The Supreme Court has ordered the liquidation of the beleaguered airline Jet Airways. The ruling delivered on November 7, was led by Chief Justice of India, D.Y. Chandrachud, who stated that the resolution plan, approved half a decade ago, was no longer feasible. The court's decision came in response to a plea by the lenders, who were against the transfer of ownership of the grounded airline to Jalan Kalrock Consortium (JKC).
The bench, which also included Justices JB Pardiwala and Manoj, exercised its extraordinary powers under Article 142 of the Constitution, a provision that allows the court to pass such orders as is necessary for doing complete justice in any cause or matter pending before it. The court's ruling has far-reaching implications. It has ordered the forfeiture of Rs 200 crore that had been infused by JKC and directed the lenders to invoke a Rs 150 crore Performance Bank Guarantee (PBG).
The Committee of Creditors (CoC), led by the State Bank of India, had argued before the apex court that the proposed revival plan was not in the best interest of the lenders. They questioned the order of the National Company Law Appellate Tribunal (NCLAT) that had upheld the resolution plan. Earlier this year, in January, the Supreme Court had ordered JKC, the successful resolution professional bidder for the cash-strapped airline, to deposit Rs 150 crore in an Escrow account jointly held by the State Bank of India and JKC. The court had warned of legal consequences if JKC failed to furnish the bank guarantee.
The court had also asked the NCLAT to decide by the end of March 2024 on the lenders' plea challenging the ownership of the grounded Airways to JKC. The consortium had committed to an infusion of Rs 350 crore equity as per the court-approved resolution plan to assume ownership of Jet Airways. A three-member bench of the NCLAT had agreed to an adjustment of Rs 150 crore from the Performance Bank Guarantee (PBG) towards the payment of Rs 350 crore.
Jet Airways, once one of India's largest and most popular airlines, had entered the corporate insolvency resolution process under the Insolvency and Bankruptcy Code (IBC) in June 2019 due to severe financial distress. The NCLAT had directed the Jet Airways monitoring committee to complete the transfer of ownership within 90 days. However, the consortium was four years behind on its payment schedule at the moment. The bench questioned the compliance and merits of the consortium's performance under the resolution plan. It sought a clarification on why the consortium had not complied with the court's previous directives, specifically the infusion of funds in cash and the execution of the Performance Bank Guarantee (PBG).
Senior advocate Mukul Rohatgi, representing the consortium, argued that the revival of Jet Airways was a commercial endeavour, subject to various external factors and the consortium cannot be held solely responsible for delays caused by security clearances and other procedural hurdles. Despite the setbacks, the consortium had remained committed to reviving the airline. They had infused Rs 350 crore into Jet Airways and were determined to re-establish the operations of the airline up and running in 2024.
