Jet Airways Faces Liquidation As Supreme Court Invokes Article 142: What It Means For Creditors

Supreme Court on Thursday ordered the liquidation of Jet Airways, invoking its extraordinary powers under Article 142 of the Constitution. This decision sets aside the National Company Law Appellate Tribunal’s (NCLAT) order that allowed the airline’s ownership transfer to the Jalan-Kalrock Consortium (JKC) without full payment to creditors.

The court cited “peculiar and alarming” circumstances around the unresolved financial obligations and concluded that liquidation was the only viable path to achieving justice for all stakeholders. According to the bench, led by Chief Justice DY Chandrachud and Justices JB Pardiwala and Manoj Misra, “Liquidation must be available to lenders as a last resort… since the resolution plan is no longer capable of implementation.”

Non-Payment Prompts Liquidation Order

The NCLAT had previously upheld the resolution plan on March 12, clearing the ownership transfer of Jet Airways to JKC. However, this was challenged by creditors, including the State Bank of India (SBI) and Punjab National Bank (PNB), following JKC’s alleged failure to pay the initial ₹350 crore required by the resolution plan. Overall, JKC had committed to a total payment of ₹4,783 crore, but incomplete payment led to prolonged delays in the plan’s implementation.

The Supreme Court ruled that the ₹200 crore already invested by JKC would be forfeited and ordered the NCLT’s Mumbai bench to appoint a liquidator immediately to begin the liquidation process for Jet Airways.

Issues with the NCLAT’s Resolution Decision

The Supreme Court’s ruling underscored a strong disapproval of the NCLAT’s decision to proceed with the ownership transfer despite the incomplete payments by JKC. The judgment highlighted that Article 142—allowing the Court to make any order for “complete justice”—was invoked due to the “flagrant disregard” shown by the NCLAT in enforcing the original conditions.

According to the Court, the NCLAT’s decision went against established legal principles and compromised creditors’ rights by enabling JKC’s partial fulfillment of the payment obligations. The court further observed that “the resolution plan’s non-implementation now necessitates liquidation as a measure to uphold creditors’ rights and ensure proper compensation to the workers and stakeholders involved.”

JKC’s Withdrawal from Escrow Proposal

The Jalan-Kalrock Consortium had previously sought permission from the NCLAT to transfer ₹200 crore into an escrow account to facilitate the payment process. However, this proposal was withdrawn in May after the tribunal declined relief, noting that the matter was already under Supreme Court consideration.

Jet Airways, once a prominent player in India’s aviation sector, has been grounded since April 2019. In 2021, JKC, a consortium led by UAE-based businessman Murari Jalan and Florian Fritsch of Kalrock Capital Partners, won the bid for Jet Airways. A monitoring committee was subsequently established to oversee the resolution plan’s execution, but financial complications and legal delays impeded the process.

Future of Jet Airways and Stakeholder Implications

The liquidation of Jet Airways marks a significant chapter in India’s aviation industry. The Supreme Court’s directive aims to settle long-standing financial grievances, ensuring creditors, including SBI and PNB, receive their due payments. Additionally, the forfeited ₹200 crore and Performance Bank Guarantee of ₹150 crore from JKC could help lenders recover part of the airline’s unpaid debts.

This liquidation order also raises questions for Jet Airways’ employees and other stakeholders, who had hoped for the airline’s revival. The Supreme Court’s decision emphasizes the need for adherence to resolution plans and the financial protection of creditors, signaling a firm stance against lapses in payment obligations.

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