Grounded air carrier Jet Airways.
Credit: Reuters Photo
In a clear win for its creditors, the Supreme Court on Thursday directed for the liquidation of grounded air carrier Jet Airways as per the provisions of the Insolvency and Bankruptcy Code.
A bench of Chief Justice of India and Justices J B Pardiwala and Manoj Misra set the National Company Law Appellate Tribunal’s (NCLAT’s) order upholding the resolution plan for Jet Airways, approving the transfer of its ownership to Jalan Kalrock Consortium (JKC).
The apex court took exception to the fact that NCLAT had disregarded the court’s order of January 2023 and allowed the adjustment of Rs 150 crore set aside as performance bank guarantee against the Rs 350 crore that JKC had committed to infuse in the airline as its resolution applicant.
The court said the NCLAT order was “perverse as it misread evidence on record since the performance bank guarantee of Rs 150 crore could not have been adjusted against the payment of Rs 350 crore”.
“Being mindful of the underlying objective that ‘Time and speed are of the essence under the (Insolvency and Bankruptcy) Code’ and to prevent the frustration of this objective, we have thought fit and necessary to exercise our plenary powers under Article 142 and direct the corporate debtor into liquidation in the manner as laid down in the IBC, 2016,” the bench said.
Justice Pardiwala, who authored the judgment on behalf of the bench, allowed the plea of SBI and other creditors. “Lenders are permitted to encash the performance bank guarantee. NCLT Mumbai is to appoint liquidator forthwith,” the bench ordered.
The court found that the determination of the resolution plan has been contravened in the matter.
“Since the resolution plan is not possible to be implemented, we have to ensure that liquidation remains an option for the corporate creditor,” the bench noted.
The NCLAT had on March 12 upheld the resolution plan of the grounded air carrier and approved the transfer of its ownership to JKC. SBI, Punjab National Bank (PNB) and JC Flowers Asset Reconstruction Private Limited challenged the NCLAT verdict.
In its judgment, the bench said the NCLT, which is the adjudicating authority and which has to approve the resolution plan under Section 31 of the IBC, 2016 also cannot trespass into the commercial wisdom exercised by the Committee of Creditors.
Functioning of the tribunals
The court also dealt with certain efficiency issues within the NCLTs and NCLAT, saying it has been noticed over a period of time that there is a serious lack of timely admission and disposal of the applications filed as regards the initiation of CIRP, approval of the resolution plan and liquidation, which only adds to the uncertainty of the process and prolongs the dispute thereby jeopardizing the interest of all the stakeholders involved.
The court also noted members often lacked the domain knowledge required to appreciate the nuanced complexities involved in high-stake insolvency matters in order to properly adjudicate such matters.
“It has been noticed that the benches of NCLT(s) and NCLAT don’t have the practice of sitting for the full working hours,” the bench said, also referring to shortage of members in the Tribunals and inadequate infrastructure to support their functioning.
The bench pointed out that over time, the court noticed the growing tendency amongst members of the NCLT(s) and NCLAT to ignore the orders of this court or act in its defiance. “We put the NCLT(s) and the NCLAT to notice, that any act of contravention of this court’s order and the larger rubric of judicial propriety will not be tolerated,” the bench said.
It asked Parliament to consider its suggestion in consultation with the Insolvency Bankruptcy Board of India and the Ministry of Finance, to improve their functioning, saying “Persons with high ideals and impeccable integrity should be appointed as Members in the NCLT as well as NCLAT. There should not be any political appointment.”
History
Naresh Goyal founded Jet Airways was grounded in 2019 due to severe financial troubles. SBI, its largest lender, initiated insolvency proceedings against the company before the National Company Law Triunal in Mumbai, leading to the Corporate Insolvency Resolution Process (CIRP).
In 2021, JKC emerged as the successful bidder for the airline’s revival.