Supreme Court directs liquidation of Jet Airways under Insolvency and Bankruptcy Code | Business News
The Supreme Court Thursday ordered the liquidation of Jet Airways under the Insolvency and Bankruptcy Code (IBC) exercising its extraordinary powers under Article 142 of the Constitution.
Allowing appeals by the lenders, including the State Bank of India (SBI), its largest lender, a bench of Chief Justice of India D Y Chandrachud and Justices J B Pardiwala and Manoj Misra set aside the order of the National Company Law Appellate Tribunal (NCLAT) allowing transfer of ownership of the airline in accordance with the Corporate Insolvency Resolution Process in which Jalan KalRock Consortium (JKC) had emerged as the Successful Resolution Applicant (SRA).
The bench noted that though the resolution plan was approved almost five years ago, there has been no forward movement on it.
“In the peculiar and alarming circumstances as discussed in this judgment and also keeping in mind the fact that almost five years have elapsed since the Resolution Plan was duly approved by the NCLAT 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 that the corporate debtor be taken in liquidation,” the bench said and asked the National Company Law Tribunal (NCLT), Mumbai, “to take appropriate steps for appointment of liquidator and all other necessary formalities for commencement of liquidation of the corporate debtor”.
SRA, according to the resolution plan, was to pay Rs 4,783 crore and infuse Rs 350 crore as the first tranche of the payment. The deadline for infusing the Rs 350 crore was subsequently extended.
On January 18, 2024, the Supreme Court set aside NCLAT’s decision to allow JKC to adjust the first tranche of payment of Rs 350 crore against a Performance Bank Guarantee (PBG), given as security by the lenders.
Thursday, the Supreme Court said “the SRA herein has failed to infuse the first tranche payment of Rs 350 crore as envisaged in the Resolution Plan despite the Effective Date being fixed on 20.05.2022. As a consequence, the payment of CIRP costs, workmen and employees’ dues etc. which must be made in priority over the dues of the other creditors have also not been made. More than 5 years have passed and the implementation of the Resolution Plan still seems to be a dim light at the far end of a long tunnel. Over this period of 5 years, several dues such as the Airport dues to be paid by the Corporate Debtor have increased multifold due to the fault of the SRA and this Court must ensure that such debts stop running at some point in time”.
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The Supreme Court bench said that “although one of the key objectives of the IBC, 2016 is to ensure the survival of the corporate debtor as a going concern, yet the same must not come at the cost of efficiency. In scenarios such as the present, “timely liquidation” is indeed preferred over an “endless resolution process”.
Such a view will prevent the likelihood of adversely affecting the interests of all the creditors who have been suffering due to no fault of their own and also securing the maximisation of value of the remaining assets.”
The Supreme Court termed the NCLAT order allowing JKC to adjust the first tranche of payment of Rs 350 crore against the PBG was “perverse and unsustainable in law” and “has led to further complications”.
The Supreme Court bench pointed out that the bank guarantee has to be kept alive till the resolution plan is completed and forfeiting it would be in breach of the plan.
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Amid mounting financial woes, the SBI initiated insolvency proceedings against Jet Airways before NCLT, Mumbai, in 2019, after which the company was admitted to the resolution process.
In 2021, JKC emerged as the successful resolution applicant to re-commence the operations of the airline.
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