A Landmark Ruling for Jet Airways
In a significant development on Thursday, the Supreme Court of India ordered the liquidation of the grounded airline Jet Airways as part of the ongoing insolvency proceedings under the Insolvency and Bankruptcy Code (IBC). The ruling, delivered by a three-judge bench led by Chief Justice of India D.Y. Chandrachud, overrides the earlier decision of the National Company Law Appellate Tribunal (NCLAT), which had approved a resolution plan for Jet Airways in favor of the Jalan Kalrock Consortium (JKC).
The Supreme Court’s decision came after the State Bank of India (SBI), along with other creditors, challenged the NCLAT’s approval of the resolution plan, arguing that the plan had been violated and could not be implemented.
NCLAT’s Decision Overturned
The apex court found that the NCLAT had misinterpreted the evidence in the case, particularly regarding the performance bank guarantee of Rs 150 crore that was wrongly adjusted against the payment of Rs 350 crore. Justice J.B. Pardiwala, who authored the judgment, stated that the NCLAT’s order was “perverse” and unsustainable in law. The court emphasized that the resolution plan, as outlined by JKC, had contravened the terms of the agreement, making it impossible to implement.
“Since the resolution plan is not possible to be implemented, we have to ensure that liquidation remains an option for the corporate creditor,” said the bench in its ruling.
Liquidation Ordered Under Article 142
The Supreme Court invoked its powers under Article 142 of the Constitution, a provision that allows the court to make orders to ensure complete justice in matters before it. The court directed that Jet Airways be liquidated immediately and that the lenders be allowed to encash the Rs 150 crore performance bank guarantee furnished by the Jalan Kalrock Consortium. The NCLT in Mumbai is now tasked with appointing a liquidator and carrying out the necessary procedures for liquidation.
The Supreme Court’s decision comes nearly five years after Jet Airways was grounded in 2019 due to severe financial troubles, with SBI, its largest creditor, initiating insolvency proceedings against the airline.
Complications and Delays in the Resolution Plan
The court also noted the delays and complications that had arisen since the resolution plan was first approved by the NCLAT in 2021. The approved plan aimed to revive the airline, but the lack of progress in executing the plan led to further legal challenges. “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,” Justice Pardiwala stated.
As a result of the ruling, the Rs 200 crore already infused by the successful resolution applicant (SRA) — the Jalan Kalrock Consortium — will now be forfeited.
The Way Forward for Jet Airways
With Jet Airways now on the path to liquidation, the airline’s future remains uncertain. The legal proceedings, which have dragged on for years, reflect the challenges involved in reviving a major airline amid financial and operational hurdles. The liquidation process will involve the sale of Jet Airways’ assets to repay creditors, but the airline’s employees and stakeholders are still left with the uncertainty of what the liquidation will ultimately mean for them.
Government Recommendations for NCLT and NCLAT Reforms
In its judgment, the Supreme Court also pointed out the inefficiencies in the functioning of the National Company Law Tribunal (NCLT) and NCLAT. It recommended that Parliament consider reforms to improve the functioning of these bodies, especially in terms of timely appointments of new members. The court stressed that members with high integrity and ideals should be appointed to these tribunals, and that political influence should be avoided.
Conclusion
The liquidation of Jet Airways marks the end of an era for one of India’s most prominent airlines, which once boasted a strong market presence. The judgment underscores the complexities of insolvency proceedings and the challenges in executing resolution plans for large-scale companies in distress. The case also highlights the importance of adhering to timelines and legal frameworks in the resolution process to ensure that creditors, employees, and other stakeholders receive their due rights.
