SC strikes down NCLAT approval of Jet Airways transfer to Jalan-Kalrock consortium

The Supreme Court on Tuesday, 7 November, set aside a previous ruling by the National Company Law Appellate Tribunal (NCLAT) that approved the transfer of Jet Airways’ ownership to the Jalan-Kalrock Consortium (JKC) under an established resolution plan.

The decision came after appeals from the State Bank of India (SBI) and other creditors, who argued that the consortium failed to comply with financial commitments laid out in the plan.

Chief Justice of India D.Y. Chandrachud, heading a three-judge bench, pronounced the verdict, which had been reserved since 16 October. Notably, the court cited JKC’s failure to provide the initial payment tranche within the stipulated timeframe as grounds for the judgment.

Consequently, a Rs 150 crore bank guarantee deposited by JKC was forfeited. The Supreme Court’s ruling comes just days before Chandrachud’s scheduled retirement on 10 November.

The case revolves around the bankruptcy proceedings of Jet Airways, which ceased operations in 2019 due to severe financial challenges. SBI, the largest lender, initiated insolvency proceedings, leading to the airline’s admission into a resolution process under the National Company Law Tribunal (NCLT).

In 2021, the consortium—comprising UAE-based businessman Murari Lal Jalan and Florian Fritsch of Kalrock Capital Partners—was declared the successful bidder with plans to revive the airline.

However, the execution of this resolution plan has been contentious. SBI and the Committee of Creditors (CoC) argued before the Supreme Court that the revival proposal was not viable, particularly given JKC’s inability to meet financial deadlines.

JKC had pledged to infuse Rs 350 crore in equity, but progress stalled as only Rs 150 crore was deposited in a joint escrow account as of January. Furthermore, the consortium struggled to meet critical benchmarks, including the procurement of an air operator's certificate, due to insufficient aircraft in its fleet.

The lenders’ frustrations with JKC’s delayed funding efforts and the escalating maintenance expenses on the grounded airline also featured prominently in court. Senior advocate Harish Salve, representing the creditors, called for the dissolution of the airline, arguing that the resolution had become unfeasible and that monthly expenses of Rs 22 crore for airport dues had compounded the CoC's financial burden.

Meanwhile, JKC, represented by senior advocate Mukul Rohatgi, contested the allegations, maintaining that the consortium had invested over Rs 700 crore toward the airline's revival. Rohatgi argued that JKC was prepared to meet its obligations but was repeatedly met with objections from creditors, which delayed further funding and operational steps.

The NCLAT had previously ordered the CoC to proceed with the transfer of Jet Airways to JKC, permitting the consortium to adjust Rs 150 crore from the performance bank guarantee as part of the Rs 350 crore equity infusion.

Additionally, JKC was expected to remit Rs 200 crore by the end of September this year. Despite these conditions, the Supreme Court rejected NCLAT’s approval, directing that the resolution process be reconsidered.

The court’s judgment also brings into question the sale of three Boeing 777-300 aircraft owned by Jet Airways, for which a 2022 agreement was signed with the Malta-based Challenge Group. Despite legal directives, the sale remains incomplete, leaving the aircraft in Mumbai and adding another layer of unresolved issues to the complex case.

The Supreme Court’s decision may prompt liquidation proceedings for Jet Airways, underscoring the challenges in reviving a legacy airline. The coming weeks will likely bring further developments as stakeholders assess potential next steps for the once-prominent carrier.