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Informist, Thursday, Nov. 7, 2024

 

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--SC: Jalan-Kalrock consortium failed to implement Jet Air resolution plan 
--CONTEXT: SC on Jet Air lenders' plea against transfer of Jet Air ownership 
--SC orders liquidation of Jet Airways 
--SC: NCLT to appoint liquidator for Jet Airways 

 

NEW DELHI – The Supreme Court on Thursday ordered liquidation of the debt-ridden Jet Airways (India) Ltd. after UK's Kalrock Capital and United Arab Emirates-based entrepreneur Murari Lal Jalan failed to implement the resolution plan. The top court set aside the National Company Law Appellate Tribunal order for the takeover of Jet Airways (India) Ltd. by the Jalan-Kalrock consortium.

 

"We hold that the successful resolution applicant has contravened the terms of the resolution plan and the corporate debtor is directed to be taken into liquidation," said the Bench led by Chief Justice of India D.Y. Chandrachud. The fundamental concern is not to do substantial justice but to also bring speedy disposal of disputes, said the court. "Since the resolution plan is not possible to be implemented, we have to ensure that liquidation remains an option for the corporate creditor. Thus, we exercise plenary powers and direct that the corporate debtor is taken into liquidation," said the Bench, also comprising Justice J.B. Pardiwala and Justice Manoj Misra. 

 

In peculiar and alarming circumstances and as three years have passed since the resolution plan was cleared, the top court used its powers under Article 142 of the Constitution to direct Jet Air to be taken into liquidation and INR 2 billion by the consortium stood forfeited. Lenders have been permitted to encash the performance bank guarantee of INR 1.50 billion. The Mumbai bench of the National Company Law Tribunal will appoint a liquidator forthwith, said the court.

 

The Bench said that the appellate tribunal allowing Jalan-Kalrock consortium to adjust the performance bank guarantee of INR 1.50 billion for its first tranche of payment of INR 3.50 billion was in "in flagrant disregard" of the top court's order of January 2023. In January, the top court had asked the Jalan-Kalrock consortium to deposit INR 1.50 billion into a designated account of State Bank of India, failing which consequences under the resolution plan would take place. On Thursday, the top court said that the appellate tribunal acted against the "settled legal principles". 

 

The top court said that the performance bank guarantee was to be kept alive. The contention of the consortium that adjustment of payment was permissible under the resolution plan must be rejected, said the court. "We have held that the successful resolution applicant has failed to implement the resolution plan by not being able to infuse the first tranche payment," said the court. The consortium has also breached clause 6.2 of the resolution plan which required payment of the minimum due of workmen, the court added.

 

Lenders, led by State Bank of India, contended that the consortium had failed to meet the conditions for the takeover of the airline and was 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 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.

 

Lenders said that even the final opportunity given by the apex court in January to pay INR 1.50 billion was not availed by the consortium, which intentionally failed to honour the order passed by the top court, by not depositing the amount. 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.

 

Appearing for the consortium, Advocate Mukul Rohatgi had 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 had said they have obstructed the process at every stage, causing the consortium to incur losses of more than INR 6 billion. 

 

Advocate Gopal Sankaranarayanan, appearing 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 1306 IST, the shares of Jet Air traded 5.0% lower at INR 34.16 rupees on the National Stock Exchange, and those of State Bank of India traded 0.4% higher at INR 858.50 rupees.  End

 

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

 

Reported by Surya Tripathi

Edited by Akul Nishant Akhoury

 

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