Jet Airways Insolvency: Supreme Court Reserves Judgment on SBI’s Plea Against Jalan Kalrock Consortium’s Ownership Transfer

In a significant development for India’s aviation sector, the Supreme Court on October 16 reserved its judgment on the ownership dispute surrounding the grounded Jet Airways. This comes after a prolonged legal battle between the airline’s lenders, led by the State Bank of India (SBI), and the Jalan Kalrock Consortium (JKC), the successful bidder in Jet Airways’ insolvency resolution process. The court’s decision will determine whether JKC will retain ownership of the airline or whether Jet Airways will be pushed into liquidation, marking a critical juncture for the struggling airline.

The Dispute: Lenders vs. Jalan Kalrock Consortium

The core issue in the dispute is JKC’s alleged failure to meet financial obligations laid out in the court-approved resolution plan. Under the plan, JKC was expected to infuse ₹350 crore as the first tranche of its payment, part of a total ₹4,783 crore commitment. The lenders argue that this payment has not been fulfilled, prompting SBI to call for the liquidation of Jet Airways.

On the other hand, JKC maintains that it has already invested ₹200 crore and raised an additional ₹150 crore through a performance bank guarantee (PBG), which the lenders have yet to fully account for. JKC also questions the lenders’ handling of the resolution process and insists that it is ready to revive Jet Airways and resume operations.

Supreme Court Hearings

The bench, headed by Chief Justice DY Chandrachud, along with Justices JB Pardiwala and Manoj Misra, heard arguments from both sides. The Additional Solicitor General (ASG) N Venkataraman, representing the SBI, stressed that JKC had failed to meet its obligations within the stipulated timeline. The ASG also argued that allowing JKC to adjust the ₹150 crore PBG against its obligations was legally incorrect and violated the terms of the resolution plan.

Senior advocates Mukul Rohatgi and Gopal Sankaranarayanan, representing JKC, contended that the lenders were trying to selectively interpret previous court orders to push for liquidation. They emphasized that JKC had fulfilled its commitments and warned that liquidation would jeopardize the ₹200 crore already invested by the consortium.

Timeline of Events

Jet Airways has been grounded since April 2019 after a severe liquidity crisis forced it to cease operations. In June 2021, the National Company Law Tribunal (NCLT) approved JKC’s resolution plan, which included an infusion of funds, clearance of creditors’ dues, and the revival of flight operations.

However, the implementation of the resolution plan has been fraught with delays and disputes. In March 2024, the National Company Law Appellate Tribunal (NCLAT) allowed the ownership transfer of Jet Airways to JKC but also permitted the adjustment of the ₹150 crore PBG against the outstanding tranche of ₹350 crore. This decision was challenged by the lenders, leading to the ongoing legal battle in the Supreme Court.

Key Arguments from Both Sides

SBI’s Position:

• SBI, as the lead lender, has argued that JKC failed to meet the financial requirements, including the infusion of ₹350 crore, within the stipulated 180-day period.
• The lenders are shedding ₹22 crore monthly to maintain Jet Airways’ operations and claim that JKC’s non-compliance constitutes a valid reason for liquidation under Article 142 of the Constitution.
• The ASG also highlighted that dues amounting to ₹289 crore owed to Jet Airways’ workmen have yet to be cleared, further justifying their push for liquidation.

JKC’s Defense:

• JKC argues that it has complied with the terms of the resolution plan, having already raised ₹200 crore, and should be given the opportunity to revive Jet Airways.
• The consortium questions the lenders’ demand for liquidation, pointing out that a substantial amount has already been invested, and liquidation would result in the loss of these funds.
• Senior advocate Gopal Sankaranarayanan noted that the January 18 Supreme Court order should be considered in full and not selectively interpreted to suit the lenders’ liquidation agenda.

Possible Outcomes

The Supreme Court’s judgment, expected soon, will have far-reaching implications for Jet Airways and the broader aviation industry. The court could take several approaches:

1. Uphold JKC’s Ownership Transfer: If the court sides with JKC, it would allow the consortium to complete its revival plans for Jet Airways. This would likely involve securing additional funds and settling the remaining dues to creditors.
2. Order Liquidation: Alternatively, if the court finds JKC in breach of its financial commitments, it could order the liquidation of Jet Airways. This would mark a major setback for the consortium and could lead to the airline’s assets being sold off to repay creditors.
3. New Resolution Plan: The court might also opt for a middle ground by setting aside JKC’s ownership bid and inviting fresh bids for Jet Airways under a revised resolution plan.

Impact on India’s Aviation Sector

The outcome of the case will be closely watched by industry experts, as it will highlight the effectiveness of India’s Insolvency and Bankruptcy Code (IBC) in handling airline insolvencies. A liquidation would raise questions about the adequacy of the current legal framework to facilitate the revival of financially distressed airlines, especially in a post-pandemic world where the aviation sector has faced significant challenges.

If the court allows JKC to proceed with its revival plan, Jet Airways could potentially return to the skies by 2024, offering hope for a resurgence of the full-service carrier. However, the airline will face tough competition from low-cost carriers like IndiGo and the newly revitalized Air India.

 

The Supreme Court’s upcoming judgment will be pivotal in determining the future of Jet Airways. Whether the court upholds JKC’s ownership or pushes the airline into liquidation, the decision will shape the course of the airline’s fate and provide a crucial test for India’s insolvency laws. The aviation industry awaits the verdict, which could pave the way for either a revival or an end to the Jet Airways saga.