Jet Airways goes into liquidation when the Supreme Court decides on the bankruptcy case

The Jet Airways saga came to an end on Thursday with the Supreme Court ordering the liquidation of the bankrupt airline. The court found that the successful bidder for the airline, Jalan Kalrock Consortium (JKC), had failed to comply with the terms of the resolution plan, marking the latest chapter in the airline’s long struggle to revive itself.

Using its special powers under Article 142 of the Constitution, the Supreme Court decided to liquidate the airline after noting that JKC had not fulfilled the key obligations of the resolution plan. These included the casting of the first part of the ₹350 crore, to pay labor charges and settle essential expenses like airport charges.

The court also set aside the March 2024 order of the National Company Law Appellate Tribunal, which had upheld the transfer of ownership to JKC. It criticized the NCLAT for ignoring its earlier rulings and for allowing the order in favor of JKC without fully examining the facts.

The Supreme Court concluded that liquidation was the only viable option through which creditors could recover some of their dues.

Delivering the judgment, Justice JB Pardiwala remarked that this case served as an eye-opener to the functioning of insolvency courts and to India’s insolvency and bankruptcy code.

The liquidation of Jet Airways, once India’s leading airline, raises wider questions about the effectiveness of the current IBC framework for dealing with airline insolvency. This comes just as another airline, Go First, also failed to revive and filed for liquidation, raising concerns about the viability of airline restructurings under the IBC.

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An “unachievable” plan

The judgment, which had been reserved on October 16 by a three-judge bench comprising Chief Justice DY Chandrachud, Justice JB Pardiwala and Justice Manoj Misra, came on a plea by lenders led by State Bank of India.

They had challenged the National Company Law Appeal Court’s decision in March that upheld the transfer of the airline’s ownership to the Jalan Kalrock consortium.

The consortium – comprising UAE-based non-resident Indian Murari Lal Jalan and Florian Fritsch, who owns shares in Jet Airways through his Cayman Islands-based investment holding company Kalrock Capital Partners Ltd – had emerged as the successful bidder to revive the airline.

The lenders argued that JKC’s resolution plan was “dysfunctional” and urged the court to use its inherent powers under Article 142 to liquidate the airline. (Article 142 of the Constitution allows the Supreme Court to issue any order necessary for “complete justice” in a case even if such order is not within the scope of existing laws or procedures.)

While JKC claimed ownership of the airline and said it was doing everything to resume operations, the lenders accused the consortium of deliberately stalling efforts and pushing the airline closer to liquidation.

Jet Airways, founded by Naresh Goyal, went bankrupt in April 2019 and suspended its flight operations due to financial problems.

JKC’s resolution plan promised an infusion of funds, approval of creditors’ dues and revival of aviation operations. But implementation of the plan ran into significant delays, leading to a protracted legal battle with the lenders that spanned five years.

“Serious Consequences”

The dispute had first reached the Supreme Court in January 2024, when the court asked JKC to depose ₹150 crore by January 31, 2024, warning of “serious consequences” if payment was not made.

The court at the time set aside NCLAT’s August 2023 order, which had directed JKC to file a ₹150 crore performance bank guarantee to meet the amount ₹350 crore liability under the resolution plan.

The lenders had contested the redemption of the performance bank guarantee and the Supreme Court clarified that the directive was wrong and should be quashed.

The court also directed the NCLAT to dispose of all appeals in the case by March 2024, and set a hard deadline for the appellate panel to resolve the outstanding issues.

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NCLAT’s March Order

Despite the Supreme Court’s earlier intervention, the NCLAT in its final order in March 2024 upheld the transfer of Jet Airways’ ownership to the Jalan Kalrock consortium.

The appeals board set a deadline of 90 days for the lenders to complete the necessary formalities, including transfer of ownership, secure an air operator’s certificate and resume operations. In addition, NCLAT directed the lenders to secure three Dubai-based properties belonging to Jet Airways, which were intended to serve as collateral for ₹350 crore payment required under the dissolution plan.

This order put JKC back in the driver’s seat of the airline’s revival. Still, the lenders were unhappy with the progress and urged the Supreme Court to challenge the NCLAT’s March 2024 order, leading to the ongoing deliberations.

Lender’s Charges

During the Supreme Court hearings, the lenders, represented by Additional Solicitor General N. Venkataraman, accused JKC of failing to meet critical commitments outlined in the resolution plan. They claimed that JKC had only deposited ₹200 million of ₹350 crore first installment, which fails to complete ₹150 crore in cash demanded under the earlier Supreme Court order.

The lenders further argued that JKC had failed to meet several other obligations, including securing an air operator’s certificate, international bilateral rights and airport slots – essential for resuming flights. In addition, they pointed out that JKC had not received security clearance from India’s Ministry of Home Affairs, which is a requirement to operate the airline.

The lenders also emphasized the need to pay around ₹272 crore in dues to Jet Airways workers. They informed the court that JKC had failed to release Jet Airways’ three Dubai properties, making it difficult to complete the transfer of ownership.

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The delay in completing the ownership process had led to monthly losses of ₹22 crore to retain Jet’s assets, while the airline still owed approx ₹7,500 crore to its creditors.

In addition, the lenders expressed concerns about JKC’s failure to cooperate with an investigation into the source of the ₹200 crore payment after Florian Fritsch, JKC’s co-founder, was charged with fraud and money laundering in Europe.

“This is a case of gross abuse of the Insolvency and Bankruptcy Code process,” Venkataraman claimed. “The court must make it clear that IBC is not there for abuse, but a genuine facilitator for buyouts. Such operators cannot come and play with the tracks.”

Venkataraman also stressed that the committee of creditors, comprising over 30 banks, would be charged with ₹1,100 million in airport tax. He said neither the CoC nor the employees would see anything, and the resolution plan had become unworkable.

JKC’s defense

JKC’s counsel, senior advocate Mukul Rohatgi, defended the consortium and accused the lenders of deliberately stalling the revival of Jet Airways to push the airline into liquidation. Rohatgi argued that the lenders were more interested in selling Jet’s assets as scrap to maximize their returns than working with JKC to revive the airline.

“They have not lifted a finger to help. They want to run this plane into the ground so that they can sell the planes as scrap and get more,” Rohatgi told the court.

“I am not the bad guy. I am trying to get the company back on the air,” another senior lawyer for JKC told the court.