Jet Airways Insolvency : Supreme Court Reserves Judgement On SBI Plea Against Transfer Of Ownership To Jalan KalRock Consortium

The Supreme Court on Wednesday (October 16) reserved its decision on the challenge by lenders of the cash-strapped Jet Airways to the NCLAT Order which allowed the Airlines' ownership transfer to the Successful Resolution Applicant (SRA). 

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

Additional Solicitor General (ASG) N Venkataraman appeared for the SBI- the lead lender of Jet Airways, while Senior Advocates Mukul Rohatgi and  Gopal Sankaranarayanan represented the Successful Resolution Applicant (SRA) Jalan KalRock Consortium (JKC). 

The main issue before the Court was the challenge to the decision of the NCLAT which allowed the completion of the transfer of ownership of the airlines to the SRA without paying the complete 350 crores 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.

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.

The bench had 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;

Notably, the NCLAT in March 2024 directed the monitoring committee of 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. 

Today, Sankaranarayanan objected to the lenders' arguments for seeking to liquidate the Airlines. He added that the Top Court's January 18 order should be considered in full, not in parts. He also raised concerns about the potential liquidation of Jet Airways, asking what would happen to the 200 crore rupees invested and if the SRA would get it back.

The ASG in his brief rejoinder stressed that JKC failed to meet its financial obligations. These included not infusing 350 crore rupees within 180 days from the Effective Date and not fulfilling other key requirements like infusing 150 crore rupees in cash and mortgaging three Dubai properties. He stressed that JKC's failure to fulfill the resolution obligations constituted a grave breach, making a fit ground for the Court to direct Jet Airway's liquidation under Article 142.

On the last hearing, the ASG argued 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. 

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.

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 

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