Gujarat High Court Approves One-Time Ex-Gratia Payment For Company-Paid Staff Of Official Liquidator's Office

“The welfare measure of a one-time ex-gratia payment is justified in equity provided that it doesn't prejudice the entitlement of stakeholders in liquidation proceedings,” Hon'ble Mrs. Justice Mauna M. Bhatt.

Background

The official liquidator filed the report seeking the High Court's direction to invest ex-gratia amounts from the common pool funds amounting to Rs. 20 lakh each for Group C employees and Rs. 18 lakh each for Group D employees. The fund was to be disbursed upon superannuation, death, or closure of the liquidator's office, whichever occurs first.

The counsel for the liquidator submitted that, unlike Central Government employees, their employees are not entitled to any statutory benefit except gratuity and leave encashment. Also, the employees would face unemployment once the official liquidator's office is phased out due to the transfer of company jurisdiction to NCLT under the IBC, 2016.

The counsel highlighted that in comparable circumstances the High Courts of Delhi, Calcutta, and Punjab & Haryana had permitted limited ex-gratia welfare disbursements to company-paid staff of respective official liquidator establishments.

Earlier, the official liquidator had sought the guidance of the Ministry of Corporate Affairs. However, the ministry clarified that such staff are not government servants and the benefits approved by the court shall be funded exclusively from the Common Pool Fund.

Court Observation

The High Court observed that the Common Pool Fund presently maintains a healthy surplus of more than Rs. 200 Cr. with recurring annual receipts and no adverse impact on the liquidation estate or creditor recoveries.

The court observed that in the absence of statutory coverage and the financial position of the Common Pool Fund, the welfare measure of a one-time ex-gratia payment is justified in equity provided that it doesn't prejudice the entitlement of stakeholders in liquidation proceedings.

Further, the ex-gratia proposal of Rs. 2.30 Cr was approved to be disbursed exclusively from the common pool fund, with a direction that the amounts shall be invested in joint term deposits in the names of the official liquidator and individual employees with future release only upon superannuation, death, or closure of office.

Furthermore, the Hon'ble High Court clarified that the order will operate only for the 12 existing staff and will not be considered as a precedent or right. Also, no payment shall be made to employees who will either be suspended or face disciplinary/vigilance proceedings.

Case Name: Official Liquidator Various Companies (In Liquidation) v. N.A.

Case No.: R/Official Liquidator Report No. 62 of 2025

Coram: Hon'ble Mrs. Justice Mauna M. Bhatt

Order Date: 15.10.2025