DELHI- Jet Airways’ lenders have alerted the Supreme Court that the Jalan-Kalrock Consortium (JKC) failed to fulfill a crucial condition for ownership transfer.
The consortium has not released the complete first tranche of a ₹350-crore deposit, raising concerns about the airline’s future.
Jet Airways End Nears
The State Bank of India-led lenders asserted that JKC has not met any conditions necessary for transferring ownership. This non-compliance strengthens the case for potentially setting aside the bankruptcy resolution plan, which could lead to Jet Airways’ liquidation.
Jet Airways, once a prominent Indian carrier founded by Naresh Goyal, ceased operations in April 2019 due to financial difficulties. The airline’s bankruptcy marked a significant downturn in India’s aviation sector.
The Jalan-Kalrock Consortium, comprising UAE-based non-resident Indian Murari Lal Jalan and Florian Fritsch, emerged as potential saviors. Fritsch holds shares in Jet Airways through Kalrock Capital Partners Ltd, a Cayman Islands-based investment holding company.
On June 22, 2021, the National Companies Law Tribunal approved the consortium’s resolution plan for the airline.
During Thursday’s (September 26, 2024) Supreme Court proceedings, Jet Airways’ lenders argued that JKC had violated a previous court directive. The consortium was required to deposit ₹150 crore to complete the first tranche of ₹350 crore but failed to do so.
Failed to Implement Resolution Plan
Jet Airways’ lenders revealed to the Supreme Court that they have received only ₹200 crore out of the promised ₹4,783 crore outlined in the resolution plan.
The plan stipulates payments over 5 years. The lenders face monthly losses of ₹22 crore while maintaining the airline and its assets. Jet Airways’ total debt to lenders amounts to approximately ₹7,500 crore.
Additional Solicitor General N. Venkataraman, representing the lenders, condemned the situation as a “gross abuse” of the Insolvency and Bankruptcy Code (IBC). He urged the court to clarify that the IBC serves as a genuine facilitator for takeovers, not a tool for exploitation.
The lenders emphasized that the Jalan-Kalrock Consortium (JKC) has failed to meet several crucial preconditions for taking over Jet Airways. These include obtaining an air operator certificate, securing approval from the Directorate General of Civil Aviation (DGCA), and acquiring slot allotments, bilateral rights, and international traffic rights.
JKC has also neglected to pay approximately ₹272 crore in provident fund and gratuity dues to workers.
Furthermore, the lenders reported that JKC has not released three Dubai-based immovable properties offered as security for the ₹150 crore performance bank guarantee.
JKC countered these claims, asserting that the lenders are impeding its takeover of the airline. The consortium stated in September of the previous year that it had injected ₹350 crore equity into Jet Airways, fulfilling its financial commitment as per the court-approved resolution plan.
The Supreme Court will resume hearing the Jet Airways case on October 1. Chief Justice D.Y. Chandrachud’s bench is examining the lenders’ appeal against the National Company Law Appellate Tribunal’s (NCLAT) March ruling.
The NCLAT decision upheld the transfer of Jet Airways’ ownership to the Jalan-Kalrock Consortium (JKC) by approving its resolution plan.
Discrepancies in Money Origin
In March, NCLAT affirmed the National Company Law Tribunal’s (NCLT) January 2023 order permitting ownership transfer. It directed lenders to complete the handover within 90 days, including share transfer and air operator’s certificate acquisition.
NCLAT instructed lenders to secure the three Dubai-based properties within 30 days. Upon securing, lenders were to adjust the ₹150 crore performance bank guarantee, with JKC required to complete the first ₹350 crore tranche payment before ownership transfer.
NCLAT acknowledged JKC’s ₹200 crore contribution towards the ₹350 crore requirement. However, lenders challenged NCLAT’s ruling in the Supreme Court, arguing that the January order mandated a ₹150 crore cash deposit. They contested the earlier NCLAT ruling allowing JKC to submit a bank guarantee.
Lenders previously raised concerns about the ₹200 crore payment source. They claimed JKC was not cooperating with an NCLT-directed investigation into the funds’ origin.
This investigation was prompted after consortium member Florian Fritsch faced fraud and money laundering allegations in Europe.
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