Employment Contract Disputes Cannot Be Adjudicated By NCLT/NCLAT Under IBC: NCLAT

The NCLAT held that employment contract disputes regarding salaries and emoluments fall outside IBC's scope, being matters for labor courts. The tribunal dismissed an operational creditor's insolvency petition against a company over ₹28 lakh unpaid salary claims. This ruling clarifies the boundary between insolvency and employment disputes, preventing IBC's misuse for individual grievances. While workmen's dues remain part of liquidation waterfall, individual employment disputes must follow labor remedies. The judgment protects companies from facing insolvency proceedings over routine employment conflicts. Legal experts note this maintains IBC's focus on debt resolution rather than becoming a general dispute mechanism. However, the tribunal clarified that mass layoffs or systemic defaults may still trigger operational creditor rights under IBC.