Jet Airways to be liquidated; Challenge stays in the aircraft deal

The Supreme Court of India has overturned the National Company Law Appellate Tribunal (NCLAT) decision, blocking the ownership transfer of the financially troubled Jet Airways to the Jalan-Kalrock Consortium (JKC).

JKC is a consortium formed by Murari Lal Jalan and Kalrock Capital, and they are the successful bidders for the resolution plan of Jet Airways.

The consortium, JKC, claimed ownership and stated it was doing everything possible to revive operations, but the lenders alleged that JKC was deliberately hindering efforts and accelerating the airline's move toward liquidation.

This development is significant as, during the resolution process, both the Committee of Creditors (CoC) and JKC were entrusted with the sale of three Boeing 777-300ER aircraft. Jet Airways suspended its operations on April 17, 2019, due to financial difficulties. These 777s were used by Jet Airways, particularly on long-haul flights.

However, in 2022, Ace Aviation, a Malta-based company and subsidiary of the Challenge Group, successfully bid for three parked Jet Airways Boeing 777-300ERs. Although the company paid a total of $5.6 million in deposit and signed a letter of intent, it was unable to acquire the aircraft as the sale was blocked. To break down the amount in this deal, the total amount includes $4.6 million as Earnest Money Deposit (EMD) for the three aircraft parked in Mumbai along with a $1 million token money deposited for the two Boeing B777s parked in Delhi. These aircraft have MSN numbers 35157, 35158, 35159, 35160 and 35162.

It is now worth noting what will happen with the transfer of these aircraft to Ace Aviation after the Supreme Court’s order. According to sources and indications from Ace Aviation to the STAT Trade Times, the company continues to be involved in the deal to acquire these aircraft and is currently analysing the situation.

The company also acquired a B777-300ER from another source due to delays in acquiring aircraft from Jet Airways. In a response to the STAT Trade Times, the company confirmed it has secured two slots for 2025 and another two for 2026 for the conversion. However, any further delays in the delivery of the B777 could affect the aircraft's airworthiness, potentially causing negative consequences for all parties involved.

The Apex Court issued its order after the resolution plan approved by the NCLAT remained unimplemented for over five years.

Using its authority under Article 142 of the constitution, the Supreme Court bench of three judges ordered the liquidation of the grounded airline.

The Supreme Court not only rescinded the NCLAT’s March 2024 decision supporting JKC’s ownership but also criticised the NCLAT for bypassing prior rulings and permitting the transfer without full consideration of the facts.

The Apex Court ordered the National Company Law Tribunal (NCLT) Mumbai Bench to appoint a liquidator without delay, also mandating the forfeiture of the Rs 200 crore paid by the Successful Resolution Applicant (SRA).

The primary issue before the Court was the challenge against the NCLAT's decision, which permitted the airline's ownership transfer to the SRA without full payment of the ₹350 crore outlined in the approved resolution plan.

According to the resolution plan, the SRA was to pay Rs 4,783 crore and infuse Rs 350 crore in the first payment tranche as agreed.

The SRA, however, disagreed with the lenders' calls for liquidating the airlines and expressed concern over the potential liquidation of Jet Airways. While JKC asserted its ownership of the airline and emphasised its commitment to resuming operations, the lenders accused the consortium of deliberately delaying efforts and driving the airline closer to liquidation.