DELHI- In a major blow to India’s aviation sector, the Supreme Court has ordered the liquidation of the Naresh Goyal founded and currently bankrupt Jet Airways airline today (November 7, 2024).
The court found that the successful bidder, the Jalan Kalrock Consortium (JKC), failed to comply with the conditions of the resolution plan, marking the final chapter in the airline’s long struggle to revive itself.
Jet Airways Liquidation Order
Exercising its powers under Article 142 of the Constitution, the Supreme Court decided to liquidate Jet Airways after noting that JKC had not fulfilled key obligations. These included infusing the first tranche of ₹350 crore, paying worker dues, and settling essential costs like airport dues.
The court also set aside the March 2024 order of the National Company Law Appellate Tribunal (NCLAT), which had upheld the transfer of ownership to JKC. The Supreme Court criticized the NCLAT for disregarding its previous rulings and for allowing the order in favor of JKC without fully examining the facts.
The Supreme Court concluded that liquidation was the only viable option through which creditors could recover some of their dues. Justice J.B. Pardiwala, who pronounced the ruling, remarked that this case served as an eye-opener for the functioning of insolvency tribunals and India’s Insolvency and Bankruptcy Code (IBC).
The verdict came on a plea by lenders led by the State Bank of India, who had challenged the National Company Law Appellate Tribunal’s (NCLAT) March order upholding the transfer of the airline’s ownership to the Jalan Kalrock Consortium (JKC).
The three-judge Supreme Court bench, comprising Chief Justice D.Y. Chandrachud, Justice J.B. Pardiwala, and Justice Manoj Misra, reserved the judgment on October 16. The lenders argued that JKC’s resolution plan was “unworkable” and urged the court to use its inherent powers under Article 142 of the Constitution to liquidate the airline.
Article 142 allows the Supreme Court to pass any order necessary for ‘complete justice’ in a case, even if such a ruling is not within the scope of existing laws or procedures. The court ultimately concluded that liquidation was the only viable option for creditors to recover a portion of their dues.
Bidder Failed to Revive Private Airline
The Jalan Kalrock Consortium, comprising UAE-based non-resident Indian Murari Lal Jalan and Florian Fritsch, had emerged as the successful bidder to revive Jet Airways. However, the consortium’s resolution plan encountered significant delays in execution, leading to a prolonged legal battle with the lenders that spanned over five years.
Jet Airways, founded by Naresh Goyal (under investigation for money laundering), went bankrupt in April 2019 and suspended its flight operations due to financial troubles.
The JKC’s resolution plan had promised an infusion of funds, clearance of creditors’ dues, and the revival of flight operations. However, the consortium was unable to fulfill the key obligations outlined in the plan, leading to the Supreme Court’s decision to liquidate the airline.
When dispute Start?
The dispute first reached the Supreme Court in January 2024, when the court directed JKC to deposit ₹150 crore by January 31, 2024, warning of “serious consequences” if the payment was not made.
The court at the time set aside an earlier order from the National Company Law Appellate Tribunal (NCLAT) that had instructed JKC to submit a ₹150 crore performance bank guarantee to fulfill the total ₹350 crore obligation under the resolution plan.
Despite the Supreme Court’s intervention, the NCLAT, in its final order in March 2024, upheld the transfer of Jet Airways’ ownership to the JKC.
The appellate tribunal set a 90-day deadline for the lenders to complete necessary formalities, including the transfer of ownership, securing an air operator certificate, and resuming operations. The NCLAT also instructed the lenders to secure three Dubai-based properties belonging to Jet Airways, which were meant to act as collateral for the ₹350 crore payment.
However, the lenders, led by the State Bank of India, remained dissatisfied with the progress and moved the Supreme Court to challenge the NCLAT’s March 2024 order.
Lenders Forced the Liquidation?
The lenders, represented by Additional Solicitor General N. Venkataraman, accused the JKC of depositing only ₹200 crore of the ₹350 crore first tranche, falling short of the ₹150 crore required under the court’s earlier order.
The delay in finalizing the ownership process had led to monthly losses of ₹22 crore in maintaining Jet’s assets, while the airline still owed approximately ₹7,500 crore to its creditors.
Additionally, the lenders raised concerns about JKC’s failure to cooperate with an investigation into the source of the ₹200 crore payment, after Florian Fritsch, JKC’s co-founder, faced fraud and money laundering charges in Europe.
Venkataraman argued that this was “a case of gross abuse of the Insolvency and Bankruptcy Code process,” emphasizing that the code is meant to facilitate genuine takeovers, not be abused.
He stressed that the committee of creditors, which includes over 30 banks, would be burdened with ₹1,100 crore in airport dues, and that neither the creditors nor the employees would see any recovery, rendering the resolution plan unworkable.
In response, JKC’s counsel, senior advocate Mukul Rohatgi, defended the consortium, accusing the lenders of deliberately stalling the revival of Jet Airways to push the airline into liquidation.
Rohatgi argued that the lenders were more interested in selling Jet’s assets as scrap to maximize their returns than cooperating with JKC to revive the airline.
Feature Image by Clément Alloing | Flickr
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