Supreme Court orders liquidation of Jet Airways. Sets aside transfer of ownership to little-known firm JKC

Jet Airways goes into liquidation

The Supreme Court of India on Thursday ordered the liquidation of defunct airline Jet Airways and quashed the sale of shares to Jalan Kalrock Consortium (JKC) as part of the insolvency process. The apex court’s order came on petitions filed by the State Bank of India (SBI) and other lenders pointing out the non-compliance by the new owner JLC, who acquired the debt-ridden Jet Airways, promoted by Naresh Goyal, now facing a series of bank fraud cases.

The Bench of Chief Justice of India D Y Chandrachud and Justices JB Pardiwala and Manoj Misra set aside the order of the National Company Law Appellate Tribunal (NCLAT) which had upheld the transfer of ownership of the airline to Jalan Kalrock Consortium (JKC) as part of the Corporate Insolvency Resolution Process (CIRP). The top court said that the NCLAT order was perverse as it misled evidence on record since the performance bank guarantee of Rs.150 crores could not have been adjusted against the payment of Rs.350 crores.

“Non-payment and non-compliance led to the failure of resolution. NCLAT acted against settled legal principles,” the Bench observed, adding that JKC, the successful resolution applicant (SRA), contravened the terms of the resolution plan and the same cannot be implemented.

“We hold that the successful resolution applicant (SRA) has contravened the terms of the resolution plan and the corporate debtor is directed to be taken into liquidation. The fundamental concern is not only to do substantial justice but also to bring speedy disposal of disputes. The determination of the resolution plan has been contravened. Since the resolution plan is not possible to be implemented we have to ensure that liquidation remains an option for the corporate creditor,” the judgment stated.

Supreme Court directed the National Company Law Tribunal in Mumbai (NCLT) to appoint a liquidator immediately to carry out the liquidation. “Thus we exercise plenary powers and direct that corporate debtor is taken into liquidation. Appeals succeed. NCLAT order set aside. In peculiar and alarming circumstances since 5 years passed since NCLAT cleared the resolution plan, thus under Article 142, we direct corporate debtor is taken into liquidation, and Rs.200 crore stands forfeited. Lenders are permitted to encash the performance bank guarantee. NLCT Mumbai to appoint liquidator forthwith,” the Court said in its order. The verdict came in the case regarding the dispute over the ownership of Jet Airways between JKC and a number of the airline’s lenders led by the State Bank of India (SBI).

Jet Airways started by Naresh Goyal in the early 90s was involved in a series of controversies and support from all Governments and many top political leaders, cutting across political lines. Till 2015, Jet Airways was considered the top airline company in India due to its political patronage. Jet Airways Naresh Goyal bagged many plum controversial contracts with Etihad due to the support of the government, violating many norms in the aviation sector. Jet Airways was grounded in 2019 due to severe financial troubles. State Bank of India (SBI), its largest lender, initiated insolvency proceedings against the company before the NCLT in Mumbai, leading to the CIRP. In 2021, a little-known firm JKC emerged as the successful bidder for the airline’s revival.

The NCLT approved its resolution plan and granted approval for the ownership transfer to JKC subject to certain conditions. The little-known firm JKC was required to pay over Rs.8,000 crore to the lenders over time from the revenue generated by operating Jet Airways. However, disputes arose between the lenders and JKC over the fulfillment of the conditions precedent, as a result of which the airline’s ownership was not transferred to the latter.

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