Jet Airways resolution plan: Supreme Court reserves decision on airline’s future

New Delhi: The Supreme Court on Wednesday reserved its judgment on the future of Jet Airways as it deliberated the ownership dispute between the bankrupt airline's lenders and the Jalan-Kalrock Consortium (JKC), the successful bidder.

A three-judge bench led by chief justice D.Y. Chandrachud is set to decide whether to uphold JKC’s approved resolution plan or favour Jet Airways’ lenders, led by the State Bank of India, who have challenged the plan. 

The judgment could either set aside JKC’s bid for failing to meet key obligations, paving the way for a new resolution plan, or push the airline into liquidation. 

Alternatively, the court may choose to uphold the current resolution plan, allowing JKC to revive the airline and take ownership.

On Wednesday, the Supreme Court concluded the hearing in the case after extensively hearing both parties. As the chief justice is scheduled to retire in early November, the judgement is expected to be passed before his retirement.

If the airline goes into liquidation, it will be the second airline to do so recently after Go First. This will raise significant questions about whether the current Insolvency and Bankruptcy Code (IBC) mechanism is sufficient to deal with airline insolvencies, according to experts.

Jet Airways, founded by Naresh Goyal, filed for bankruptcy in April 2019 after financial difficulties forced it to suspend all flight operations. In June 2021, the National Company Law Tribunal (NCLT) approved JKC’s resolution plan, which promised an infusion of funds, clearance of creditors’ dues, and the revival of flight operations.

However, the plan’s execution encountered significant delays, leading to a legal battle with lenders led by the State Bank of India.

Dispute reaching Supreme Court

The case reached the Supreme Court after lenders challenged the March 2024 order of the National Company Law Appellate Tribunal (NCLAT), which had upheld the ownership transfer to JKC. The NCLAT had directed lenders to transfer ownership of Jet Airways to JKC within 90 days and complete the necessary formalities, including transferring shares to JKC and obtaining an air operator’s certificate for the airline.

The appellate tribunal also required the lenders to secure three Dubai properties belonging to Jet Airways within 30 days, after which JKC was to pay the first tranche of ₹350 crore, a critical component of the resolution plan. The NCLAT noted that JKC had already raised ₹200 crore of the ₹350 crore required but had yet to meet certain other conditions, which triggered the lenders’ objections.

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Lenders’ allegations

During the Supreme Court hearings, Jet Airways’ lenders, represented by additional solicitor general N. Venkataraman, accused JKC of failing to fulfill key commitments outlined in the resolution plan. 

They argued that JKC had only deposited ₹200 crore of the ₹350 crore first tranche and had failed to provide the ₹150 crore in cash as mandated by an earlier Supreme Court order. The lenders further claimed that JKC had not met several other obligations, including securing an air operator certificate, international bilateral rights, and airport slots, which are essential for resuming flights. In addition to these financial concerns, the lenders highlighted that JKC had not obtained security clearance from India’s Home Ministry, a requirement for operating the airline.

They also mentioned the need to pay around ₹272 crore in dues owed to Jet Airways’ workers. The lenders informed the court that JKC had not released three Dubai properties, which were to serve as security, making it difficult to complete the transfer of ownership. They stated that the delay in finalizing the ownership process had led to monthly losses of ₹22 crore in maintaining Jet’s assets, while Jet Airways still owed around ₹7,500 crore to its creditors.

The lenders also alleged that JKC had failed to cooperate with an investigation into the source of its ₹200 crore payment after Florian Fritsch, JKC’s co-founder, faced fraud and money laundering charges in Europe.

“This is a case of gross abuse of the Insolvency and Bankruptcy Code (IBC) process,” Venkataraman argued. “The court must make it clear that the IBC is not for abuse but a genuine facilitator for takeovers. Operators like this cannot come and play with the courts.”

JKC’s defence

In response, JKC’s counsel, senior advocate Mukul Rohatgi, defended the consortium, accusing the lenders of deliberately stalling the revival of Jet Airways to push the airline towards liquidation. Rohatgi argued that the lenders wanted to sell Jet’s assets as scrap to maximize their returns, instead of cooperating with JKC to revive the airline.

“They haven’t lifted a finger to help. They want to drive this plan into the ground so that they can sell the planes as scrap and get more,” Rohatgi told the court.

Also Read: Jet Airways’ winning bidder JKC tells Supreme Court lenders want to sell airline’s assets as scrap 

Rohatgi contended that JKC had complied with the resolution plan and was ready to release the Dubai properties to adjust the ₹150 crore performance bank guarantee. He argued that the delay in fulfilling this condition was due to the lenders’ failure to act, such as writing to the Reserve Bank of India for the release of the properties.

Rohatgi further pointed out that despite JKC’s efforts, the consortium was unable to secure crucial airport slots or the airline’s air operator certificate because of the delays in the ownership transfer. “Neither do I have planes nor does the company have an operational crew. How can anyone expect me to secure airport slots without these essentials?” he questioned.

He also emphasized that reviving Jet Airways would benefit India’s airline industry, pointing to the profitability of airlines like IndiGo and Air India, while noting that SpiceJet was struggling.

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