New Delhi: In a major development in the Jet Airways insolvency saga, the Supreme Court on Thursday ordered the grounded airline’s liquidation, forfeiture of Rs 200 crore infused by successful bidder Jalan Kalrock Consortium and permitted the lenders led by SBI to encash Rs 150 crore performance bank guarantee.
Invoking its extraordinary powers under Article 142 of the Constitution, a bench comprising Chief Justice D Y Chandrachud and Justices J B Pardiwala and Manoj Misra put the curtains down on the insolvency proceedings of the airlines by setting aside the order of the National Company Law Appellate Tribunal (NCLAT).
The bench termed the case as an “eye opener” and rapped NCLAT for allowing adjustment of performance bank guarantee (PBG) in view of payment of the first tranche by Jalan Kalrock Consortium (JKC).
Insolvency appellate tribunal NCLAT had allowed JKC to take over Jet Airways without fully complying with its payment obligations, it observed.
“The impugned order of the NCLAT directing the SRA (successful resolution applicant) to adjust PBG of Rs 150 crore against first tranche of payment of Rs 350 crore was in flagrant disregard of the order of this court…,” it said.
Pronouncing judgement for the bench, Justice Pardiwala allowed the plea of SBI and other creditors against the NCLAT decision that upheld the resolution plan of Jet Airways in favour of JKC.
The apex court, as a result, allowed the appeals of the lenders and set aside the NCLAT order.
“In the peculiar and alarming circumstances as discussed in this judgement, and also keeping in mind the fact that almost five years have elapsed since the resolution plan was duly approved by the NCLT (National Company Law Tribunal) and there being no progress worth the name, we are left with no other option but to invoke our jurisdiction under Article 142 of the Constitution and direct to the corporate debtor be taken in liquidation,” held the bench.
Article 142 of the Constitution gives top court the power to make orders and decrees to ensure complete justice in any matter or cause pending before it.
The bench ordered that requisite steps be taken for commencement of liquidation process of the grounded airline and “the amount of Rs 200 crore already infused by the SRA stands forfeited”.
“The lender creditors are further permitted to encash the performance bank guarantee of Rs 150 crores furnished by the SRA,” it added.
It held that the NCLAT’s approval of adjusting the performance bank guarantee as a partial payment was in “flagrant disregard” of an earlier directive of the top court, as well as the terms of the resolution plan and established principles under the Insolvency and Bankruptcy Code.
It noted in addition to non-payment of the initial tranche, JKC, represented by advocates Debmalya Banerjee and Kartik Bhatnagar of Karanjawala & Co., had not cleared other crucial dues, including corporate insolvency resolution process costs and employee dues.
“The litigation has been an eye-opener on multiple issues, including NCLAT’s functioning,” Justice Pardiwala noted, stressing that JKC’s failure to implement the resolution plan triggered provisions of the IBC that necessitate liquidation.
It emphasised that timely compliance with resolution plans is fundamental to the IBC’s purpose, which prioritises swift and effective resolution for distressed companies.
“We have no doubt in our mind that the NCLAT acted contrary to the settled legal principles and went to the extent of drawing wrong inferences from true facts while deciding the matter,” it said.
On the first issue, the top court concluded that the performance bank guarantee of Rs 150 crore could not have been adjusted against the first tranche payment of Rs 350 crore, which was to be made by the SRA under the resolution plans.
“The IBC is clear in its intention that PBG shall not be set off or used as a part of the consideration that was to be given by the SRA under the plan,” it said.
“We arrived at the findings that this SRA failed to implement the resolution plan by not depositing the first tranche of payment…,” it said.
The NCLAT on March 12 upheld the resolution plan of the grounded air carrier and approved the transfer of its ownership to JKC. The SBI, Punjab National Bank and JC Flowers Asset Reconstruction Private Limited challenged the NCLAT verdict.
The appellate tribunal had further directed the Jet Airways monitoring committee to complete the transfer of ownership within 90 days. Besides, the NCLAT had also directed the lenders of Jet Airways to adjust Rs 150 crore paid by the consortium as performance bank guarantee.
The banks had said the JKC failed to meet its financial obligations, including the infusion of Rs 350 crore within the stipulated 180-day period from the effective date under the resolution plan.
Jet Airways, which has remained grounded since April 2019, had in September, 2023 said the new proposed promoters — the Jalan-Kalrock consortium — had completed an additional infusion of Rs 100 crore into the carrier.
The airline had also said it was looking to re-launch operations from 2024.
After grounding in 2019 owing to a severe liquidity crisis at that time, the full-service carrier underwent an insolvency resolution process.
However, it was having a dispute with the lender. In 2021, JKC emerged as the successful bidder of Jet Airways.
