NEW DELHI: Hopes of Jet Airways getting fresh wings crashed on Thursday as the Supreme Court ordered its liquidation, with the successful bidder – Jalan Kalrock Consortium – failing to deposit even the first tranche of Rs 350 crore of the Rs 4,783 crore resolution plan for years, thereby burdening SBI-led lenders with huge financial liabilities.
Noting the gross violations of the plan by JKC, comprising UAE-based NRI Murari Lal Jalan and Florian Fritsch, who holds shares in Jet Airways through his Cayman Islands-based investment holding company Kalrock Capital Partners, the SC exercised its rarely-exercised omnibus powers under Article 142 of the Constitution to order liquidation of the unviable airline.
In a 169-page judgment which provided guidelines for future Insolvency and Bankruptcy Code (IBC) proceedings and streamlining the processes before company law tribunals NCLT and NCLAT, the bench accepted arguments of additional solicitor general N Venkataraman and SBI counsel Sanjay Kapur to allow SBI-led lenders’ consortium to forfeit the Rs 250 crore deposited by JKC as well as its Rs 150-crore performance bank guarantee.
No option but to order liquidation, says SC after no progress in Jet revival plan
Writing the judgment for the bench, Justice Pardiwala said, “The amount of Rs 200 crore already infused by SRA (successful resolution applicant in JKC) stands forfeited. Lenders/creditors are further permitted to encash the performance bank guarantee of Rs 150 crore furnished by SRA. We order accordingly.”
The bench said, “In the peculiar and alarming circumstances as discussed in this judgment and keeping in mind the fact that almost five years have elapsed since Resolution Plan was duly approved by 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 Jet Airways be taken in liquidation. The NCLT, Mumbai, shall now take appropriate steps for appointment of liquidator and all other necessary formalities for commencement of liquidation of Jet Airways.”
Faulting NCLAT for allowing JKC to adjust performance bank guarantee of Rs 150 crore to meet the shortfall in deposit of first tranche of Rs 350 crore which was to be made good by May 22, 2022, the bench said for five years, the resolution plan remained in limbo during which period several dues, including airport dues, to be paid by Jet Airways have increased due to the fault of JKC. “The court must ensure that such debts stop running at some point of time,” it said.
The bench said although IBC was enacted to ensure survival of bankrupt entities, 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’,” it said. “Such a view will prevent the likelihood of adversely affecting interests of all creditors who have been suffering due to no fault of their own and securing the maximisation of value of the remaining assets,” the court said.
Rejecting pleas of senior advocates Mukul Rohatgi and Gopal Sankaranarayanan, who appeared for JKC and blamed SBI-led consortium of non-cooperation while seeking more time to fully pay the first tranche, the bench said, “No further extensions or accommodations can be given to JKC in light of multiple opportunities already granted.”
Terming JKC case an eye-opener for the IBC platform, Justice Pardiwala said, “Scrupulous following of the code along with behavioural and ethical discipline is especially required from key participants of IBC who are central to its design, that is the adjudicating authorities, corporate debtors, resolution professionals, committee of creditors, potential and successful SRAs, approved valuers, and liquidators.”