Supreme Court Orders Liquidation of Jet Airways Over Failed Resolution Plan Implementation

Supreme Court Orders Liquidation of Jet Airways: The Supreme Court on Thursday directed the winding up of cash strapped Jet Airways as the resolution plan approved five years ago is no longer implementable.

A bench of Chief Justice of India D.Y. Chandrachud, Justice J.B. Pardiwala and Justice Manoj Misra allowed the lenders plea opposing the transfer of ownership to Jalan Kalrock Consortium (JKC). The bench also used its extraordinary powers under Article 142 of the Constitution “to do complete justice” between the parties and directed the appointment of a liquidator forthwith.

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The court also ordered the forfeiture of Rs 200 crore invested by JKC and directed the lenders to invoke the Rs 150 crore Performance Bank Guarantee (PBG).

The Committee of Creditors (CoC), led by State Bank of India, had argued in its plea that the proposed revival plan was not in the interest of the lenders and challenged the National Company Law Appellate Tribunal (NCLAT) order approving the resolution plan.

In January this year, the Supreme Court had directed JKC, the successful resolution applicant for the cash strapped airline, to deposit Rs 150 crore in an escrow account jointly held by State Bank of India and JKC. It had warned of legal consequences if JKC failed to provide the bank guarantee.

The Supreme Court also directed NCLAT to decide the lenders plea by end of March 2024.

According to the court approved resolution plan, the consortium had committed to infuse Rs 350 crore to acquire the ownership of Jet Airways. A three member NCLAT bench later allowed adjustment of Rs 150 crore from the PBG towards this Rs 350 crore commitment. The tribunal also allowed the consortium to pay Rs 100 crore by August 31, 2023 and an additional Rs 100 crore by September 30, 2023.

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Once India’s largest and most popular airline, Jet Airways had entered corporate insolvency resolution process under IBC in June 2019 due to financial distress.

Justice Pardiwala was disappointed with the handling of the case stating, “This litigation is an eye-opener and has taught us many lessons about the IBC and the functioning of NCLAT."

The decision has sent shockwaves in the corporate restructuring community as the Court has made it clear that IBC process should be fair and effective in resolving distressed assets. Senior Advocate Mukul Rohatgi and Advocate Gopal Sankaranarayanan, appearing for Jalan KalRock Consortium, had sought approval for transfer of ownership but the Court rejected their plea.

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