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The Supreme Court will on Thursday (November 7) deliver its verdict in the dispute over the ownership of Jet Airways between Jalan Kalrock Consortium (JKC) and a number of the airline's former lenders led by State Bank of India (SBI).
The verdict, which was reserved on October 16, will be pronounced by a bench led Chief Justice of India DY Chandrachud, who is set to retire on November 10.
While JKC has staked its claim in the ownership of the airline, the creditors urged the Supreme Court to use its inherent powers under Article 142 to liquidate the company.
The litigation spanned five years before the National Company Law Tribunal (NCLT), the National Company Law Appellate Tribunal (NCLAT) and the Supreme Court. In this article, we explore how the case unfolded over the years, what orders were passed and how it reached the Supreme Court more than once.
NCLT hearings
Jet Airways was grounded in April 2019 due to escalating financial difficulties, prompting the State Bank of India, its largest lender, to initiate insolvency proceedings before the NCLT Mumbai. The airline entered the insolvency resolution process in June 2019.
In 2021, a consortium led by UAE-based entrepreneur Murari Lal Jalan and UK-based Kalrock Capital emerged as the successful bidder for the airline's revival. The NCLT approved its resolution plan and granted approval for the ownership transfer to JKC, on certain conditions (conditions precedent), particularly the acquisition of an air operator's certificate. JKC was required to pay over ₹8,000 crore to the lenders over time from the revenue generated by operating Jet Airways.
However, disputes arose between the lenders and JKC over the fulfilment of the conditions precedent, as a result of which the airline’s ownership was not transferred to the latter. In January 2023, the NCLT dismissed objections and allowed the transfer of ownership. The lenders subsequently approached the NCLAT.
NCLAT proceedings
In February 2023, the lenders challenged the NCLT's order transferring ownership to JKC. However, in March 2023, the NCLAT declined to pass an order staying the transfer of ownership. In May that year, the NCLAT granted JKC an additional time of over 100 days time to pay ₹350 crore to the lenders, who appealed against this order as well.
In August 2023, the lenders told the NCLAT that they may choose not to pursue the appeal if JKC pays ₹350 crore towards fulfilling the conditions precedent, by September 30. While JKC agreed to pay ₹200 crore in cash, it sought to adjust the remaining ₹150 crore from the bank guarantees that it had already furnished. The lenders contested that JKC could not adjust the ₹150 crore from bank guarantees, as those were kept for some other purpose.
The NCLAT permitted JKC to adjust the ₹150 crore from the existing bank guarantee, prompting the lenders to file another appeal in the Supreme Court.
In January 2024, the Supreme Court, set aside NCLAT’s order permitting the adjustment of ₹150 crore from the existing bank guarantee. The Court also directed JKC to deposit ₹ 50 crore in a designated bank account as a part of its fund infusion into the airline. The apex court further urged the NCLAT to decide the appeal by the lenders by March 31, 2024.
On March 12, 2024, the NCLAT ultimately upheld the transfer of ownership of the airline to JKC, prompting another appeal by the lenders.
Supreme Court
The apex court heard the case on two different occasions. In January 2023, it heard the appeals by the lenders against the orders of NCLAT refusing to grant a stay, extending the deadline for payments and permitting JKC to adjust payment from the bank guarantee.
The lenders argued that while they wanted to recover over ₹8,000 crore from JKC, the consortium was struggling to infuse ₹350 crore. They also told the Court that liquidating the company was the only solution, as the resolution plan had become unworkable. JKC countered this by arguing that the lenders were making the plan unworkable by not permitting it to take steps towards reviving the airline. It is JKC’s contention that the lenders had not even initiated the process of transferring the ownership to JKC.
The Court, however, remanded the case back to NCLAT as it had not passed a final order on the transfer of ownership. However, once the NCLAT passed its final order upholding the transfer of ownership to JKC, the lenders moved the apex court again.
Before the Supreme Court on October 16, JKC’s lawyer Senior Advocate Gopal Sankaranarayanan argued that the NCLAT has rendered a detailed judgment on all the issues and the lenders have raised no substantial question of law in the appeal.
"The NCLAT judgment splits itself into issues. They spend 35 pages on interpreting the Supreme Court's January 2024 judgment. The only issue before NCLAT was whether conditions precedent (CP) had been met. No substantial question of law has been shown to this court. A lot of prejudice has been created (against JKC)," he said.
Further, he argued that the lenders were put in a tight spot because of SBI's decision to grant thousands of crores in loans to the previous management of Jet Airways.
"I am not the bad guy, I am trying to get the company back in the air.”
Sankaranarayanan contended that it is because of the decision of the lenders to prolong the litigation that the airport dues of the airline have piled up.
Responding to these arguments, Additional Solicitor General N Venkataraman contended that JKC has no intention to implement the resolution plan.
"The Committee of Creditors, which has over 30 banks, will have to bear the airport dues of ₹1,100 crore, going by their contention. Neither the CoC nor the employees will get anything. The resolution plan will become unworkable."
Venkataraman urged the apex court to use its inherent powers under Article 142 of the Constitution to liquidate the company to avoid another round of litigation.
The ASG also clarified that it was not the government's intention to bring down the airline.
"Whenever this matter gets heard, the news in the media says government is pulling down one airline or the other. We are not doing this. We are left with no choice in this case," he said.
Venkataraman reiterated that the lenders are spending more money in the case of Jet Airways rather than recovering it. According to the ASG, the lenders are spending over ₹20 crore a month and have so far spent over ₹300 crore.
With Go First's plea for liquidation expected to be heard on November 8, the coming week is likely to be important for India's aviation sector as a whole.