SC orders liquidation of Jet Airways as revival plan fails
What's the story
The Supreme Court of India has ordered the liquidation of Jet Airways, bringing an end to a long-standing bankruptcy saga and the battle over the airline's revival. The apex court found that the Jalan Kalrock Consortium (JKC), which had won the bid for the airline, did not meet key conditions of their resolution plan. The decision was taken using special powers under Article 142. Jet Airways, founded by Naresh Goyal, went bankrupt in April 2019.
Unfulfilled obligations
JKC failed to meet resolution plan conditions
The Supreme Court observed that JKC had failed to meet important commitments mentioned in the resolution plan. These were infusing an initial tranche of ₹350 crore, paying worker dues, and paying necessary expenses like airport dues. The court also set aside an earlier order of the National Company Law Appellate Tribunal (NCLAT) which had approved the transfer of ownership to JKC.
Tribunal's oversight
Supreme Court criticizes NCLAT's decision
The Supreme Court slammed the NCLAT for ignoring its earlier judgments and permitting the order in favor of JKC without properly considering the facts. The court held that liquidation was the only practical way for creditors to get back some of their dues. Justice JB Pardiwala, who pronounced the ruling, said this case was a wake-up call for insolvency tribunals and India's Insolvency and Bankruptcy Code (IBC).
IBC scrutiny
Liquidation raises questions about IBC's effectiveness
The liquidation of erstwhile leading Indian airline Jet Airways also begs larger questions about the efficacy of the current IBC framework in dealing with airline insolvencies. This comes as another airline, Go First, also couldn't revive and filed for liquidation. The incidents are further fueling concerns over the feasibility of airline restructurings under the IBC.
Plan dispute
Lenders challenge JKC's resolution plan
The verdict was pronounced on a plea by lenders led by the State Bank of India (SBI), who had challenged the NCLAT's March order upholding the airline's ownership transfer to JKC. The consortium—UAE-based non-resident Indian Murari Lal Jalan and Florian Fritsch (who owns shares in Jet Airways through his Cayman Islands-based investment holding company Kalrock Capital Partners Ltd)—had won the bid to revive Jet Airways.
Accusations
Lenders accuse JKC of stalling revival efforts
The lenders contended that JKC's resolution plan was "unworkable" and requested the court to invoke its inherent powers under Article 142 to liquidate Jet Airways. While JKC claimed ownership of the airline and said it was doing everything possible to restart operations, the lenders alleged that the consortium was deliberately delaying efforts and driving Jet Airways closer toward liquidation.