New Delhi. The Supreme Court on Thursday ordered the liquidation of stalled airline Jet Airways, confiscation of Rs 200 crore contributed by the successful bidder Jalan Kalrock Alliance and allowed the SBI-led lender to encash the performance bank guarantee of Rs 150 crore.
Using his special powers under Article 142 of the Constitution, Chief Justice D.Y. Chandrachud and Justice J. B. A bench of Justice Pardiwala and Justice Manoj Mishra stayed the Diwali proceedings of Jet Airways, rejecting the order of the National Company Law Appellate Tribunal (NCLAT).
The bench termed the case as an “eye-opener” and pulled up the NCLAT for allowing adjustment of the Performance Bank Guarantee (PBG) in view of the payment of the first installment by the Jalan Kalrock Consortium (JKC). The National Company Law Appellate Tribunal (NCLAT) has directed JKC to fully honor its payment obligations. Permission was given to acquire Jet Airways without following the instructions.
The Court said, “The order of NCLAT directing the SRA (successful resolution applicant) to adjust the PBG of Rs 150 crore against the first installment of payment of Rs 350 crore is in flagrant disregard of the order of this Court… “Delivering the verdict on behalf of the bench, Justice Pardiwala accepted the petition of SBI and other lenders against the NCLAT decision. The petition opposes the decision to maintain the resolution plan of Jet Airways in favor of JKC. The apex court accepted the appeal of the lenders and canceled the NCLAT order.
The bench said, “In view of the strange and worrying circumstances discussed in this judgment and the fact that almost five years have passed since the resolution plan was duly approved by the NCLT and no progress has been made… “We are left with no other option but to exercise our authority under Article 142 of the Constitution and direct the corporate debtor to be liquidated.” Article 142 of the Constitution empowers the Supreme Court to issue orders and decrees to ensure complete justice in any case or case pending before it.
The bench ordered that necessary steps be taken to initiate the liquidation process of the defunct airline company and “an amount of Rs 200 crore already deposited by the SRA be seized.” In the process of liquidation, debts are paid from the money received by selling the company’s assets.
“The lender creditors are permitted to encash the performance bank guarantee of Rs 150 crore furnished by the SRA,” the court said. It said the NCLAT’s approval to adjust the performance bank guarantee as part payment was in “blatant disregard” of the apex court’s earlier direction, as well as the terms of the resolution plan and the principles established under the Insolvency and Bankruptcy Code. There was disregard.
The court said that apart from non-payment of the initial installment, JKC has also not paid other significant dues including corporate insolvency resolution process cost and employee dues. JKC was represented in the case by advocates Debmalya Banerjee and Karthik Bhatnagar of Karanjawala & Company.
Justice Pardiwala said, “This case has been an eye-opener on many issues including the functioning of NCLAT.” He emphasized that JKC’s failure to implement the resolution plan led to the imposition of provisions of the Insolvency and Bankruptcy Code (IBC), necessitating liquidation.
The bench said, “We have no doubt in our mind that the NCLAT acted contrary to established legal principles and went to the extent of drawing wrong conclusions from the true facts while adjudicating the case.” NCLAT had on March 12 upheld the resolution plan of the defunct airline company and approved the transfer of its ownership to JKC. State Bank of India (SBI), Punjab National Bank (PNB) and JC Flowers Asset Reconstruction Private Limited had moved the court against the NCLAT decision.
Jet Airways will never be able to fly again, the airline which has been stalled for five years will be liquidated
Jet Airways had announced temporary closure of its operations five years ago in the month of April after flying as a full service airline for 25 years. The airline had taken this step due to cash crunch. Now after the Supreme Court’s order for liquidation of the airline, the possibility of it flying again is completely gone.
More than 20,000 jobs have been lost since the airline ground operations and thousands of crores of rupees worth of dues to lenders, vendors and passengers have been ‘sunk’ awaiting insolvency resolution. Today the Supreme Court ordered the liquidation of the airline, formally ending its troubled journey and dashing its hopes of revival.
The airline’s last flight S2-3502 departed from Amritsar at around 10.30 pm on April 17, 2019 and landed at Mumbai’s Chhatrapati Shivaji International Airport at 12.22 am on April 18. JetLite, the low-cost arm of Jet Airways, operated flights with Boeing 737-800 aircraft, which were later leased by low-cost airline SpiceJet.
At the peak of its operations, Jet Airways had more than 120 aircraft. When the airline ceased operations due to rising debts and non-payment of salaries to its employees, it had 16 aircraft of its own. Founded by Naresh Goyal, this airline has served crores of passengers for more than two and a half decades. Goyal started with travel agency JetAir as a general sales agent for several international airlines.
Jet Airways was also one of the major private airlines in the Indian aviation sector, but it started declining due to financial crisis. The airline started its journey as an air taxi operator with service from Mumbai to Ahmedabad. At its peak it had approximately 20,000 employees, including approximately 1,300 pilots. Jet Airways had more than 20,000 employees when it announced the temporary closure of operations in 2019. At that time the company owed more than Rs 8,500 crore to banks. Apart from this, thousands of crores of rupees of agent and passenger refunds were outstanding.
Weeks after Jet Airways ceased operations on April 17, 2019, lenders sought insolvency resolution process to recover their dues. The National Company Law Tribunal (NCLT) accepted the insolvency petition filed against the airline on June 20, 2019.
Jalan Kalrock Consortium (JKC) emerged as the successful bidder for Jet Airways under the insolvency resolution process in 2021, but persistent differences with lenders resulted in the resolution plan being shelved. On Thursday, the Supreme Court, using its extraordinary powers under Article 142 of the Constitution, set aside the order of the National Company Law Appellate Tribunal (NCLAT) and stayed the bankruptcy proceedings of the airline.
NCLAT said that it had given permission to JKC to acquire Jet Airways without fully complying with the payment obligations. Apart from liquidation, the Supreme Court has directed confiscation of Rs 200 crore put in by the successful bidder JKC. The court has also allowed the SBI-led lender to encash performance bank guarantee of Rs 150 crore.
The court accepted the petition of SBI and other lenders against the NCLAT decision. NCLAT had upheld the resolution plan of Jet Airways in favor of JKC. All that is left after so many years of the airline being defunct is… disrupted livelihoods, non-payment of dues and a few planes with the image of Jet Airways gathering dust….