Home  /  Code on Social Security, 2020  /  Section 83

Section 83: Insolvency of employer

The Code on Social Security, 2020 (Act No. 36 of 2020) • Official Statutory Text & Plain English Practice Guide

Statutory Mandate
Chapter VII: Employee's Compensation
Competent Labour Forum
Act No. 36 of 2020
Section 82 All 163 Sections of Code on Social Security, 2020 Section 84

Legal Commentary & Landmark Judgments: Section 83

Section 83 of the Code protects employee compensation claims in the event of the insolvency of the employer, providing that employer insurance rights against insurers transfer to and vest in the employee upon insolvency.

  • Direct Statutory Transfer of Insurance Rights to Worker: Provides that if an employer who has entered into a contract with insurers for compensation liability becomes bankrupt or enters liquidation, the employer's rights against the insurer transfer directly to the injured employee.
  • Priority of Compensation Claims in Liquidation: Directs that where liability is not fully covered by insurance, unpaid compensation claims constitute a first-priority debt in insolvency proceedings under the Insolvency and Bankruptcy Code, 2016.
  • Protection from Commercial Resolution Haircuts: Prevents resolution applicants and liquidators from repudiating or discounting approved employee compensation liabilities.
Key Landmark Precedents:
  • Moser Baer Karamchari Union v. Union of India (2023) 9 SCC 275: Supreme Court affirmed that worker social security dues (provident fund, gratuity, and compensation) are excluded from the liquidation estate and enjoy overriding priority over secured financial creditors under Section 53 IBC.
  • Sunil Kumar Jain v. Sundaresh Bhatt (2022) 7 SCC 540: Supreme Court held that employee social security and compensation claims must be treated with statutory sanctity during corporate insolvency resolution.
  • Bakshish Singh v. Darshan Engineering Works (1994) 1 SCC 9: Affirmed that employer insolvency cannot extinguish retiral and disability entitlements earned by workers.
Courtroom Practice & Strategic Litigation Guidance:

If an employer enters corporate insolvency resolution process (CIRP) under IBC, injured workers should file Form E with the Resolution Professional citing Section 83 read with Moser Baer, establishing that compensation claims must be paid in full without liquidation haircuts.

Section 82 All 163 Sections of Code on Social Security, 2020 Section 84