Jet Airways Insolvency : Successful Resolution Applicant Has No Security Clearance To Operate Airlines, SBI Tells Supreme Court

The Supreme Court on Thursday (September 26) was told by the lenders of the crash strapped Jet Airways that the Successful Resolution Applicant had not yet obtained relevant security clearance for running the Airlines. 

Additional Solicitor General (ASG) N Venkataraman appearing for the SBI- the lead lender of Jet Airways- told the Court that the Successful Resolution Applicant (SRA) Jalan KalRock Consortium has not yet obtained security clearance from the Home Ministry and has defaulted in paying several dues as per the approved resolution plan. As per the resolution plan, the SRA was to pay a sum of Rs 4783 Crores, and infuse 350 crores in the first tranche of the payment as agreed. 

"The investor has to have a security clearance which he doesn't have since day 1. We put it on record, he doesn't have a security clearance from Home Ministry. This is the type of investor we have gotten. To fly an airlines, you need a security clearance." 

The bench of CJI DY Chandrachud and Justices JB Pardiwala and Manoj Misra was hearing the matter. 

In the January 18 order, the Supreme Court set aside the NCLAT's August 8,2023 decision to allow the SRA to adjust the first tranche of payment of 350 crores against a Performance Bank Guarantee (PBG) which was given as security by the lenders. 

Notably, the NCLAT in March 2024 directed the monitoring committee of the Jet Airways to complete the pending transfer of ownership of the airlines to JKC within a period of 90 days and allowed the adjustment of the PBG of Rs 150 Crores towards the pending tranche payment of Rs 350 crores by the SRA. 

ASG mainly contended that (1) the impugned order of the NCLAT is in violation of the Supreme Court's order of January 18 ; (2) the impugned order adjusting the 150 crores with the PBG is 'legally incorrect'; (3) the impugned order is completely opposite to what the resolution plan envisages- the latter prioritizes the creation of securities and only then the adjustment of PBG; (4) the upfront payment of airport dues of Rs 473 crores as per the resolution plan has not been done

ASG stressed "that even today, securities have not been created." 

The ASG explained that the SRA, as per the resolution plan has to pay Rs. 4,783 crores. However it has been struggling to pay the first tranche of Rs 350 crores. So far lenders have only received 200 crores 

Additionally, workmen dues of Rs. 289 crores were also pending to be cleared. On a monthly basis, the lenders are shedding Rs 22 crore for maintaining the operations of the Airlines. 

The SRA was represented by by Sr. Advocates Mukul Rohatgi and Gopal Sankarnarayanan.

The matter will now be heard on October 1. 

The Supreme Court in its January 18 Order held that the NCLAT's order dated August 8, 2023 was not justified in allowing the adjustment of the PBG against the last tranche of payment of a sum of Rs 150 crores which was to be paid by SRA.

The bench directed that (1) the SRA on or before 31 January 2023 deposit Rs 150 crores to the SBI escrow account, failing which the SRA shall be treated as non-compliant with the RP;(2) The PBG of 150 crores shall continue to remain in operation and effect until the final disposal of the appeal before the NCLAT and shall be subject to the outcome of the same;

Case Details : STATE BANK OF INDIA AND ORS. Versus THE CONSORTIUM OF MR. MURARI LAL JALAN AND MR. FLORIAN FRITSCH AND ANR.| C.A. No. 5023-5024/2024 and Connected