Non-payment of salary to employees on the due date is not only a breach of the contract of employment on the part of the employer but also a contravention of the provisions of the Payment of Wages Act 1936 if applicable.
The remedy available in such a situation is to file a claim u/s 15 of the Payment of Wages Act 1936 before the Deputy Labor Commissioner for the area who is the competent authority under the said Act to entertain and dispose of claims relating to non-payment of wages provided the monthly salary of the employee shall be Rs.24000/= or below. In other cases institution of a civil suit for recovery and damages is the only option.
However, the narrative indicates that the employer is not of sound financial status to discharge his contractual obligation relating to Payment of salary to the employees as a result of which asking the employees to resign forthwith. It is always prudent to jump out of the sinking ship before it starts to sink. Therefore , it is better for the employees of the organization to resign forthwith with the condition to adjust the unpaid salary proportionately against the notice period.