Supreme Court Sets Aside NCLAT Ruling on Jet Airways Ownership Transfer to Jalan-Kalrock Consortium

In a significant decision, the Supreme Court of India on November 7, 2024, overturned the National Company Law Appellate Tribunal (NCLAT) ruling that upheld the transfer of Jet Airways' ownership to the Jalan-Kalrock Consortium (JKC) as part of an approved resolution plan. The verdict comes after an appeal by the State Bank of India (SBI) and other creditors who argued that JKC had not met the financial obligations outlined in the resolution plan.

A bench led by Chief Justice of India DY Chandrachud ruled that JKC failed to meet the financial commitments, specifically the infusion of an initial tranche of funds, within the stipulated timeframe. Consequently, the court also ordered the forfeiture of JKC's Rs 150 crore bank guarantee. The judgment, which had been reserved on October 16, was delivered by the three-judge Bench comprising Chief Justice Chandrachud along with Justices Hrishikesh Roy and PS Narasimha.

The case centers on JKC’s claim to the ownership of Jet Airways, grounded since 2019 due to financial distress. In 2021, JKC, a consortium comprising UAE-based Murari Lal Jalan and Florian Fritsch, emerged as the winning bidder in the insolvency process conducted by the National Company Law Tribunal (NCLT). However, SBI and other members of the Committee of Creditors (CoC) argued that JKC failed to fulfill the required financial obligations under the court-approved resolution plan, particularly the timely infusion of funds.

SBI, representing the creditors, requested the Supreme Court to exercise its inherent powers under Article 142 of the Constitution to liquidate Jet Airways, contending that the JKC's proposed revival was not in the creditors' best interest. JKC was required to inject Rs 350 crore in equity as part of its ownership obligations, yet has reportedly only furnished Rs 150 crore via a Performance Bank Guarantee (PBG), which the consortium sought to adjust towards the required equity.

In response, the CoC, led by SBI, argued that creditors have already incurred expenses amounting to over Rs 350 crore to keep the airline’s assets and dues in order, with additional monthly expenditures of Rs 22 crore. JKC, in contrast, maintained that it had spent Rs 700 crore to revive the airline and accused the lenders of obstructing their efforts.

The NCLAT had previously upheld JKC’s ownership rights in March 2024, directing the CoC to transfer ownership within 90 days and requiring JKC to secure an Air Operator’s Certificate (AOC) within that timeframe. JKC was expected to secure at least 20 aircraft for its international operations, yet it reportedly managed only five. The Supreme Court had earlier mandated JKC to deposit Rs 150 crore in an escrow account jointly held with SBI, cautioning that failing to meet the bank guarantee requirement would result in legal consequences.

The legal battle also involved the proposed sale of three Boeing 777-300 aircraft owned by Jet Airways. The Malta-based Challenge Group had bid to acquire the aircraft in October 2022; however, the sale remains incomplete due to delays, despite orders from multiple courts.

As the situation currently stands, the Supreme Court’s decision leaves the future of Jet Airways uncertain. While JKC claims it has met its obligations, the CoC remains firm that the consortium’s commitments have fallen short. The judgment underscores the apex court’s commitment to enforcing strict adherence to financial commitments within the resolution process, especially in high-profile insolvency cases.

With today’s ruling, SBI and other creditors may consider alternatives, including potential liquidation of Jet Airways, marking a major setback for JKC’s planned revival of the once-prominent airline.