The Supreme Court of India has decided to liquidate Jet Airways, currently undergoing bankruptcy, under Article 142 of the Constitution, delivering a significant blow to the country’s aviation sector. This decision, announced today (November 7, 2024), determines the fate of Jet Airways, a now-bankrupt airline founded by Naresh Goyal.
How Was the Jet Airways Liquidation Decision Made?
The Court ruled for liquidation, citing that the winning bidder, the Jalan Kalrock Consortium (JKC), had failed to comply with its resolution plan. JKC did not complete a required payment installment of ₹350 crore, nor did it pay wages and airport dues. The Court also overturned the National Company Law Appellate Tribunal’s (NCLAT) March 2024 decision approving JKC’s ownership of the airline.
Supreme Court’s Justification: Protecting Creditors’ Rights
The Court concluded that liquidation was the most reasonable option for creditors to recover part of their claims. Justice JB Pardiwala noted that this case serves as a cautionary example under India’s Insolvency and Bankruptcy Code (IBC). Creditors, led by the State Bank of India, argued that JKC’s resolution plan was unworkable, urging the Supreme Court to opt for liquidation.
Role of Article 142 of the Constitution
Article 142 grants the Supreme Court the authority to make decisions beyond legal frameworks to ensure ‘complete justice.’ The Court exercised this authority to order Jet Airways’ liquidation, allowing creditors to recover at least some of their dues.
The Jalan Kalrock Consortium’s Failure
The Jalan Kalrock Consortium (JKC), led by UAE-based Indian businessman Murari Lal Jalan and Florian Fritsch, had submitted the highest bid to take over Jet Airways to revive it. However, JKC’s resolution plan faced significant implementation delays. After more than five years of struggle with creditors, liquidation became the only option.
JKC’s Inadequate Resolution Plan
The resolution plan proposed by JKC included fund injection, creditor payment, and resuming flight operations. However, the consortium failed to fulfill core obligations. Due to incomplete payments and unfulfilled commitments, the Supreme Court ruled for liquidation.
Origin of the Dispute and Court Proceedings
The dispute reached the Supreme Court in January 2024. The Court ordered JKC to deposit ₹150 crore, which remained unpaid. In March 2024, the NCLAT approved JKC’s ownership of Jet Airways, requiring a ₹350 crore guarantee. However, creditors contested this decision and ultimately appealed to the Supreme Court.
Creditors’ Request for Liquidation and Defenses
Creditors’ lawyers requested liquidation, noting that JKC had only deposited ₹200 crore of the committed ₹350 crore. Concerns intensified as JKC co-founder Florian Fritsch faced fraud allegations in Europe.
JKC’s attorney, Mukul Rohatgi, argued that creditors sought to delay Jet Airways’ revival intentionally, aiming to sell the airline’s assets through liquidation.
Impact of Jet Airways’ Closure on the Aviation Sector
The Supreme Court’s decision signals a turbulent period for India’s aviation sector. Jet Airways’ liquidation could reduce competition, limiting flight options for passengers. As creditors strive to recover their assets during the liquidation process, the economic challenges in India’s airline industry come into sharper focus.
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