Jet Airways revival: Lenders likely to give JKC an extension to pay dues

The lenders of Jet Airways said on Monday that they may agree to extend the deadline for Jalan Kalrock Consortium (JKC), the successful bidder for the airline, to pay dues of Rs 350 crore until the end of September.

The National Company Law Appellate Tribunal (NCLAT) has reserved its order on an application by JKC seeking an extension for payment to the lenders.

Initially, the payment date was set for August 31, but JKC has now requested an extension. The appellate tribunal had previously instructed JKC to file an application with a revised payment schedule within 24 hours during the last hearing.

Senior advocate Ravishankar Prasad, representing JKC, informed the court that the consortium would deposit Rs 100 crore by August 21 and another Rs 100 crore by the end of September. Since JKC has already pledged a bank guarantee of Rs 150 crore, the lenders could invoke it.

On Monday, however, the lenders argued that the Performance Bank Guarantee of Rs 150 crore is a backup and cannot be invoked at this stage. They stated that while they might consider an extension of the deadline for payment until September 30, they objected to cashing the bank guarantee.

The lenders also questioned how JKC could pay the Rs 7000-odd crore dues to them when it is struggling to pay Rs 350 crore. JKC assured the tribunal of its commitment to resuming airline operations.

During the last hearing, Additional Solicitor General N Venkatraman, who represented lenders, including State Bank of India (SBI), countered that the infusion of Rs 350 crore is merely the first step towards payment of dues. He added that this initial payment would be followed by three more tranches, culminating in the transfer of equity shares.

Venkatraman challenged JKC’s argument, asserting that the bank guarantee of Rs 150 crore could not be considered part of the Rs 350-crore payment as it was intended for a different segment of the resolution plan.

On May 26, the NCLAT had granted JKC 107 days to pay the lenders' share. The order noted that the successful resolution applicant (SRA) was ready to infuse the first tranche of Rs 175 crore, with Rs 50 crore within 30 days and the rest within the allowed time. It also directed that the bank guarantee of Rs 150 crore should not be invoked by SBI until the deadline of 107 days, until August 30.

Initially, JKC was allocated 180 days, from November 16, 2022, to May 15, 2023, to pay the lenders' dues. The court later observed that JKC was entitled to an exclusion of over three months to deposit the dues since 107 days were excluded from the 180-day period.

The NCLAT issued the order on JKC's application to prevent SBI from invoking the guarantee. The public sector lender informed the tribunal in a prior hearing that JKC had not paid dues that were due on May 15.

JKC conveyed to the court that it received a letter from SBI on May 13, detailing the identified bank account and warning that non-compliance with payment obligations by May 15 might lead to legal consequences, including the invocation of the performance bank guarantee.

The court noted that lenders should take steps to facilitate the implementation of the Resolution Plan rather than invoke the performance bank guarantee. It emphasised that the Resolution Plan was approved to revive Jet Airways.

Jet's air operator certificate (AOC), revalidated by India's aviation regulator on May 20 of the previous year, expired on May 19, suggesting that the airline is unlikely to commence commercial flights soon. By May of last year, JKC had deposited Rs 150 crore with the lenders as a performance bank guarantee (PBG).

Last December, the National Company Law Tribunal (NCLT) directed the lenders to hand over Jet Airways to the consortium and instructed JKC to submit Rs 175 crore with the lenders by May 14 of this year to initiate the ownership transfer process.

According to the resolution plan, JKC had to deposit a PBG of Rs 150 crore with the lenders in two tranches. A refundable earnest deposit of Rs 15 crore was made in July 2020, followed by the first performance bank guarantee tranche of Rs 47.5 crore in October 2020. The remaining sum of Rs 87.5 crore was deposited in the second PBG tranche on May 20 last year when all conditions were met.