New Delhi:
On Thursday, the Supreme Court of India ordered the liquidation of Jet Airways, invoking its extraordinary powers under Article 142 of the Constitution, following the failure of the airline’s resolution plan to be implemented over a span of five years.
The Court set aside the NCLAT Order which allowed the cash-strapped Jet Airways’ ownership transfer to the Successful Resolution Applicant (SRA) without complete payment in accordance with the resolution plan.
The Court directed the NCLT Mumbai Bench to appoint a liquidator forthwith.
The bench of CJI DY Chandrachud and Justices JB Pardiwala and Manoj Misra had reserved the judgment on October 16. The NCLAT order was challenged by SBI-led lenders of the cash-strapped Airlines.
The NCLAT had allowed the adjustment of the first tranche of Rs 350 crore against the Performance Bank Guarantee (PBG), but the Supreme Court found this decision to be in “flagrant disregard” of its earlier order passed on January 18, 2024, and termed it “perverse.”
Justice Pardiwala expressed disappointment with the handling of the case, stating, “This litigation is an eye-opener and has taught us many lessons about the IBC and the functioning of NCLAT.” The court emphasized that the PBG must remain intact until the resolution plan was fully implemented, and could only be forfeited in case of a breach.
The Court’s judgment marks a critical moment in the saga of Jet Airways’ financial troubles, with the airline having been grounded since 2019. The airline’s lenders, led by the State Bank of India (SBI), have long expressed concerns over the non-implementation of the resolution plan, which was supposed to bring the airline back into operation.
The Court further observed that since the resolution plan was no longer viable due to the SRA’s failure to make the necessary payments, the option of liquidation was now the only course of action. The ruling underscores the serious consequences of non-compliance with the terms of the resolution process under the Insolvency and Bankruptcy Code (IBC).
The decision has sent shockwaves through the corporate restructuring community, with the Court’s emphasis on ensuring that the IBC process remains fair and effective in resolving distressed assets. Senior Advocate Mukul Rohatgi and Advocate Gopal Sankaranarayanan, representing the Jalan KalRock Consortium, had argued for the approval of the ownership transfer, but the Court ruled against their plea.
