SC orders liquidation of Jet Airways under Insolvency and Bankruptcy Code

Exercising its extraordinary powers under Article 142 of the Constitution, the Supreme Court on Nov 7 ordered the liquidation of Jet Airways under the Insolvency and Bankruptcy Code (IBC).

Allowing appeals by the lenders, including the State Bank of India (SBI) – its largest lender, a three-judge bench headed by Chief Justice of India D Y Chandrachud set aside the order of the National Company Law Appellate Tribunal (NCLAT) allowing transfer of ownership of the airline in accordance with the Corporate Insolvency Resolution Process in which Jalan KalRock Consortium (JKC) had emerged as the Successful Resolution Applicant (SRA).

According to the resolution plan, SRA was to pay ₹ 4783 crore and infuse ₹ 350 crore as the first tranche of the payment.

Notably, the Supreme Court on January 18, 2024, set aside NCLAT’s decision to allow JKC to adjust the first tranche of payment of ₹ 350 crore against a Performance Bank Guarantee (PBG), given as security by the lenders.

On Nov 7, the bench also comprising of Justices – JB Pardiwala and Manoj Misra said the NCLAT order allowing JKC to adjust the first tranche of payment of ₹ 350 crore against the PBG was “perverse” and in “flagrant disregard” of its January 18 order.

The court pointed out that the bank guarantee has to be kept alive till the resolution plan is completed and forfeiting it would be in breach of the plan.

The bench ruled that as the resolution plan is not possible to be implemented, the liquidation option has to be kept open. It said SRA had “contravened” the resolution terms, and asked the National Company Law Tribunal (NCLT), Mumbai, to forthwith appoint the liquidator to carry out the liquidation.

Pertinently, amid mounting financial woes, the SBI initiated insolvency proceedings against Jet Airways before NCLT, Mumbai, in 2019, after which the company was admitted to the resolution process. In 2021, JKC emerged as the successful resolution applicant to re-commence the operations of the airline.