Once India’s second-largest airline, Jet Airways was ordered to be liquidated by the Supreme Court of India yesterday. The order came after over five years of the airline being grounded and a lengthy legal battle between the people who wanted control of the airline and the bankers who did not want to hand it over.

Jet Airways’ recovery process so far

Jet Airways came into being in 1993, and from there, the airline was in being till 2019, having sold a large chunk of equity (24%) to Etihad Airways after it fell on hard times financially. Etihad was building its Etihad Airline Partners set of airlines, where it had an equity partnership with the airline and would use them to feed traffic into Abu Dhabi for its operations to the rest of the world.

The airline had to suspend operations in April 2019 and never returned from that suspension. Once it became clear that the airline was not returning, the Insolvency and Bankruptcy Code was enacted, and the airline was taken to the National Corporate Law Tribunal (NCLT). The Committee of Creditors (CoC), basically the banks who were owed the most money by the airline, took charge and wanted to attempt a revival of the airline.

After many attempts at revival with no takers, the Jalan-Kalrock Consortium, comprising UAE-based businessman Murari Lal Jalan and asset management firm Kalrock Capital, became the Successful Resolution Applicant that could acquire Jet Airways through the Insolvency and Bankruptcy Code (IBC). They committed to relaunching the airline in 2022, but it was far from a restart.

In 2022, an executive team was brought together, and the airline was also close to a restart; receiving an airline operator certificate, had a plane due for delivery, and many things were falling into place. Except they did not, and in late October 2022, the whole effort fell apart when it came to light that the employee retirals which Jet Airways did not deposit during their operational lifetime were due to be paid by the JKC, a situation not accounted for in the original revival plan.

Jet Airways’ to-be-owner, JKC, continued to maintain a small team of people in the hope of a restart, and they would dish out greetings as late as October 2024.

Wishing you a Diwali full of light, warmth, and joy. May your journeys be as bright as the festive lights around you. Happy Diwali from all of us at Jet Airways!"#Diwali24#HappyDiwali  #JetAirways pic.twitter.com/fT0c8UtXPw

— Jet Airways (@jetairways) October 31, 2024

The JKC – CoC legal tussle

Since October 2022, the lenders (via the CoC) and the Jalan Kalrock Consortium have been in a legal battle over the airline’s ownership. JKC said it had deposited INR 200 Crores and offered a Bank Guarantee worth INR 150 Crores for the first tranche of the payment towards ownership transfer. The CoC claimed that the “resolution plan” was not fully completed for them to transfer the airline.

In reality, the resolution plan could have been better written and could not have been executed on day one for the transfer to take place anyway.

After the National Corporate Law Appellate Tribunal (NCLAT) confirmed that the conditions precedent were met and that the airline should be transferred to JKC in early 2024, the appeal was made in the Supreme Court, and the order was made yesterday.

Jet Airways to be liquidated

The Supreme Court of India, on November 7, 2024, made an order that the erstwhile order by the NCLAT was to be set aside, and the appeal was allowed. The court ordered that there was no progress made in the five years since the Resolution Plan was approved, and hence, they were ordering the corporate debtor (Jet Airways) to be taken into liquidation. Not only that, but the INR 200 Crores (USD 23.7 Million) paid by JKC and the INR 150 Crore (USD 17.8 Million) deposited as a Performance Bank Guarantee will be forfeited by the creditors.

Here is the complete order, a reading of 169 pages, and here is the excerpt that matters,

186. For all the foregoing reasons, we have reached the conclusion that the impugned order passed by the NCLAT is perverse and unsustainable in law. It has led to further complications. As a result, the appeals succeed and are allowed. The impugned order passed by the NCLAT is set aside.

187. 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. The NCLT, Mumbai shall now take appropriate steps for appointment of liquidator and all other necessary formalities for commencement of liquidation of the corporate debtor.

188. The amount of Rs 200 Crore already infused by the SRA stands forfeited. The Lenders/ Creditors are further permitted to encash the performance bank guarantee of Rs. 150 Crore furnished by the SRA. We accordingly order so.

What can be liquidated?

Since the airline will now go into liquidation, the creditors will be asked to resubmit their claims. The last list of creditors was made in 2020. As per my understanding, employees and Financial Creditors will get a preference in the liquidation process, and other creditors, such as ticket holders, will come after.

The following aircraft will be up for liquidation:

• 5 Boeing 777-300ERs: VT-JEM, VT-JEV, VT-JET, VT-JES, VT-JEU
• 2 A330-200: VT-JWW, VT-JWV
• 2 Boeing 737-800:  VT-JBL, VT-JBG
• 1 Boeing 737-900: VT-JGD

There are also more aircraft I might miss. Drop me a comment, and I will add them. Other stuff rotting across the country include engines, aircraft spares, tow tractors, and trolleys. Jet Airways also has a stake in JetPrivilege Private Limited and owns the Jet Airways brand, which might also go up on sale. Besides this, some real estate in the Jet Airways Godrej Building in BKC, Mumbai, might also be up for sale.

Bottomline

The sun has set on the hope of a revival of Jet Airways. The Supreme Court of India has ordered a liquidation of the airline so that the creditors can return whatever money can be salvaged after selling the airline’s remaining assets. The timeline of this process is unknown, but this pulls a plug on the return of Jet Airways and also a blot on the use of the IBC process for the revival of airlines.

What do you make of the long wait and the ultimate process of shutting down Jet Airways for good?

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