The Supreme Court on Thursday ordered the the liquidation of defunct airline Jet Airways as per the Insolvency and Bankruptcy Code using its extraordinary powers granted under Article 142 of the Constitution, The Indian Express reported.
Article 142 gives the Supreme Court the power to pass any decree or order necessary to ensure complete justice in any case or matter pending before it.
The Insolvency and Bankruptcy Code provides a legal framework to resolve insolvency cases and release non-performing assets quickly.
A bench of Chief Justice DY Chandrachud and Justices JB Pardiwala and Manoj Misra set aside a National Company Law Appellate Tribunal order that upheld the transfer of ownership of the airline to the United Kingdom-based Jalan Kalrock Consortium, a group of private investors, as part of the Corporate Insolvency Resolution Process, Bar and Bench reported.
A company in financial distress or difficulty can be admitted into the Corporate Insolvency Resolution Process in response to a case filed by an operational or financial creditor or by itself under the Insolvency and Bankruptcy Code.
In 2021, the Jalan Kalrock Consortium had emerged as the Successful Resolution Applicant, or the selected resolution applicant whose compliant resolution plan is approved by the Committee of Creditors, to re-commence the operations of the airline.
However, the National Company Law Appellate Tribunal order was challenged by State Bank of India-led lenders of the cash-strapped airlines.
According to the resolution plan, the Successful Resolution Applicant had to pay Rs 4,783 crore and infuse Rs 350 crore in the first tranche of the payment, according to The Indian Express.
On January 18, the court set aside the National Company Law Appellate Tribunal order allowing the consortium to adjust the first tranche of payment of Rs 350 crore against a Performance Bank Guarantee, or a financial guarantee that a successful bidder provides to ensure they will fulfil the terms of a contract given as security by the lenders.
On Thursday, the bench noted that the tribunal’s order allowing Jalan Kalrock Consortium to adjust the first tranche of payment of Rs 350 crore against the Performance Bank Guarantee was “perverse” and in “flagrant disregard” of its January 18 order, The Indian Express reported.
“We have no doubt that the NCLAT acted contrary to settled legal principles,” the court said, according to Live Law. “NCLAT incorrectly interpreted our order.”
The bank guarantee had to be kept alive till the resolution plan was completed and forfeiting it would be in breach of the plan, the bench added.
The Successful Resolution Applicant had “contravened” the resolution terms, the court said and directed the National Company Law Appellate Tribunal to appoint a liquidator to carry out the liquidation.
In 2019, the State Bank of India had initiated insolvency proceedings against Jet Airways before the tribunal amid a financial crisis. Subsequently, the airline was admitted to the resolution process.
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