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Business News/ Companies / News/  Pay 150 crore or face consequences, SC tells Jet winner JKC

Pay ₹150 crore or face consequences, SC tells Jet winner JKC

The lenders voiced their disapproval during a Supreme Court hearing on several appeals challenging JKC’s ownership of the airline before a bench led by Chief Justice D.Y. Chandrachud

As the NCLT order has reached its finality, the Jet Airways resolution plan is deemed to be in violation of the IBC and is liable to be set aside. (Mint)Premium
As the NCLT order has reached its finality, the Jet Airways resolution plan is deemed to be in violation of the IBC and is liable to be set aside. (Mint)

The tortured rescue of bankrupt Jet Airways took a crucial turn on Thursday, with the Supreme Court asking winning bidder Jalan Kalrock Consortium (JKC) to pay 150 crore by 31 January, or face “serious consequences".

A failure to pay would jeopardize JKC’s approved resolution plan, potentially forcing it to come up with a new one or leave the ownership claim. This could further worsen any possibility of Jet Airways’ revival, and push the airline into liquidation.

This is set to further delay the return of Jet Airways, which went through a bankruptcy process that was concluded in June 2021 and led to the selection of JKC as its new owner.

A three-judge bench, led by chief justice D.Y. Chandrachud, also set aside the National Company Law Appellate Tribunal’s (NCLAT) order from 28 August.

The NCLAT had allowed JKC to submit the 150 crore performance bank guarantee to fulfill the total obligation of 350 crore for completing the pre-conditions of the resolution plan. Lenders had challenged this in the Supreme Court, and contested the encashing of the performance bank guarantee.

A Jet Airways spokesperson declined to comment.

The apex court also instructed the NCLAT to dispose of all appeals in the case by March, and clarified that the tribunal’s directive to adjust the bank guarantee to meet the payment obligation of 350 crore was incorrect and must be stayed.

The directions were issued during a two-day marathon hearing, where challenges to JKC’s ownership of the airline were thoroughly examined.

Lenders argued that JKC has not fulfilled various pre-conditions necessary to take over Jet Airways, including lacking an Air Operator Certificate (AOC) or any approval from DGCA, slot allotment, bilateral rights, and international traffic rights. Additionally, JKC has not paid dues amounting to 272 crore for provident fund and gratuity to workers, violating a previous National Company Law Tribunal (NCLT) order. Lenders asserted that JKC’s failure to meet these conditions makes their resolution plan unworkable and liable to be set aside.

During the hearing, additional solicitor general N. Venkataraman, representing lenders, stated that JKC has not met several conditions for the last four years and accused the company of engaging in unproductive litigation. Lenders emphasized that public money amounting to 400 crore has already been wasted, and daily payments of 25 crore are being made to the airport for parking purposes. Lenders informed that banks were supposed to recover a total 7,800 crore from the bankrupt airline.

Lenders also raised concerns about the source of the money through which 200 crore was paid, stating that JKC is not cooperating with the investigation to determine the source, as directed by the NCLT. In October, the NCLT had instructed the resolution professional, Ashish Chhawchharia, to clarify JKC’s eligibility to take over Jet Airways, considering the investigation of the second party in the consortium, Florian Fritsch, for fraud and money laundering offenses in Europe.

In response, Mukul Rohatgi, a senior lawyer representing JKC, argued that setting aside their plan would leave liquidation as the only option for the airline. He explained that the issue could have been resolved in September when JKC fulfilled its conditions precedent and handed over 350 crore, but lenders challenged this.

Rohatgi highlighted JKC’s plan to restart the airline following the model adopted by Akasa Air. JKC plans to commence operations with around 50 workers and apply for an AOC and permission for routes. However, he expressed concern about the significant financial burden on JKC, with the original obligation of around 52 crore to workers escalating to around 226 crore.

The Supreme Court also heard the plea of the workmen, who insisted that JKC must pay around 470 crore for 24 months, including provident fund and gratuity. Workmen raised concerns about staff and their dues being transferred to Jet Airways subsidiary Airjet Ground Services Ltd (AGSL), a demerged subsidiary. Rohatgi clarified that the demerged AGSL was part of the resolution plan, and a previous NCLAT order had imposed the burden of paying workmen on JKC.

On June 22, 2021, the NCLT approved the resolution plan for Jet Airways submitted by the Jalan-Kalrock consortium. The consortium comprises Murari Lal Jalan, a UAE-based non-resident Indian holding shares in Jet Airways in his personal capacity, and Florian Fritsch, who holds shares through his investment holding company Kalrock Capital Partners Ltd, Cayman.

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Krishna Yadav
Krishna, a lawyer turned journalist, is a key member of Mint's corporate team. He covers major legal battles in Delhi's courtrooms, with a focus on finance, markets, and policy. Additionally, he crafts easy-to-understand explainers for complex stories and holds a PG Diploma from the renowned Asian College of Journalism.
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Published: 18 Jan 2024, 12:25 AM IST
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