The Supreme Court on Thursday directed the liquidation of Jet Airways to commence as the “last viable resort” to protect the interests of the debt-ridden airline, its creditors, workmen and employees, following the failure of a resolution plan.
A three-judge Bench headed by Chief Justice of India DY Chandrachud said speedy resolution, if not, time-bound liquidation was essential to ensure that the assets of the beleaguered airlines do not ‘fritter away’.
Noting that time and speed were of the greatest essence to prevent any further depreciation of the airline’s assets, Justice JB Pardiwala, who authored the 168-page judgment, invoked the court’s plenary powers under Article 142 of the Constitution to direct the airline into liquidation in compliance with the Insolvency and Bankruptcy Code (IBC) of 2016.
Plenary powers
“In the peculiar and alarming circumstances as discussed in this judgment and also keeping in mind the fact that almost five years have elapsed since the resolution plan was duly approved by the NCLAT and there being no progress worth the name, we are left with no other option but to invoke our jurisdiction under Article 142 of the Constitution and direct that the corporate debtor be taken in liquidation,” Justice Pardiwala ordered.
The apex court directed the National Company Law Tribunal (NCLT), Mumbai, to take appropriate steps for appointment of liquidator and all other necessary formalities for commencement of liquidation of the corporate debtor.
“Granting this relief [liquidation] would not run counter to the timelines and predictability that is central to IBC. On the contrary, it would be in furtherance of it. Ensuring that liquidation commences as soon as possible would also be in the best interests of the Corporate Debtor and the creditors including the workmen/employees who are yet to receive their rightful dues,” the Supreme Court held.
The judgment was based on an appeal filed by the airline’s creditors led by the State Bank of India challenging a judgment of the National Company Law Appellate Tribunal (NCLAT) in March. The appellate tribunal had upheld the resolution plan and transfer of ownership to the Successful Resolution Applicant (SRA), a consortium of Murari Lal Jalan and Florian Fritsch.
The NCLAT had further directed the adjustment of the Performance Bank Guarantee (PBG) of ₹150 crore towards the first tranche payment of ₹350 crore to be made by the SRA. The creditor banks’ total claim was worth approximately ₹7,800 crore.
Flagrant disregard
The Supreme Court held that the NCLAT direction to adjust the PBG against the first tranche payment was in “flagrant disregard” of an earlier order of the apex court of January 2023, the terms of the resolution plan and the established law.
“We have reached the conclusion that the order passed by the NCLAT is perverse and unsustainable in law. It has led to further complications,” Justice Pardiwala observed.
The Court allowed the creditors to encash the PBG furnished by the SRA. It further forfeited another ₹200 crore infused by the SRA in the airline.