Multiple investigations and parallel bankruptcy filings by operational creditors will cast a shadow over the insolvency proceedings of Jet Airways (India) Ltd that its lenders have decided to initiate, experts said.
A consortium of lenders led by the State Bank of India (SBI) on Monday decided to approach the National Company Law Tribunal (NCLT) after efforts to recover dues and revive the airline outside the Insolvency and Bankruptcy Code (IBC) failed.
This has added to the woes of the beleaguered airline. The income tax department is investigating Jet Airways for alleged tax evasion of ₹650 crore, while the ministry of corporate affairs (MCA) is probing alleged fraud at the airline, and the enforcement directorate is investigating Gulf airline Etihad PJSC’s 2013 investment in Jet.
The investigations will continue even as the insolvency process gets underway.
“These are statutory bodies investigating criminal aspects such as alleged fraud and tax evasion. These will continue and would not be impacted by the insolvency plea," said Vineet Naik, a senior advocate at Bombay high court.
The I-T probe is being conducted on the basis of an internal report that alleged that funds sent by Jet Airways to some Dubai-based entities were linked to promoters and purportedly meant to evade taxes.
The probe by the MCA is on some violations of the Companies Act 2013 and to verify some suspect transactions.
“Investigations will fasten liability on the beneficiary and will come back only on the promoters/ beneficiaries if proved. Any incoming investors, though it looks difficult at this time, will have indemnity from any liability arising out of these investigations. The company law investigations will be theoretical as the company would be wound up till then," said Ravi Kini, founder, M.V. Kini and Associates.
The investigations will continue separately but no monetary demand will be raised during the moratorium of 180 days, extendable up to 270 days.
“Though the investigations will continue, no demand can be raised against the company during the moratorium period. For instance, if the tax authorities give a final assessment of tax demand, these will be added to pending dues. These will be then settled as per the waterfall mechanism, making the government dues at par with those of unsecured creditors," said Manoj Kumar, partner, Corporate Law Professionals.