The Supreme Court is expected to announce its decision on Thursday regarding a petition filed by State Bank of India (SBI), and other creditors, challenging the National Company Law Appellate Tribunal’s (NCLAT’s) decision to uphold the resolution plan of grounded airline Jet Airways and approve the transfer of its ownership Jalan Kalrock Consortium. A bench of Chief Judge D Y Chandrachud along with Justices J B Pardiwala & Manoj Misra is expected to pronounce the verdict, which was reserved on 16 October.
The NCLAT approved the transfer of ownership to JKC on 12 March. The appellate court also ordered the Jet Airways Monitoring Committee to complete the transfer within 90 days.
The NCLAT has also instructed the lenders to Jet Airways to adjust INR150 crore paid by Jet Airways as performance bank guarantees (PBG).
The NCLAT’s verdict of March 12 has been challenged by the SBI, Punjab National Bank and JC Flowers Asset Reconstruction Private Limited. The consortium had argued that the creditors including the SBI were seeking to liquidate Jet Airways in an unjustified manner.
The banks referred to media reports and claimed that public lenders are being unfairly held responsible for the closing of private airline companies and that these companies are now facing insolvency procedures. The JKC argued the obligations under the Resolution Plan were contingent on the occurrence the effective date which marks the initiation by the consortium of its obligation to make payments according to the plan.
It had reacted to the lenders’ claim that the consortium had defaulted, and rendered the resolution plan ineffective. It had stated that the consortium has taken all the necessary positive steps to implement the resolution plan, and now it is up to the lenders fulfil their obligations. The banks claimed that the JKC had failed to meet all its financial obligations. This included the infusion of INR350 crore within the 180-day period stipulated by the resolution plan.
The lenders also claimed that the consortium had failed to meet other obligations, including infusing INR150 crore in cash or mortgaging three Dubai property as required by the resolution plan. On October 15, the consortium said that it was the creditors, not the law officer, who had delayed resolution.
It had stated that the revival Jet Airways was a business venture, subject to a variety of external factors. The consortium could not be held solely responsible for delays due to security clearances and other procedures hurdles.
In its verdict, the NCLAT confirmed the NCLT Mumbai verdict of January 13 2023, which approved the transfer of ownership to the consortium. The NCLAT has also instructed Jet Airways’ lenders that they must adjust the INR 150 million paid by the consortium to Jet Airways as PBG.
Multiple people who are aware of this development have confirmed that the consortium has appealed the Supreme Court’s ruling against a separate ruling from the National Company Law Appellate Tribunal directing it clear unpaid provident funds dues of Rs. 250 crore to its employees. This highlights the remaining legal hurdles the new owners face.
The PBG of INR150 crore, which lies with the monitoring committee/MC lender, shall be adjusted toward the first tranche payment INR350 crore as INR200 crore have already been paid to the SRA(JKC).
The statement said:
“The first tranche of payment will be completed through the adjustment of PBG according to the resolution plan.”
Jet Airways has been grounded since April 2019. In September 2023, the Jalan Kalrock consortium, the new promoters proposed, announced that they had completed an additional INR100 crore injection into the airline.
JKC had stated that with this infusion it has fulfilled its total financial obligation of INR 350 crore equity, according to the court approved resolution plan. The consortium has met all other commitments in order to take control of the carrier, it added.
The airline also stated that it was planning to relaunch operations in 2024. The full-service airline, which had been grounded in 2019 because of a severe liquidity problem at that time due to a severe crisis in the industry, went through an insolvency resolution procedure. The dispute was with the lender. JKC was the successful bidder for Jet Airways in 2021.
