Start winding-up process for Jet Airways: Lenders tell Supreme Court

Jet Airways lenders on Monday urged the Supreme Court to initiate the winding-up process for the grounded airline, asserting that the approved resolution plan by the National Company Law Tribunal (NCLT) was unfeasible.

Representing the Committee of Creditors (CoC), Additional Solicitor General N Venkatraman informed the apex court that the Jalan-Kalrock Consortium -- the successful bidder for the airline -- had not infused any funds into the company. Furthermore, he stated the Directorate General of Civil Aviation (DGCA) was not inclined to renew Jet Airways’ air operator's certificate (AOC), which expired in May.

The CoC is a group of financial creditors (lenders) that represent the interests of all stakeholders in an insolvency process.

Venkatraman said the consortium failed to meet its commitment to infuse funds into the airline, even as it received multiple extensions from tribunals. He added that if the CoC were to recover any of its outstanding dues, the company would have to undergo liquidation. Liquidation is the process of selling off assets to repay lenders and dissolve a business.

The court has scheduled the next hearing in two weeks and has called for a response from the consortium.

The National Company Law Appellate Tribunal (NCLAT) on May 26 granted the consortium 107 days to pay lenders’ share. “SRA(successful bidder i.e. JKC) is ready and willing to infuse the first tranche of Rs 175 crore, and to show the bona fide of the SRA, the SRA shall infuse Rs 50 crors within 30 days and the rest within time as allowed,” the order noted.

It said that until this time (107 days, until August 30), the bank guarantee of Rs 150 crore should not be invoked by State Bank of India (SBI). JKC was earlier given 180 days, from November 16, 2022, to May 15, 2023, to pay the dues to lenders.

“After considering the facts and sequence of events in the present case, we are of the view that SRA is entitled to exclusion of period from November 16, 2022, till March 3, 2023, when this tribunal in the present appeal passed an order declining the interim relief as prayed by the lenders,” the NCLAT said.

This means that JKC got an extension of over three months to deposit dues to the lenders since 107 days were excluded from the period of 180 days.

The NCLAT gave the order on JKC’s application to stop SBI from invoking the guarantee. The public sector lender told the tribunal in the earlier hearing that JKC had not paid dues that had a deadline of May 15.

JKC told the tribunal that on May 13 it received a letter from SBI, asking it to infuse amounts as referred to in the letter. The SBI’s letter further stated the identified bank account details had been shared on May 13. The letter further stated that if the payment obligations were not honoured by May 15, lenders may exercise their rights and remedies as available in law (which includes invocation of Performance Bank Guarantee, as well).

The court noted that lenders should instead of invoking performance bank guarantee, should take steps, which may help the implementation of the Resolution Plan and to achieve the objective of the Resolution Plan. “The Resolution Plan has been approved with the intent and purpose to revive the Corporate Debtor(Jet Airways),” the court said.

Jet's AOC -- revalidated by India’s aviation regulator on May 20 last year -- expired on May 19, indicating that the airline is unlikely to start commercial flights anytime soon. By May last year, JKC had deposited Rs 150 crore with lenders as a performance bank guarantee.

The National Company Law Tribunal (NCLT) last December asked lenders to hand over Jet Airways to the consortium. It asked the consortium to submit Rs 175 crore—as decided under the insolvency resolution plan—with lenders by May 14 this year so that ownership transfer can begin. The lenders have not received this amount as yet.

As per the resolution plan, JKC was required to deposit with lenders a PBG of Rs 150 crore in two tranches: the first of Rs 47.5 crore when a committee of creditors (lenders) approves the resolution plan and the second tranche of Rs 102.5 crore on "effective date" when all CPs (conditions precedent) were fulfilled.

A refundable earnest deposit of Rs 15 crore was made to the lenders in July 2020 when JKC submitted its resolution plan to lenders. The first performance bank guarantee tranche of Rs 47.5 crore was deposited in October 2020 when the committee of creditors approved the resolution plan. The remaining amount of Rs 87.5 crore was deposited in the second PBG tranche on May 20 last year—called the "effective date"—when all CPs were fulfilled.