A bench comprising Chief Justice of India (CJI) DY Chandrachud and Justices JB Pardiwala and Manoj Misra set aside the National Company Law Appellate Tribunal (NCLAT) decision that approved the transfer of Jet Airways’ ownership to the Jalan Kalrock Consortium (JKC) as part of the Corporate Insolvency Resolution Process (CIRP).
NEW DELHI: The Supreme Court on Wednesday(7th Nov) ordered the liquidation of Jet Airways under the Insolvency and Bankruptcy Code (IBC).
A bench comprising Chief Justice of India (CJI) DY Chandrachud and Justices JB Pardiwala and Manoj Misra set aside the National Company Law Appellate Tribunal (NCLAT) decision that approved the transfer of Jet Airways’ ownership to the Jalan Kalrock Consortium (JKC) as part of the Corporate Insolvency Resolution Process (CIRP).
The Court found the NCLAT’s order erroneous, observing that the tribunal had misinterpreted the evidence, particularly regarding the Rs 150 crore performance bank guarantee, which was improperly adjusted against the required Rs 350 crore payment.
The Bench held that non-compliance with the payment terms invalidated the resolution plan, stating,
“The successful resolution applicant (SRA) has contravened the terms of the resolution plan, and the corporate debtor is directed to liquidation. The primary concern is not only to achieve substantial justice but also to ensure a prompt resolution of the dispute.”
Consequently, the Supreme Court directed the National Company Law Tribunal (NCLT) in Mumbai to promptly appoint a liquidator to initiate the liquidation process, invoking Article 142 of the Constitution due to the “peculiar and alarming” circumstances, noting that five years had passed since NCLAT approved the resolution plan. Additionally, it ordered that Rs 200 crore be forfeited and permitted lenders to encash the performance bank guarantee.
BRIEF FACTS
The decision favored the appeals from Jet Airways’ lenders, led by the State Bank of India (SBI), who opposed the NCLAT order allowing ownership transfer to JKC, a consortium led by UAE-based businessman Murari Lal Jalan and UK-based Kalrock Capital.
Since Jet Airways’ grounding in 2019 due to severe financial troubles, the airline’s lenders have been embroiled in a prolonged legal dispute over its ownership transfer. In 2021, JKC was the successful bidder for Jet Airways’ revival, and the NCLT conditionally approved the transfer of ownership. However, JKC faced issues meeting these conditions, including a required Rs 8,000 crore payment to creditors from Jet’s operational revenue.
In March 2023, the NCLAT confirmed the ownership transfer to JKC and allowed them to use Rs150 crore from their bank guarantee towards the Rs 350 crore payment. This prompted appeals from the airline’s lenders and former employees to the Supreme Court.
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During the hearings, Senior Advocate Gopal Sankaranarayanan, representing JKC, argued that the NCLAT’s detailed judgment covered all concerns and that the lenders had no significant legal grounds for appeal. He also suggested that the lenders themselves prolonged the litigation, increasing Jet Airways’ outstanding airport dues.
In response, Additional Solicitor General N. Venkataraman contended that JKC lacked intent to execute the resolution plan, placing undue financial burdens on the creditors and employees. He urged the Court to exercise its powers under Article 142 to direct liquidation, arguing that further litigation would only add to creditors’ losses. The ASG emphasized that liquidation was not the government’s aim but a necessary step under the circumstances, as the lenders had already incurred significant expenses in the matter.
Case Title: State Bank of India and ors v. Consortium of Mr. Murali Lal Jalan and Mr. Florian Fritsch and anr.
