and the recovery file for your establishment, and those documents tell you whether the money was ever deposited and what the department did about it.
A short application under section 6(1) of the RTI Act, 2005, with the ₹10 fee, to the CPIO of the EPFO regional office covering your establishment:
The public information officer has 30 days under section 7(1). Build the request with the AI RTI Drafter, track the deadline on the Timeline Tracker, and if the reply is evasive, run it through the PIO Reply Checker before you file a first appeal with the First Appeal Builder. The full text of the statute is at the RTI Act 2005, and the end to end method is in The RTI Playbook.
Rank is not cash. Section 53 decides the order in which money is handed out. It does not decide whether there is any money. Suppose a company owes ₹90 crore and its assets fetch ₹6 crore: the payout exhausts tier 1 and part of tier 2 and then stops. That is an illustration, not a prediction, and this page deliberately quotes no average recovery figure. Sitting in a high tier with an empty estate pays nothing.
Two honest consequences follow. Do not turn down a settlement purely because you have been told workmen rank high. And do not assume that being outside the estate under section 36(4)(a)(iii) means the money will arrive, because that carve-out only protects a fund that actually holds your money.
Legally an employee is an operational creditor, because section 5(21) defines operational debt to include a claim in respect of the provision of services “including employment”. In practice the door is narrow. By notification S.O. 1205(E) dated 24 March 2020, issued under the proviso to section 4, the Central Government specified one crore rupees as the minimum amount of default for an application. An ordinary salary arrear does not reach that. An individual employee therefore almost always joins a process that someone else has started rather than starting one, and recovery of wages through the labour authorities is usually the faster route.
Yes. Regulation 16(1) of the Liquidation Regulations, as it now stands, only requires you to submit a claim in the liquidation if you did not submit one during the corporate insolvency resolution process. If you already filed, you do not start again. You should still update the claim if any part of it has been satisfied from any source.
For a newly submitted claim in liquidation, regulation 16(2), as substituted on 2 June 2026, requires you to prove the dues as on the insolvency commencement date, which section 5(12) defines as the date the Tribunal admitted the insolvency application. That is a different date from the liquidation commencement date used to measure the 24 or 12 month priority window. Keep the two apart in your working.
The section 36(4)(a)(iii) exclusion operates on sums due to you from the provident fund, the pension fund and the gratuity fund. If no such fund was created or funded, there is no separate pot standing outside the estate, and your gratuity is a claim in the process like any other. Whether you are a workman also matters here, because section 326 of the Companies Act, 2013 folds welfare fund dues into “workmen's dues” for a workman. Get advice on your specific facts rather than assuming either outcome.
Your contract of employment is with the contractor, so your claim in the corporate debtor's process is weaker and often disputed. Your stronger route is usually against the principal employer under the labour codes. See our guide on contract worker wages and principal employer liability.
Move fast, because the verification clock is now very short. Regulation 30 of the Liquidation Regulations, as substituted with effect from 2 June 2026, requires the liquidator to verify a claim received under regulation 16(1) within seven days of receiving it, to record written reasons if he rejects it, and to communicate the admission or rejection with reasons to you within seven days of that decision. So you should have a reasoned decision in hand quickly, and that reasoned decision is what you attack.
On the appeal itself, be careful. Sections 40 and 42 of the Code, which set out admission or rejection of claims and a 14 day appeal to the Adjudicating Authority, were omitted with effect from 26 May 2026, and an Explanation added to section 35 keeps the old machinery alive only for liquidation processes initiated on or before that date. The Liquidation Regulations have not caught up: the model timeline in their schedule and regulation 31(4) still speak of an appeal by a creditor under section 42 within 14 days. Practically, treat 14 days from the day you receive the liquidator's decision as your outer limit, take it to the National Company Law Tribunal that ordered the liquidation, and get a lawyer to fix the correct provision to your facts based on the date of your liquidation order.
They can. Following Sunil Kumar Jain v. Sundaresh Bhatt, wages and salaries for the resolution process period are insolvency resolution process costs payable in full under section 53(1)(a), but only where it is shown that the resolution professional ran the company as a going concern and that you actually worked during that period. Keep attendance records, gate passes, emails and work output from that window, because that is the evidence the liquidator will ask for.