SC orders liquidation of Jet Airways, rejects NCLAT's approval of takeover

The Supreme Court has directed the liquidation of Jet Airways, citing the failure of the Jalan-Kalrock Consortium to meet revival conditions, overturning the NCLAT's approval

Don't want to miss the best from Business Standard?

The Supreme Court on Thursday ordered the liquidation of Jet Airways after determining that the National Company Law Appellate Tribunal’s (NCLAT) ruling violated the apex court’s judgment from January 2023. The ruling came after a series of appeals, including one from the airline’s lenders, challenging the NCLAT’s approval of the airline’s takeover by a consortium comprising UK’s Kalrock Capital and UAE-based entrepreneur Murari Lal Jalan.

 

The top court said that liquidation is in the best interest of Jet Airways’ creditors and employees. Justice JB Pardiwala, while delivering the verdict, described the airline’s legal journey as an ‘eye-opener’ offering important lessons for India’s Insolvency and Bankruptcy Code (IBC).

Jet Airways crisis: NCLAT’s judgment found faulty  

The apex court criticised the NCLAT for disregarding its earlier ruling. Specifically, the court highlighted the NCLAT’s approval of adjusting a Rs 150 crore performance bank guarantee (PBG) against a required infusion of Rs 350 crore from the Jalan-Kalrock Consortium (JKC), the resolution applicant. The court ruled that the performance bank guarantee should have remained in place until the insolvency process was completed, underscoring that the consortium’s failure to infuse the promised funds further justified the airline’s liquidation.

Failure to meet conditions for revival  

The top court’s ruling concluded that the consortium had failed to fulfill the conditions necessary to revive Jet Airways, making liquidation the only viable option. Lenders, led by the State Bank of India, had argued that JKC’s inability to inject the required capital left no possibility for the airline's revival.

 

In its decision, the Supreme Court set a significant precedent for insolvency resolution in India’s aviation sector.

Jet Airways grounded

 Jet Airways was grounded in 2019 due to escalating financial issues. Its largest lender, the State Bank of India, initiated insolvency proceedings against the airline before the National Company Law Tribunal (NCLT) in Mumbai, leading to the airline's admission into the resolution process.

 

In 2021, a consortium consisting of UAE-based non-resident Indian Murari Lal Jalan and Florian Fritsch, represented by his investment holding company Kalrock Capital Partners Ltd (based in the Cayman Islands), emerged as the successful bidder to revive Jet Airways. Despite this, the consortium faced difficulties in taking control of the airline.

Ownership transfer disputes  

While JKC claimed that the lenders had not initiated the transfer of ownership, the lenders countered, asserting that JKC had failed to infuse the required funds into the airline. In February 2023, the lenders filed an appeal with the NCLAT against the NCLT’s order on ownership transfer. However, the NCLAT refused to grant an injunction in favour of the lenders on the matter.

Jet Airways row: Sale of aircraft  

As part of the resolution process, both the Committee of Creditors (CoC) and JKC were tasked with selling three Boeing 777-300 aircraft that were previously operated by Jet Airways. The Malta-based Challenge Group successfully bid for the aircraft and executed Letters of Intent in October 2022 through its special purpose vehicle, Ace Aviation, to purchase the three B777-300 aircraft.

 

[With agency inputs]