NCLAT rejects SBI plea on Jet Airways’ bank guarantees

Mumbai: The National Company Law Appellate Tribunal (NCLAT) on Friday dismissed a plea by lenders to Jet Airways (India) Ltd to invoke bank guarantees provided by the consortium of UAE-based businessman Murari Lal Jalan and Florian Fritsch, promoter of London-based Kalrock Capital, that has taken over the grounded carrier. This follows State Bank of India’s plea on behalf of the lenders in the appeals court seeking to invoke the bank guarantees worth ₹150 crore.

The court also gave more time to the consortium by granting it an exemption of the period from 16 November to 3 March to clear payments to stakeholders.

A bench led by Justices Ashok Bhushan and Barun Mitra held that “there is no doubt that Performance Bank Guarantee can be invoked by the MC Lenders, but the said invocation can only take place when Successful Resolution Applicant ( Consortium) has failed to implement the Plan”.

“MC Lenders instead of threatening to invoke Performance Bank Guarantee, should take steps, which may help implementation of the Plan and to achieve the objective of Resolution Plan,” it said.

As per the earlier effective date of 16 November, the consortium was expected to make payments by 15 May.

Gopal Jain, senior counsel for SBI, informed the appeals court that the consortium was to make the payments by 15 May but the bank has yet to receive the same.

Separately, the counsel representing the consortium said it will deposit ₹50 crore in an escrow account and requested NCLAT to direct SBI from making any move to encash the bank guarantees.

The counsel said the consortium is taking efforts to turnaround the debt-laden firm and is also awaiting certain approvals from the home ministry as well as other authorities.

In November 2022, the Mumbai bench of National Company Law Tribunal (NCLT) allowed the Jalan-Kalrock consortium to take ownership of Jet Airways by implementing its proposed resolution plan.

“Jet Airways’ revival is dependent on the Consortium making the payment to SBI, its ownership transfer shall be on hold until then. This may prove to a significant hurdle to Jet’s revival. The NCLAT is not likely to grant further relief after this order as the Consortium has been taking an inordinate amount of time to complete the resolution process. With the pending dues and no transaction completion in sight, Jet Airways is looking at the prolongation of its misery,” said Kundan Shahi founder and chief executive at LegalPay.

The lenders and the consortium have been at loggerheads over the implementation of the resolution plan approved by the NCLT in June last year. Earlier, the NCLAT had also directed the consortium to pay gratuity and provident fund dues to workmen and employees of Jet.

The consortium challenged this decision before the Supreme Court. The top court dismissed their appeal in January.