K Srinivasan
ON November 7, the Supreme Court ordered the liquidation of Jet Airways after concluding that the National Company Law Appellate Tribunal’s (NCLAT) ruling violated the apex court’s judgment of January 2023. The verdict was a follow-up of several appeals, including from lenders challenging the NCLAT’s approval of the airline’s takeover by a consortium comprising UK’s Kalrock Capital and UAE-based businessman Murari Lal Jalan that had emerged as Successful Resolution Applicant (SRA).
No other option
While allowing appeals by the lenders, including the State Bank of India, its largest lender, a Bench of Chief Justice DY Chandrachud and Justices JB Pardiwala and Manoj Misra said: “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 asked the National Company Law Tribunal (NCLT), Mumbai, “to take appropriate steps for appointment of liquidator and all other necessary formalities for the commencement of liquidation of the corporate debtor’’
The court’s view that the case was an ‘eye-opener’ that spelt out important lessons for India’s Insolvency and Bankruptcy Code (IBC) is spot on. According to the resolution plan, SRA was to pay Rs 4,783 crore and infuse Rs 350 cr as the first tranche. The deadline for infusing Rs 350 cr was subsequently extended. In January this year, the SC had set aside the NCLAT’s decision to allow the SRA to adjust the first tranche of payment of Rs 350 crore against a Performance Bank Guarantee (PBG), given as security.
Payment failure
As the SC said in its final judgement “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.”
The SC Bench further said, “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.”
According to CNBC TV 18, Jet Airways has 11 aircraft parked in Mumbai, Delhi and Hyderabad. This includes several Boeing 777s. A single aircraft will not cost less than Rs 3,000 crores. And all the aircraft in their present condition even at scarp value should easily fetch over Rs 2000 crore. That apart, office space and other items could fetch several hundred crores.
So how has dragging the resolution process for so long helped in the cause of recovery of funds for the lenders? In 2022, Ace Aviation, a Malta-based company and subsidiary of the Challenge Group, had successfully bid for the three Jet Airways Boeing 777s. However, it was unable to acquire the aircraft as the sale was blocked. That is one issue that is still in limbo.
The judgment is a stunning commentary on how the NCLT is operating across the country. Rather than act as a dynamic platform to help companies resuscitate and come back to life, it has become a pedantic bureaucratic institution where retired officials have a cosy sinecure with the health of a company or the predicament of the lenders being of really no consequence.
