Jet Airways resolution plan: Supreme Court reserves decision on airline’s future

New Delhi: The Supreme Court on Wednesday reserved its judgment on the future of Jet Airways while considering the ownership dispute between the bankrupt airline’s lenders and successful bidder Jalan-Kalrock Consortium (JKC).

A three-judge bench headed by Chief Justice DY Chandrachud will decide whether to uphold the resolution plan approved by JKC or Jet Airways’ lenders, led by the State Bank of India, which has challenged the plan.

The judgment could put JKC’s bid on hold for failing to meet key obligations, pave the way for a new resolution plan, or push the airline into liquidation.

Alternatively, the court may choose to uphold the current settlement, allowing JKC to revive the airline and take ownership.

The Supreme Court concluded hearings in the case on Wednesday after hearing extensively from both parties. As the Chief Justice is scheduled to retire in early November, the judgment is expected to be passed before his retirement.

If the airline goes into liquidation, it would be the second airline to do so in recent times, after Go First. Experts say this will raise major questions about the adequacy of the existing Insolvency and Bankruptcy Code (IBC) mechanisms to handle airline insolvency.

Jet Airways, founded by Naresh Goyal, filed for bankruptcy in April 2019 after being forced to suspend all flight operations due to financial difficulties. In June 2021, the National Company Law Tribunal (NCLT) approved JKC’s resolution plan, which promised to infuse capital, clear creditors’ dues and resume flight operations.

However, execution of the scheme encountered significant delays, leading to a legal dispute with lenders led by the State Bank of India.

Dispute reaches Supreme Court

The case reached the Supreme Court after the lenders challenged the March 2024 order of the National Company Law Appellate Tribunal (NCLAT), which upheld the ownership transfer to JKC. NCLAT has directed the lenders to transfer ownership of Jet Airways to JKC within 90 days and complete necessary formalities, including transfer of shares to JKC and obtaining the airline’s air operator certificate.

The appeals court also gave lenders 30 days to acquire Jet Airways’ three Dubai properties, after which JKC will disburse the first tranche $3.5 billion, is an important part of the settlement plan. NCLAT noted that JKC has raised funds $200 Crores $350 crore is required but certain other conditions have not been met, triggering objections from lenders.

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Lender’s Allegation

During the Supreme Court hearing, Jet Airways’ 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 $Rs 350 crore in first tranche but failed to deliver $As per the Supreme Court’s earlier order, 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 for the resumption of flights. In addition to these financial issues, lenders highlighted that JKC has yet to receive security clearance from India’s home ministry, a requirement to operate the airline.

They also mentioned needing to pay around $Jet Airways employees are owed Rs 272 crore in dues. The lender informed the court that JKC had not yet released the three Dubai properties held as collateral, making it difficult to complete the ownership transfer. Delays in finalizing ownership proceedings resulted in monthly losses, they said $Rs 22 crore to maintain Jet’s assets while Jet Airways remains in arrears $Rs 7,500 crore goes to its creditors.

The lender also claimed that JKC failed to cooperate with an investigation into the source of its 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 Insolvency and Bankruptcy Code (IBC) process,” 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 such an operator comes to play on the pitch.”

JKC’s defense

In response, 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 argued that lenders wanted to sell Jet’s assets for scrap to maximize returns rather 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.

Also read: Jet Airways’ winning bidder JKC tells Supreme Court lenders want airline’s assets sold as scrap

Rohatgi argued that JKC had complied with the resolution plan and was ready to release Dubai properties for adjustment $150 Crore Performance Bank Guarantee. He argued that the delay in meeting this condition was due to the lender’s failure to take action, such as writing to the Reserve Bank of India seeking the release of the properties.

Rohatgi further noted that despite JKC’s efforts, the consortium was unable to obtain critical airport slots or the airline’s air operator certificate due to delays in ownership transfer. “I don’t have a plane and my company doesn’t have the operators. Without these necessities, who can expect me to get airport slots?” he asked.

He also stressed that revitalizing Jet Airways would benefit the Indian aviation industry and pointed to the profitability of airlines such as IndiGo and Air India, while noting that SpiceJet was struggling.

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