In a landmark decision on Thursday, the Supreme Court of India invoked its powers under Article 142 to overturn a tribunal’s ruling and order the liquidation of Jet Airways, after the Jalan-Kalrock Consortium failed to fully pay creditors. The court emphasized the “peculiar and alarming” circumstances of the case and pointed to the improper execution of the resolution plan.
Court Criticizes Tribunal for Approving Plan Without Full Payments
The Supreme Court ruled that the transfer of ownership to the Jalan-Kalrock Consortium (JKC) without fulfilling its financial obligations was unacceptable. The creditors, including major banks like State Bank of India (SBI) and Punjab National Bank (PNB), had appealed the decision, arguing that the consortium had failed to pay an initial ₹350 crore as part of the approved resolution plan. Despite this, the National Company Law Appellate Tribunal (NCLAT) had previously upheld the resolution plan in March.
Liquidation Seen as Best Option for Creditors and Stakeholders
The Court underscored that liquidation should be a last resort for creditors, but with the resolution plan now deemed unviable, it ruled that liquidation would be the best course of action. Chief Justice DY Chandrachud, along with Justices JB Pardiwala and Manoj Misra, highlighted that the interests of creditors, employees, and other stakeholders needed to be prioritized. In their ruling, they said, “Liquidation must be available to lenders as a last resort… since resolution plan is no longer capable of implementation.”
₹200 Crore Infused by JKC to Be Forfeited
The Court’s decision also included the forfeiture of the ₹200 crore that was already infused into Jet Airways by the Jalan-Kalrock Consortium. Additionally, the NCLAT’s Mumbai Bench has been directed to appoint a liquidator to oversee the winding-up process.
Timeline of Events: Jet Airways and the Jalan-Kalrock Consortium
Jet Airways, once a prominent airline in India, was grounded in April 2019. After a prolonged battle, the Jalan-Kalrock Consortium, led by Murari Jalan and Florian Fritsch, secured the bid for ownership in 2021. However, since then, multiple legal and financial hurdles have delayed the execution of the resolution plan, leading to its eventual failure to meet the required payments.
NCLAT’s Role in Controversial Decision
The NCLAT’s controversial decision in March to approve the transfer of ownership was challenged after JKC failed to make the agreed payments. Initially, JKC was required to pay ₹4,783 crore as part of the plan, but only ₹200 crore was paid, which the court ruled insufficient to sustain the plan’s implementation.
Plea for Escrow Account Withdrawn by JKC
In May, JKC sought permission from the NCLAT to place the ₹200 crore into an escrow account for further use. However, this plea was withdrawn after the tribunal denied the request, citing the ongoing Supreme Court hearing. This withdrawal marked a significant moment in the legal battle.
Financial Delays Continue at Jet Airways
In addition to the legal challenges, Jet Airways faced significant financial delays. In May 2023, the airline announced a delay in releasing its financial results for the quarter and fiscal year ending March 2023. The monitoring committee set up to oversee the resolution plan’s implementation also faced obstacles, further complicating the airline’s revival efforts.
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