NEW DELHI, Nov 7: The chapter of revival of Jet Airways was closed for ever as the Supreme Court on Thursday invoked its extraordinary powers under Article 142 to order its liquidation setting aside a tribunal’s decision upholding a resolution plan and transfer ownership – to the Jalan-Kalrock Consortium – without full payment to creditors.
Article 142 allows the court to make orders for ‘complete justice’ in any pending matter. In this instance, it noted “peculiar and alarming” circumstances of the case – referring to improper implementation of the resolution plan – and said it had, therefore, “no choice but to send Jet Airways into liquidation.”
“Liquidation must be available to lenders as a last resort… since resolution plan is no longer capable of implementation,” Chief Justice DY Chandrachud and Justices JB Pardiwala and Manoj Misra said, allowing a plea by creditors, including the State Bank of India and the Punjab National Bank.
The court said liquidation would best serve the interests of creditors, workers and other stakeholders, and also rapped the National Company Law Appellate Tribunal (NCLAT) for its decision to uphold resolution despite non-payment to creditors. Justice J.B. Pardiwala, who authored the judgment, ordered the amount of Rs 200 crores paid by Jalan-Kalrock Consortium (JKC) towards the initial tranche payment of ₹350 crore to the creditors to be forfeited.
Justice Pardiwala said the fact that resolution plan had not progressed despite the lapse of five years was both “peculiar and alarming.”
The court set aside the NCLAT direction to the lenders of Jet Airways to adjust the ₹150 crore paid by JKC the consortium as performance bank guarantee (PBG). The top court directed the NCLT (Mumbai) to commence the liquidation process and appoint a liquidator as early as possible. The Supreme Court verdict was based on appeal filed by the State Bank of India-led consortium of creditors which had challenged the March 12 order of the NCLAT.
The NCLAT had upheld the resolution plan of the grounded air carrier and approved the transfer of its ownership to the JKC. It had further ordered the Jet Airways monitoring committee to complete the transfer of ownership within 90 days.
In its appeal before the apex court, the SBI consortium, which included the Punjab National Bank and JC Flowers Asset Reconstruction Private Limited, said the situation was a “nightmare” for the lenders. The lenders described the NCLAT verdict of March 12 as “shocking” and a deviation from the Supreme Court direction of January 18, 2024.
The judgment saw the court agree with the banks before ordering for the liquidation of the airline company. The court said it had no choice now and understood that “liquidation remains the last resort.” The lenders had argued in the hearing that they were even bearing the burden of airport dues, which came to ₹1000 crore and ₹22 crore a month. Besides, the “clock [was] ticking” on the maintenance of aircrafts lying dormant on the tarmac before they turn junk.
The JKC denied the allegations, arguing that it had spent ₹700 crore to revive the airline and the lenders, keen on liquidation, was stonewalling its very move. One of the primary issues before the Supreme Court in this hearing was that the NCLAT had allowed transfer of ownership despite JKC failing to pay an initial ₹ 350 crore as required by the resolution plan. Overall JKC was required to pay ₹ 4,783 crore.
The JKC earlier had asked the NCLAT for permission to move the ₹ 200 crore to an escrow account, but withdrew that plea in May after the tribunal denied relief, noting the top court is hearing the matter.
Jet Airways was grounded in April 2019 and, two years later, JKC – a consortium of Murari Jalan, a United Arab Emirates-based non-resident Indian, and Florian Fritsch, a Jet shareholder via an offshore holding company called Kalrock Capital Partners Limited – successfully bid for ownership. Subsequently, a monitoring committee was set up to oversee plan implementation, but there have been legal and financial delays. In May Jet announced a delay in declaring financial results for the quarter and year ending March, and that the monitoring committee would meet soon to clear the data.
(Manas Dasgupta)
