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Informist, Wednesday, Oct. 16, 2024

NEW DELHI – The Supreme Court on Wednesday reserved its verdict on a petition by lenders against the National Company Law Appellate Tribunal's order approving the takeover of Jet Airways (India) Ltd. by a consortium of UK's Kalrock Capital and United Arab Emirates-based entrepreneur Murari Lal Jalan. The top court is set to decide whether to uphold the takeover of Jet Airways, making it the first-ever successful completion of a bankruptcy resolution of an airline in India, or liquidate the airline, a prayer made by the lenders.

The lenders, led by State Bank of India, contend that the consortium has failed to meet the conditions for the takeover of the airline and is no longer in a position to revive the airline. The banks, in their petition, said that in the present case, the total admitted claims of the lenders were INR 78 bln billion and the financial package offered by the Jalan-Kalrock consortium in its resolution plan was INR 47.83 billion, payable in tranches over five years. The first tranche of INR 3.5 billion was required to be paid by Mar. 21, 2022, which has not been paid till date despite several extensions and exclusions granted to the consortium, according to the petition. Further, the resolution plan, approved by the National Company Law Tribunal in June 2021, has failed and banks, till date, have not even received the first tranche of payment from the consortium, the lenders argued.

In January, the top court had asked the Jalan-Kalrock consortium to deposit INR 1.50 billion into a designated account of SBI, failing which consequences under the resolution plan would take place. Admittedly, even this final opportunity was not availed by the consortium, which intentionally failed to honour the order passed by the top court, by not depositing the amount, they argued.

The orders of the appellate tribunal directing the Jalan-Kalrock consortium to belatedly create security by mortgaging their Dubai properties within 30 days of its order, was also not complied with. The lenders said that the appellate tribunal, instead of holding that the consortium had not complied with the resolution plan, had modified the resolution plan.

The appellate tribunal has now directed that the performance bank guarantee of INR 1.50 billion given by Jalan-Kalrock towards implementation of the resolution plan be adjusted towards the first tranche payment, said the lenders. Resultantly, they have been left with no security, the lenders added.

Appearing for the consortium, Advocate Mukul Rohatgi argued that the creditors have delayed the resolution process by raising continuous appeals at every stage of compliance by the consortium. Rohatgi said the conditions precedent were fulfilled as of May 2022, but subsequent delays were caused by the creditors, not the consortium.

Rohatgi said the revival of Jet Airways was a commercial endeavour, subject to various external factors. He argued that the consortium cannot be held solely responsible for delays caused by security clearances and other procedural hurdles. Questioning the conduct of the creditors, Rohatgi said they have obstructed the process at every stage, causing the consortium to incur losses of more than INR 6 billion. 

Advocate Gopal Sankaranarayanan, for the consortium, said that SBI has been allowing companies to flounder. "They (SBI) are the ones who lent thousands of crores to Jet's previous management without obtaining enough security. I am not the bad guy, I am trying to get the company back in the air," said Sankaranarayanan. The airport dues kept piling up because SBI kept dragging this case in the court for the last two years, he added.

Jet Airways has been grounded since 2019 after it filed for bankruptcy amid piling debt. In the insolvency process, the Jalan-Kalrock consortium emerged as the winning bidder to take over the airline in 2021. Thereafter, the case has seen multiple rounds of litigation across various forums over the failure of the consortium to release money on time as well as the failure to get necessary permissions from civil aviation authorities to revive the airline. While the consortium has maintained that it is in a position to implement the revival plan, the lenders termed its claim as akin to "fantasy".

At 1410 IST, shares of Jet Airways were up 1.4% at INR 38.70 on the National Stock Exchange, while shares of SBI were flat at INR 805.30.  End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Reported by Surya Tripathi

Edited by Ashish Shirke

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