The Supreme Court on Thursday ordered Jalan-Kalrock consortium, the new owners of the bankrupt Jet Airways, to deposit Rs 150 crore in SBI’s escrow account by January 31, 2024. The apex court said that this amount was part of the Rs 350 crore that the consortium had agreed to pay as the first tranche of the Rs 4,783 crore financial package for reviving the airline. The court also modified the order of the National Company Law Appellate Tribunal (NCLAT) that had allowed the consortium to adjust Rs 150 crore from the performance bank guarantee (PBG) against the payment. The court said that the PBG was a security against non-performance and could not be adjusted against the payment.
Background
Jet Airways, once India’s largest private airline, was grounded in April 2019 due to acute financial crisis and insolvency proceedings were initiated against it in June 2019. In October 2020, the National Company Law Tribunal (NCLT) approved the resolution plan submitted by Jalan-Kalrock consortium, which proposed to invest Rs 600 crore as equity and infuse Rs 4,183 crore as long-term debt in the airline. The consortium also promised to pay Rs 1,010 crore to the financial creditors, who had claimed Rs 8,462 crore from the airline. However, the implementation of the resolution plan faced several hurdles, including regulatory approvals, slot allocation, payment of dues to employees and other stakeholders.
NCLAT Order
The NCLAT, in its order dated August 28, 2023, had directed the consortium to deposit Rs 350 crore in SBI’s escrow account as per the reworked payment schedule. The consortium had already deposited Rs 200 crore in two instalments of Rs 100 crore each by September 30, 2023. The NCLAT had allowed the consortium to adjust the remaining Rs 150 crore from the PBG of Rs 250 crore that it had submitted to SBI. The NCLAT had also directed SBI to release Rs 100 crore from the PBG to Jet Airways for meeting its operational expenses. The NCLAT had further directed the Directorate General of Civil Aviation (DGCA) and the Ministry of Civil Aviation (MoCA) to allot slots to Jet Airways on a temporary basis for six months.
SC Order
The SC, while hearing appeals filed by SBI and other lenders against the NCLAT order, observed that the NCLAT was not justified in permitting adjustment of Rs 150 crore from the PBG towards payment of Rs 350 crore by the consortium. The SC said that the PBG was a separate and independent obligation of the consortium and could not be treated as part of the payment. The SC also noted that the PBG was meant to ensure that the consortium would perform its obligations under the resolution plan and could be invoked by SBI in case of any default or breach by the consortium.
The SC, therefore, ordered the consortium to deposit Rs 150 crore in SBI’s escrow account by January 31, 2024, failing which it would be treated as non-compliant with the resolution plan. The SC also revived the PBG of Rs 150 crore and directed SBI to return Rs 100 crore that it had released from the PBG to Jet Airways. The SC also referred the case back to the NCLAT for expeditious disposal of all pending appeals by March-end, including those filed by employees and other stakeholders seeking payment of their dues from Jet Airways.
The SC order came as a setback for Jalan-Kalrock consortium, which had claimed that it had sufficient funds to revive Jet Airways and pay all its creditors as per the resolution plan. The consortium’s lawyer Mukul Rohatgi had argued that they had not received even one per cent control over Jet Airways and were committed to fulfilling their obligations. On the other hand, SBI’s lawyer Tushar Mehta had contended that Jalan-Kalrock consortium’s approved resolution plan had been rendered “unviable” and “unworkable” as nothing had been paid to SBI-led lenders so far and even no money had been infused for Jet Airways’ revival. He had also said that lenders had to recover Rs 7,800 crore from Jet Airways and were also incurring expenses on maintaining aircraft. Meanwhile, Jet Airways’ employees had also filed a plea seeking payment of their provident fund and gratuity dues amounting to over Rs 200 crore.