India News | SC Orders Liquidation of Jet Airways Assets, Forfeiture of Winning Bidder's Money
Get latest articles and stories on India at LatestLY. In a major development in the Jet Airways insolvency saga, the Supreme Court on Thursday ordered its liquidation, forfeiture of Rs 200 crore infused by the successful bidder of the airline and permitted the lenders led by SBI to encash Rs 150 crore performance bank guarantee.
New Delhi, Nov 7 (PTI) In a major development in the Jet Airways insolvency saga, the Supreme Court on Thursday ordered its liquidation, forfeiture of Rs 200 crore infused by the successful bidder of the airline and permitted the lenders led by SBI to encash Rs 150 crore performance bank guarantee.
Terming the verdict of the National Company Law Appellate Tribunal as "perverse and unsustainable in law", a bench comprising Chief Justice D Y Chandrachud and Justices J B Pardiwala and Manoj Misra said it led to further complications and invoked its extraordinary powers under Article 142 of the Constitution to order liquidation of the ailing airline.
The court, in the process, put the curtains down on the insolvency proceedings of the airlines by setting aside the order of the NCLAT.
In the 169-page judgement authored on behalf of the bench, Justice Pardiwala termed the case as an "eye opener" and rapped NCLAT for allowing adjustment of performance bank guarantee (PBG) in view of payment of the first tranche by Jalan Kalrock Consortium (JKC).
NCLAT had allowed JKC to take over Jet Airways without fully complying with its payment obligations, it held.
The bench allowed the plea of SBI and other creditors against the NCLAT decision that upheld the resolution plan of Jet Airways in favour of JKC.
"We have reached the conclusion that the impugned order passed by the NCLAT is perverse and unsustainable in law. It has led to further complications. As a result, the appeals (of lenders) succeed and are allowed. The impugned order passed by the NCLAT is set aside," the judge wrote.
The verdict went on to add, "Keeping in mind the fact that almost five years have elapsed since the resolution plan was duly approved by the NCLAT and there being no progress worth the name, we are left with no other option but to invoke our jurisdiction under Article 142 of the Constitution and direct that the corporate debtor be taken in liquidation."
The verdict directed the National Company Law Tribunal, Mumbai to take appropriate steps now for appointment of the liquidator and all other necessary formalities for commencement of liquidation of the airlines.
"The amount of Rs 200 crore already infused by the SRA (successful resolution applicant that is JKC in present case) stands forfeited. The lenders/creditors (SBI and others) are further permitted to encash the performance bank guarantee of Rs 150 crore furnished by the SRA," it ordered.
It also directed its registry to send a copy of the judgement to the principal secretary, Ministry of Finance and the chairperson of the Insolvency Bankruptcy Board with a request to look into the verdict, particularly the suggestions therein.
"This litigation is an eye opener for one and all and therefore, before we close this matter, we deem it absolutely necessary to bring to light certain deficiencies in the IBC, 2016 which require immediate attention. We would also like to definitely say something as regards the functioning of the NCLTs and NCLAT," the judgment underlined.
Given the importance of the IBC for the betterment of the economy at large, it was imperative that the insolvency ecosystem be continuously strengthened through a regular identification of its shortcomings and a quick redressal, it said.
"Scrupulous following of the provisions of the Code along with behavioural and ethical discipline is especially required from the key participants of the IBC who are central to its design, i.e., the adjudicating authorities, corporate debtor, resolution professionals, committee of creditors, potential and successful resolution applicants, approved valuers and liquidators," it said.
No doubt the commercial wisdom of the committee of creditors (CoC) cannot be subjected to a judicial review, the court noted, adding, "However, in order to foster a much more effective and time-bound decision making by the members of the CoC in the interests of maximisation of value of the assets of the corporate debtor, certain self regulating guidelines were issued by the IBBI (Insolvency and Bankruptcy Board of India)."
The CoC was asked to exercise commercial wisdom and approve or reject the resolution plans placed before it "exhibiting fairness and with good reasons".
"Furthermore, it is also suggested that the Central government or the IBBI explore the possibilities of better enforcement of the standards and practices enumerated in the guidelines through an independent mechanism under the auspices of an oversight committee instead of making them self-regulatory," it added.
It held that the NCLAT's approval of adjusting the performance bank guarantee as a partial payment was in "flagrant disregard" of an earlier directive of the top court, as well as the terms of the resolution plan and established principles under the Insolvency and Bankruptcy Code.
It noted in addition to non-payment of the initial tranche, JKC, represented by advocates Debmalya Banerjee and Kartik Bhatnagar of Karanjawala & Co., had not cleared other crucial dues, including corporate insolvency resolution process costs and employee dues.
The bench emphasised that timely compliance with resolution plans is fundamental to the IBC's purpose, which prioritises swift and effective resolution for distressed companies.
"We have no doubt in our mind that the NCLAT acted contrary to the settled legal principles and went to the extent of drawing wrong inferences from true facts while deciding the matter," it said.
On the first issue, the top court concluded the performance bank guarantee of Rs 150 crore could not have been adjusted against the first tranche payment of Rs 350 crore, which was to be made by the SRA under the resolution plans.
"The IBC is clear in its intention that PBG shall not be set off or used as a part of the consideration that was to be given by the SRA under the plan," it said.
"We arrived at the findings that this SRA failed to implement the resolution plan by not depositing the first tranche of payment," it said.
Jet Airways, which has remained grounded since April 2019, had in September, 2023 said the new proposed promoters -- the Jalan-Kalrock consortium -- had completed an additional infusion of Rs 100 crore into the carrier.
The airline had also said it was looking to re-launch operations from 2024.
After grounding in 2019 owing to a severe liquidity crisis at that time, the full-service carrier underwent an insolvency resolution process.
However, it was having a dispute with the lender. In 2021, JKC emerged as the successful bidder of Jet Airways.
(This is an unedited and auto-generated story from Syndicated News feed, LatestLY Staff may not have modified or edited the content body)