Supreme Court orders liquidation of Jet Airways as debt resolution fails

The Supreme Court on Thursday ordered the liquidation of Jet Airways in view of the failure to implement the debt resolution plan under some "peculiar and alarming" circumstance.

The debt resolution plan of Jet Airways has been hanging fire for the past five years as SBI-led lenders of the cash-strapped airline challenged the NCLAT order in the Supreme Court.

The National Company Law Administrative Tribunal (NCLAT) had allowed transfer of ownership of the debt-strapped airline’s assets to the successful resolution applicant without complete payment in accordance with the resolution plan.

A bench of Chief Justice DY Chandrachud and Justices JB Pardiwala and Manoj Misra set aside the NCLAT order by invoking the apex court’s extraordinary powers under Article 142 of the Constitution. 

The SC directed the NCLT Mumbai bench to appoint a liquidator and commence proceedings for the liquidation of Jet Airways, forthwith. 

With the SC order, the Rs200 crore infused by the SRA, Jalan KalRock Consortium (JKC), stands forfeited. Lenders and creditors of Jet Airways can also encash the Rs159 crore performance bank guarantee furnished by the SRA.

The SC bench had, on 16 October, reserved judgment on the case.

Before pronouncing the judgement, Justice Pardiwala orally cited the Illegalities in the NCLAT order allowing ownership transfer, and said the case has brought to light the way the NCLT is functioning under the IBA.

The SC held that the NCLAT order allowing the clubbing of the Rs200 paid as the first tranche of payment and the Rs150 crore performance bank guarantee against the required Rs350 crore Performance Bank Guarantee (PBG) was in "flagrant disregard" of the SE order of 18 January and was "perverse."

The NCLAT acted against settled legal principles and intrepreted the SC order incorrectly, it said, adding that both the SRA and the NCLAT failed in the implementation of the resolution plan by failing to infuse the first tranche of the payment and failing to keep the Performance bank guarantee alive till the completion pf debt resolution.