Jet Airways liquidation: A wake-up call for India’s insolvency code

Jet Airways’s liquidation comes even after a consortium successfully bid to revive the airline, following a dispute between the group and Jet’s lenders that got tossed around between bankruptcy tribunals and the Supreme Court for years.

Justice J.B. Pardiwala, who pronounced the ruling, remarked that this case served as an eye-opener for the functioning of insolvency tribunals and for India’s Insolvency and Bankruptcy Code.

The liquidation of Jet Airways raises broader questions about the effectiveness of the IBC framework in handling airline insolvencies. Go First airline has also filed for liquidation, adding to concerns about the viability of airline restructurings under the IBC.

“Airlines insolvencies pose issues that are quite unique and an approach that works in other sectors may not necessarily work with airline insolvencies," said Vihang Virkar, partner, DMD Advocates.

“Airlines in India typically do not own most of their fleet and the ownership lies with the aircraft lessors. The only assets of value in an airline are, therefore, its landing-parking rights, slots, people, and low-value ground-handling and engineering equipment," he added. “None of these can be easily converted to liquid funds in the case of a liquidation."

The Supreme Court ordered Jet Airways’s liquidation after finding that the Jalan Kalrock Consortium (JKC), the successful bidder for the airline, had failed to comply with the conditions of the resolution plan, marking the final chapter in Jet’s long struggle for revival.

The court concluded that liquidation was the only viable option through which creditors could recover some of their dues.

“I hope this judgment leads to changes in the IBC framework, with amendments to address insolvencies in the aviation sector," Virkar added.

Also read | India's insolvency court needs an understanding of aviation

Sumant Nayak, senior partner at Desai & Diwanji law firm, labelled the Supreme Court’s Jet Airways decision a defining case for the entire IBC framework. “These are watershed moments in the landscape of insolvency and resolution process and it may spur development of guidelines towards setting up of soft timelines for implementation of the resolution plan."

“We are satisfied with the outcome. JKC’s repeated non-compliance with the terms of the resolution plan caused the value of the plan to diminish significantly," said Devesh Dubey, senior associate at Sanjay RPK Law, a firm representing Jet Airways’s lenders. “The Hon’ble Supreme Court has correctly concluded that liquidation is the appropriate course of action."

An ‘unworkable’ plan

Jet Airways, founded by Naresh Goyal, had gone bankrupt in April 2019 and suspended its flight operations due to financial troubles.

The Supreme Court, as part of its order on on Thursday, set aside the National Company Law Appellate Tribunal’s decision in March upholding the transfer of ownership of Jet Airways to JKC. It criticized the NCLAT for disregarding its previous rulings and for allowing the order in favour of JKC without fully examining the facts.

The verdict, which had been reserved on 16 October by a three-judge bench comprising Chief Justice D.Y. Chandrachud, Justice J.B. Pardiwala, and Justice Manoj Misra, was in response to a plea by Jet’s lenders, led by the State Bank of India.

The lenders argued that JKC’s resolution plan was “unworkable" and urged the court to use its inherent powers under Article 142 to liquidate the airline. (Article 142 in the Constitution allows the Supreme Court to pass any order necessary for ‘complete justice’ in a case even if such its ruling is not within the scope of existing laws or procedures.)

The Jalan Kalrock consortium—comprising UAE-based non-resident Indian Murari Lal Jalan and Florian Fritsch, who holds shares in Jet Airways through his Cayman Islands-based investment holding company Kalrock Capital Partners Ltd—had emerged as the successful bidder to revive the airline.

While JKC claimed ownership of the airline and stated it was doing everything possible to restart its operations, the consortium accused the lenders of intentionally stalling efforts and pushing the airline closer to liquidation.

On Thursday, the Supreme Court, using its special powers under Article 142 of the Constitution, decided to liquidate the airline after noting that JKC had not fulfilled key obligations outlined in the resolution plan.

JKC’s resolution plan included infusion of funds, paying worker dues, settling essential costs like airport dues, clearance of creditors’ dues, and revival of flight operations. However, the execution of the plan encountered significant delays, leading to a prolonged legal battle with the lenders that spanned over five years.

‘Doomed from the beginning’

Jet Airways’s former accountable manager Captain P.P. Singh toldMintthe Supreme Court ruling was on expected lines as there was no visible sign that JKC was technically and financially capable of reviving and successfully operating an airline like Jet Airways.

“They bid for the airline without understanding the intricacies of the business, thinking they could somehow make it work. But with no real experience in aviation, they didn’t stand a chance of successfully implementing the complex resolution plan." Singh said.

He added that the likelihood of Jet Airways going into liquidation was a possibility right from the beginning given how the resolution plan was written.

“The plan was doomed to fail because of its own inherent flaws," Singh said, while also criticising Jet’s resolution or insolvency professional for failing to protect the airline’s assets, allowing 11 serviceable aircraft and spares worth millions of dollars to deteriorate.

“What do you expect when you put an accountant in charge of managing an airline revival?," Singh remarked.

‘Serious consequences’

The dispute had first reached the Supreme Court in January 2024, when the court directed JKC to deposit ₹150 crore by 31 January 2024, warning of “serious consequences" if the payment was not made.

The court at the time set aside NCLAT’s order of August 2023, which had instructed JKC to submit a ₹150 crore performance bank guarantee to fulfil the total ₹350 crore obligation under the resolution plan.

The lenders had contested the encashment of the performance bank guarantee, and the Supreme Court clarified that the directive was incorrect and should be stayed.

The court also instructed NCLAT to dispose of all appeals in the case by March 2024, setting a hard deadline for the appellate tribunal to resolve the outstanding issues.

Also read | Re-tweak the IBC to better secure aircraft lessor rights

NCLAT’s March order

Despite the Supreme Court’s earlier intervention, the NCLAT, in its final order in March 2024, upheld the transfer of Jet Airways’s ownership to the Jalan Kalrock consortium.

The appellate tribunal set a 90-day deadline for the lenders to complete necessary formalities, including the transfer of ownership, securing an air operator certificate, and resuming operations. Additionally, NCLAT instructed the lenders to secure three Dubai-based properties belonging to Jet Airways, which were meant to act as collateral for the ₹350 crore payment required under the resolution plan.

This order placed JKC back in the driver’s seat for the airline’s revival. Still, the lenders were dissatisfied with the progress and moved the Supreme Court to challenge NCLAT’s March 2024 order, leading to the current deliberations.

Lenders’ allegations

During the Supreme Court hearings, the lenders, represented by Additional Solicitor General N. Venkataraman, accused JKC of failing to fulfil critical commitments outlined in the resolution plan. They argued that JKC had deposited only ₹200 crore of the ₹350 crore first tranche, falling short of the ₹150 crore in cash required under the earlier Supreme Court order.

The lenders further claimed that JKC had not met several other obligations, including securing an air operator certificate, international bilateral rights, and airport slots—essential for resuming flights. Additionally, they pointed out that JKC had not obtained security clearance from India’s home ministry, which is a requirement for operating the airline.

The lenders also emphasized the need to pay around ₹272 crore in dues owed to Jet Airways’s workers. They informed the court that JKC had failed to release Jet Airways’s three Dubai properties, making it difficult to complete the transfer of ownership.

Also read | Go First’s foreign funding push to test India’s insolvency framework

The delay in finalizing the ownership process had led to monthly losses of ₹22 crore in maintaining Jet’s assets, while the airline still owed approximately ₹7,500 crore to its creditors.

In addition, the lenders raised concerns about JKC’s failure to cooperate with an investigation into the source of the ₹200 crore payment after Florian Fritsch, JKC’s co-founder, faced fraud and money laundering charges in Europe.

“This is a case of gross abuse of the Insolvency and Bankruptcy Code process," Venkataraman argued. “The court must make it clear that the IBC is not for abuse, but a genuine facilitator for takeovers. Operators like this cannot come and play with the courts."

Venkataraman also stressed that the committee of creditors, which includes over 30 banks, would be burdened with ₹1,100 crore in airport dues. He said that neither the CoC nor the employees would see anything, and the resolution plan had become unworkable.

JKC’s defence

JKC’s counsel, senior advocate Mukul Rohatgi, defended the consortium in court, accusing the lenders of deliberately stalling the revival of Jet Airways to push the airline into liquidation.

Rohatgi argued that the lenders were more interested in selling Jet’s assets as scrap to maximize their returns than cooperating with JKC to revive the airline.

“They haven’t lifted a finger to help. They want to drive this plan into the ground so that they can sell the planes as scrap and get more," Rohatgi told the court.

“I am not the bad guy. I am trying to get the company back in the air," another senior counsel for JKC told the court.

JKC couldn’t be immediately reached for comment.