Supreme Court orders Jet Airways to enter liquidation

The Supreme Court has directed Jet Airways Ltd, India’s once leading airline, to enter liquidation as the successful bidder, Jalan Kalrock Consortium (JKC), failed to implement its insolvency resolution plan.

A three-judge bench of Chief Justice DY Chandrachud, Justice JB Pardiwala and Justice Manoj Misra had reserved the judgment on October 16, citing a plea by lenders led by State Bank of India.

They challenged the National Company Law Appellate Tribunal’s (NCLAT) order in March upholding the transfer of ownership of the airline to the Jalan Kalrock consortium.

The consortium consists of Murari Lal Jalan, a non-resident Indian living in the UAE, and Florian Fritsch, who has a stake in Jet Airways through his Cayman Islands-based investment holding company Kalrock Capital Partners Ltd and has emerged as the key player in reviving the airline. Successful bidder.

The lenders argued JKC’s solution was “unworkable” and urged the court to use its inherent powers under Section 142 to liquidate the airline. (Article 142 of the Constitution allows the Supreme Court to pass any order in a case that “complete justice” requires, even if its ruling does not fall within the ambit of existing law or procedure.)

ALSO READ | Indian bankruptcy courts need to understand aviation industry

While JKC claimed ownership of the airline and said it was doing everything possible to restart operations, lenders accused the consortium of deliberately delaying efforts and bringing the airline closer to liquidation.

Jet Airways, founded by Naresh Goyal, went bankrupt in April 2019 and suspended flight operations due to financial problems.

JKC’s resolution plan promises to inject capital, clear creditor dues and resume flight operations. However, implementation of the scheme encountered significant delays, resulting in a legal dispute with lenders that lasted for more than five years.

‘serious consequences’

The dispute first came to the Supreme Court in January 2024, when the court directed JKC to pay the deposit $150 crore till January 31, 2024, with a warning of “serious consequences” in case of non-payment.

The court then dismissed NCLAT’s August 2023 order, which directed JKC to submit a $Total performance bank guarantee of Rs 1.5 billion completed $Debt of Rs 350 crore stipulated in the settlement plan.

Lenders challenged encashment of performing bank guarantees and the Supreme Court clarified that the order was incorrect and should be stayed.

The court also directed NCLAT to dispose of all appeals in the case by March 2024, setting a strict deadline for the appellate court to resolve outstanding issues.

ALSO READ | Realigning the IBC to better protect the rights of aircraft lessors

NCLAT March Order

Despite the Supreme Court’s earlier intervention, NCLAT in its final order in March 2024 upheld the transfer of ownership of Jet Airways to the Jalan Kalrock consortium.

The appeals court set a 90-day deadline for the lender to complete the necessary formalities, including transferring ownership, obtaining an air operator certificate and resuming operations. Additionally, NCLAT directed the lenders to acquire three properties owned by Jet Airways in Dubai, which were intended to be used as collateral for the loans. $The settlement plan calls for a payment of Rs 350 crore.

This order puts JKC back into the driver’s seat of the airline’s revival. Still, the lenders are not satisfied with the progress and have asked the Supreme Court to challenge NCLAT’s March 2024 order, leading to the current deliberations.

Lender’s Allegation

During the Supreme Court hearing, the lenders, represented by Solicitor General N. Venkataraman, accused JKC of failing to fulfill key commitments outlined in the resolution plan. They argued that JKC only deposited $200 Crores $The first tranche of 3.5 billion rupees fell short of the expected target. $As per the previous order of the Supreme Court, Rs 150 crore in cash was required.

The lenders further claimed that JKC failed to meet several other obligations, including obtaining an air operator certificate, international bilateral rights and airport slots – which are critical to resuming flights. Additionally, they pointed out that JKC has not yet received security clearance from India’s home ministry, a requirement to operate the airline.

Lenders also emphasize the need to pay $Jet Airways employees are owed Rs 272 crore in dues. They told the court that JKC had failed to release Jet Airways’ three properties in Dubai, making it difficult to complete ownership transfers.

ALSO READ | Go First pushes foreign financing to test India’s bankruptcy framework

Delays in finalizing title proceedings result in monthly losses $Rs 22 crore to maintain Jet’s assets while the airline remains in arrears $Rs 7,500 crore goes to its creditors.

Lenders also expressed concerns about JKC’s failure to cooperate with investigations into the source of the funds. $JKC co-founder Florian Fritsch paid Rs 200 crore after facing fraud and money laundering charges in Europe.

“This is a case of gross abuse of the process of the Bankruptcy Code,” Venkataraman argued. “The court must make it clear that the IBC is not out to abuse its power but is a real facilitator of takeovers. There is no way an operator like this comes to play on the pitch.”

Venkataraman also stressed that a committee of creditors consisting of more than 30 banks will assume $1,100 crore in airport fees. He said neither the council nor staff could see any results and the solution had become unworkable.

JKC’s defense

JKC’s counsel, senior advocate Mukul Rohatgi, defended the consortium, accusing the lenders of deliberately delaying Jet Airways’ revival to push the airline into liquidation. Rohatgi believes lenders would rather sell Jet’s assets for scrap to maximize returns than work with JKC to revive the airline.

“They didn’t lift a finger to help. They wanted to put this plan into action so that they could sell these aircraft for scrap and get more,” Rohatgi told the court.

“I’m not a bad person. I’m trying to get the company back on track,” another senior lawyer for JKC told the court.