Supreme Court orders liquidation of Jet Airways over non-implementation of resolution plan
The Supreme Court on Thursday invoked its extraordinary powers under Article 142 of the Constitution to order the liquidation of Jet Airways over its non-implementation of the resolution plan in the past five years.
The Bench of Chief Justice of India DY Chandrachud, Justice JB Pardiwala and Justice Manoj Misra set aside the March 2024 order of the National Company Law Appellate Tribunal (NCLAT), which allowed ownership transfer of the cash-strapped airlines to the Successful Resolution Applicant (SRA), without complete payment in accordance with the resolution plan.
The Bench directed the NCLT Mumbai Bench to immediately appoint a liquidator and commence proceedings for the liquidation of the corporate debtor.
It further held that the amount of Rs 200 crore already infused by SRA -Jalan KalRock Consortium (JKC), would stand forfeited. The Apex Court entitled the lenders and creditors to encash the Performance Bank Guarantee of Rs 150 crore furnished by the SRA.
The Bench orally remarked during the hearing today that the litigation was an eyeopener, which taught the Court many lessons about the IBC and the functioning of NCLAT.
Calling the NCLAT order that allowed the adjustment of the first tranche of payment of Rs 350 crore against the Performance Bank Guarantee (PBG) as ‘perverse,’ the top court of the country said the Tribunal verdict was in ‘flagrant disregard’ of the Apex Court’s January 18 order.
It said NCLAT acted contrary to settled legal principles and incorrectly interpreted the Apex Court order.
the Apex Court further said that the PBG had to be kept alive until the completion of the resolution plan as it could only be forfeited in breach of the plan. The SRA by not infusing the first tranche had defaulted in giving the payment costs. The contention of SRA that adjustment of payment was permissible under the resolution plan must be rejected. The SRA has failed to implement the resolution plan by not being able to infuse the first tranche payment, it added.
Since it was not possible to implement the resolution plan, the Bench said it would have to ensure that liquidation remained an option for the corporate creditor.
It said the fundamental concern was not only to do substantial justice but also to bring speedy disposal of the dispute.
Earlier on October 16, the top court of the country had reserved its verdict on the petition filed by the State Bank of India (SBI) and other lenders of the cash-strapped airlines.
The petition challenged the NCLAT decision which allowed the completion of the transfer of ownership of the airlines to the SRA without paying the complete Rs 350 crore as per the approved Resolution Plan.
As per the resolution plan, the SRA was to pay a sum of Rs 4783 crore, and infuse Rs 350 crore in the first tranche of the payment as agreed.
On January 18, the Apex Court had set aside the NCLAT’s August 8, 2023 order to allow the SRA to adjust the first tranche of payment of Rs 350 crore against a Performance Bank Guarantee (PBG) which was given as security by the lenders.
The top court of the country had directed the SRA to deposit Rs 150 crore to the SBI escrow account, on or before January 31, 2023, failing which the SRA shall be treated as non-compliant with the RP.
It further ruled that the PBG of Rs 150 crore shall continue to remain in operation and effect until the final disposal of the appeal before the NCLAT and shall be subject to the outcome of the same;
In March 2024, the NCLAT directed the monitoring committee of Jet Airways to complete the pending transfer of ownership of the airlines to JKC within a period of 90 days and allowed the adjustment of the PBG of Rs 150 crore towards the pending tranche payment of Rs 350 crore by the SRA.
SBI, the lead lender of Jet Airways, was represented by Additional Solicitor General (ASG) N Venkataraman. Senior Advocates Mukul Rohatgi and Gopal Sankaranarayanan appeared for the Successful Resolution Applicant (SRA) – Jalan KalRock Consortium (JKC).
The ASG contended that the NCLAT order, adjusting Rs 150 crore with the PBG, was legally ‘incorrect’ and violated the Apex Court’s January 18 verdict. The NCLAT order was completely opposite to what the resolution plan envisaged as the latter prioritised the creation of securities and only then the adjustment of PBG, he noted.
ASG Venkataraman further said that the upfront payment of airport dues of Rs 473 crore as per the resolution plan was yet to be done. He explained that the SRA, as per the resolution plan, has to pay Rs 4,783 crore.
However, it has been struggling to pay the first tranche of Rs 350 crore. So far the lenders have only received Rs 200 crore. Workmen dues of Rs 289 crore were also pending to be cleared. On a monthly basis, the lenders were shedding Rs 22 crore for maintaining the operations of the Airlines, added the ASG.
The Counsel appearing for the SRA objected to the lenders’ arguments seeking to liquidate the Airlines. He said the Apex Court order of January 18 should be considered in full, not in parts. The counsel further raised concerns about the potential liquidation of Jet Airways, asking what would happen to Rs 200 crore invested and whether the SRA would get the amount back.0