Jet Airways is permanently grounded as the Supreme Court mandates liquidation

The Supreme Court’s decision to liquidate Jet Airways on November 7 essentially put an end to efforts to bring the once-dominant Indian airline back to life. The decision came after a protracted judicial battle in which Jet’s successful bidder, the Jalan Kalrock Consortium (JKC), failed to satisfy important requirements outlined in the 2021 resolution plan.

The court’s ruling underscores the difficulties associated with corporate recovery in India’s aviation industry, since Jet Airways has been grounded since 2019 owing to financial difficulties. The court determined that JKC had failed to pay Rs 226 crore in past-due staff salaries and pump Rs 350 crore into the airline, among other necessary financial duties.

These monies were essential to Jet Airways’ recovery strategy, but the viability of the process was called into question by JKC’s failure to provide them.A National Company Law Appellate Tribunal (NCLAT) ruling that permitted the financially stressed Jet Airways to transfer ownership to the Successful Resolution Applicant (SRA) without full payment in line with the resolution plan was also overturned by the court.

Justice Pardiwala emphasized the need for clearer criteria in appellate rulings and stronger adherence to the Insolvency and Bankruptcy Code (IBC) as part of the larger lessons learned from this drawn-out battle. “This litigation is an eye-opener and has taught us many lessons about the IBC and the functioning of NCLAT,” Justice Pardiwala stated.

The Supreme Court ruled that the NCLAT’s decision, which permitted JKC to deduct a Rs 150 crore Performance Bank Guarantee (PBG) from its payment commitments, was in violation of the IBC’s underlying legal principles.

The Supreme Court ordered speedy liquidation and directed the National Company Law Tribunal (NCLT) in Mumbai to designate a liquidator after five years with no notable progress. Lenders led by the State Bank of India (SBI) are permitted to use the Rs 150 crore PBG to recoup a portion of their obligations, but JKC would forfeit the Rs 200 crore that it has already invested.

In a previous appeal to the Supreme Court, lenders argued that JKC had not upheld important elements of the settlement plan. Despite winning the competition, they contended, JKC had failed to secure regulatory permits, including security clearances and an air operator certificate, and had failed to supply the required funds.

In its defense, the consortium pointed to regulatory obstacles and lender delays, but the court deemed these arguments insufficient and determined that liquidation was the only practical course of action.

In addition to ending Jet Airways’ attempts at revival, this ruling reaffirms the judiciary’s role in holding bidders accountable in insolvency proceedings and demonstrates the Supreme Court’s strict stance on adherence to the IBC. Jet Airways is the second significant airline in India to be liquidated under the IBC after GoFirst, which is a glaring example of the regulatory difficulties facing the aviation sector.