Supreme Court has on November 7 set aside the National Company Law Appellate Tribunal (NCLAT) ruling that upheld the transfer of Jet Airways ownership to the Jalan-Kalrock Consortium (JKC) under an approved resolution plan. The apex court allowed appeal by State Bank of India (SBI) and other creditors.
SC rescinded resolution plan for revival of the bankrupt airline by JKC by saying that the consortium failed to infuse even the first tranche money within stipulated time as mandated by resolution plan.
The verdict, which was reserved on October 16, was pronounced by a bench led Chief Justice of India DY Chandrachud, who is set to retire on November 10. Bank guarantee of Rs 150 crore submitted by JKC was also forfeited. The verdict was decided by a three-judge Bench headed by Chief Justice of India.
As part of the ongoing case, the JKC has staked its claim in the ownership of the airline, while the committee of creditors for airline had urged the Supreme Court to use its inherent powers under Article 142 to liquidate the company.
The Committee of Creditors (CoC), led by the State Bank of India, has said that the proposed revival plan was not in the best interest of lenders and questioned the National Company Law Appellate Tribunal (NCLAT) order upholding the resolution plan.
In January this year, the Supreme Court ordered JKC, the successful resolution professional bidder for the cash-strapped airline, to deposit Rs 150 crore in an escrow account jointly held by the State Bank of India and JKC. It had cautioned that legal consequences would follow if the JKC failed to furnish the bank guarantee.
The SC had also asked the NCLAT to decide by the end of March 2024 on the lenders’ plea challenging the ownership of the grounded Airways to JKC.
The consortium had undertaken an infusion of Rs 350 crore equity per the court-approved resolution plan to assume ownership of Jet Airways. The three-member bench of the NCLAT had agreed to an adjustment of Rs 150 crore from the Performance Bank Guarantee (PBG) towards the payment of Rs 350 crore.
The appellate tribunal had also accepted an undertaking given by the consortium committing to pay Rs 100 crore by August 31 last year and another Rs 100 crore by September 30, 2023.
In May, The SC had witnessed an intense showdown between the lawyers for the lenders of grounded airline Jet Airways and its successful resolution applicant JKC.
Senior advocate Harish Salve, who appeared for the lenders, had back in May commenced his arguments saying “From resolution this has to go to dissolution. This thing has become a joke.”
Salve further contended that obtaining an international travel permit was a condition precedent in the resolution plan and to get the same an airline requires minimum of 20 aircraft. However, JKC has managed to get just five so far.
Lenders also said that they are continuously spending for airport dues and other expenses at the rate of Rs 22 crore a month. They have thus far spent over Rs 350 crore on dues, however NCLAT asked them to transfer the airline to JKC in 90 days ignoring all this.
However, senior advocate Mukul Rohatgi, who appeared for JKC, vehemently denied these allegations. According to Rohatgi, JKC never availed the offer made by the lenders since they were anyway supposed to make a payment of Rs 350 crore. Rohatgi also argued that JKC has spent Rs 700 crore so far in trying to revive the airline despite the lenders objecting to every move they make.
On March 12, the NCLAT upheld the transfer of ownership of the grounded airline to JKC. The National Company Law Tribunal (NCLT) had already permitted the transfer of ownership to JKC back in January last year.
The appellate tribunal further directed the lenders to effect the transfer in 90 days, while asking JKC to obtain an air operator's certificate with in this window.
JKC and the lenders of Jet Airways have been engaged in a legal tussle over the transfer of ownership of the airline to the successful bidder for over a year. In January, the Supreme Court, while refusing to interfere in other issues, had set aside the order of the NCLAT permitting JKC to adjust Rs 150 crore from its bank guarantee.
Jet Airways was grounded in 2019 amid mounting financial vows. State Bank of India (SBI), its largest lender, initiated insolvency proceedings against the company before NCLT Mumbai, and the company was subsequently admitted to the resolution process.
In 2021, the consortium—comprising UAE-based non-resident Indian Murari Lal Jalan and Florian Fritsch, who holds shares in Jet Airways through his Cayman Islands-based investment holding company Kalrock Capital Partners Ltd—had emerged as the successful bidder to revive the airline.
While JKC had claimed that the lenders have not begun the process of transferring ownership of the airline, the lenders argued that JKC had not infused any funds into Jet Airways. In February 2023, the lenders approached the NCLAT against the NCLT’s order on the transfer of ownership. The NCLAT, however, refused to issue any injunction in favour of the lenders on the issue.
As part of the resolution process of Jet Airways, the CoC for Jet Airways and JKC were also asked to sell three Boeing 777-300 aircraft of the grounded Jet Airways. The Malta-based Challenge Group, which had successfully bid for and executed Letters of Intent to purchase 3 B777-300 aircraft from Jet Airways in October 2022, through its special purpose vehicle Ace Aviation.
However, the sale of the aircraft was not completed and two years after the company signed the deal with the monitoring committee of Jet Airways to take possession of the three aircraft based in Mumbai, there has been no headway. This is despite orders from three courts, including the Supreme Court, to hand over the possession of the planes to the Challenge Group.
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