The Supreme Court on Thursday ordered the liquidation of Jet
Airways after determining that the National Company Law Appellate
Tribunal’s (NCLAT) ruling violated the apex court’s judgment from January 2023.
The ruling came after a series of appeals, including one from the airline’s
lenders, challenging the NCLAT’s approval of the airline’s takeover by a
consortium comprising UK’s Kalrock Capital and UAE-based entrepreneur Murari
Lal Jalan.
The top court said that liquidation is in the best interest of
Jet Airways’ creditors and employees. Justice JB Pardiwala, while delivering
the verdict, described the airline’s legal journey as an ‘eye-opener’ offering
important lessons for India’s Insolvency and Bankruptcy Code (IBC).
The apex court criticised the NCLAT
for disregarding its earlier ruling. Specifically, the court highlighted the
NCLAT’s approval of adjusting a Rs 150 crore performance bank guarantee (PBG)
against a required infusion of Rs 350 crore from the Jalan-Kalrock Consortium
(JKC), the resolution applicant. The court ruled that the performance bank
guarantee should have remained in place until the insolvency process was
completed, underscoring that the consortium’s failure to infuse the promised
funds further justified the airline’s liquidation.
The top court’s ruling concluded
that the consortium had failed to fulfill the conditions necessary to revive
Jet Airways, making liquidation the only viable option. Lenders, led by the
State Bank of India, had argued that JKC’s inability to inject the required
capital left no possibility for the airline's revival.
In its decision, the Supreme Court
set a significant precedent for insolvency resolution in India’s aviation
sector.
Jet Airways was grounded in 2019
due to escalating financial issues. Its largest lender, the State Bank of
India, initiated insolvency proceedings against the airline before the National
Company Law Tribunal (NCLT) in Mumbai, leading to the airline's admission into
the resolution process.