What happens to my unpaid salary and other dues if my employer company goes into insolvency?

Question

The company I work for has been admitted into corporate insolvency resolution process and I have several months of unpaid salary and provident fund dues. I want to know how I get paid. I would like to understand which provision governs this, what it entitles me to, and how long I have before the remedy lapses. I also want to know whether I need a lawyer for this or can do it myself.

MyVakeel Legal Desk · Accepted Answer

In India, the answer to "What happens to my unpaid salary and other dues if my employer company goes into insolvency?" turns on Insolvency and Bankruptcy Code 2016, Section 53, Insolvency and Bankruptcy Code 2016, Section 36(4) and Employees' Provident Funds and Miscellaneous Provisions Act 1952, Section 11. The points below set out the position and then what to do about it, in the order it should be done.

Section 53 of the Insolvency and Bankruptcy Code 2016 sets out the waterfall mechanism for distribution of liquidation proceeds, and workmen's dues for the preceding 24 months rank alongside secured creditors at the top of the priority list, ahead of unsecured financial creditors and government dues.

Section 36(4) of the Code excludes provident fund, pension fund and gratuity fund dues from the liquidation estate of the corporate debtor, meaning these amounts, to the extent they have actually been deposited into dedicated funds, do not get distributed among creditors and remain payable in full to employees.

Section 11 of the EPF Act 1952 gives provident fund dues priority over most other debts even outside liquidation, reinforcing that unpaid statutory PF contributions that were deducted from an employee's salary but never deposited remain a first charge recoverable from the employer's assets.

During the corporate insolvency resolution process itself, employees are treated as operational creditors for unpaid wages and can file their claim with the interim resolution professional or resolution professional in the prescribed form within the timeline set by public announcement.

Employees who do not file their claim within the process may lose the ability to recover dues through the resolution plan, since claims not submitted in time are typically not factored into the plan approved by the committee of creditors and the adjudicating authority.

Practical steps: 1) Check the public announcement of the corporate insolvency resolution process for the claim filing deadline; 2) File your claim for unpaid wages and dues with the resolution professional in the prescribed form as a workman or employee; 3) Separately verify your provident fund contribution and deposit status with the EPFO, since these dues are excluded from the liquidation estate; 4) Consult an insolvency or labour lawyer if your claim is rejected or under-valued by the resolution professional.

If the other side has already issued a notice, filed a case or set a deadline, treat the matter as time-sensitive — remedies under Insolvency and Bankruptcy Code 2016, Section 53 carry limitation periods, and unexplained delay weakens an otherwise strong case. You can post the details on the MyVakeel forum for a practising advocate to review, or book a paid consultation with a Bar Council verified lawyer in labour law.