New Delhi: In a significant development, the Supreme Court on Thursday ordered the liquidation of grounded air carrier Jet Airways as per the Insolvency and Bankruptcy Code (IBC).
The verdict was delivered by a three-judge bench led by Chief Justice of India and comprising Justices J B Pardiwala and Manoj Misra. The apex court set aside the National Company Law Appellate Tribunal (NCLAT) decision, which upheld the resolution plan of Jet Airways and approved the transfer of its ownership to Jalan Kalrock Consortium (JKC).
The apex court said the NCLAT order was "perverse as it misled evidence on record since the performance bank guarantee of Rs 150 crore could not have been adjusted against the payment of Rs 350 crore".
Justice Pardiwala, pronouncing the judgment on behalf of the bench, allowed the plea of SBI and other creditors, who moved the apex court against the NCLAT decision, which upheld the resolution plan of Jet Airways in favour of JKC.
The bench said JKC contravened the terms of the resolution plan and the same cannot be implemented. It said the fundamental concern was "not to do substantial justice but also bring speedy disposal of dispute" and added that the determination of the resolution plan has been contravened.
“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.
“Under Article 142, we direct corporate debtor is taken into liquidation… Lenders are permitted to encash the performance bank guarantee. NLCT Mumbai to appoint liquidator forthwith," the apex court ordered. The detailed judgment will be uploaded later in the day. Article 142 of the Constitution gives the Supreme Court power to make orders and decrees to ensure complete justice in any matter or cause pending before it.
The NCLAT on March 12 upheld the resolution plan of the grounded air carrier and approved the transfer of its ownership to JKC. The SBI, Punjab National Bank (PNB) and JC Flowers Asset Reconstruction Private Limited have challenged the NCLAT verdict.
Jet Airways was grounded in 2019 due to severe financial troubles. SBI, its largest lender, initiated insolvency proceedings against the company before the NCLT in Mumbai, leading to the Corporate Insolvency Resolution Process (CIRP). In 2021, JKC emerged as the successful bidder for the airline's revival.
The bench said being mindful of the underlying objective that “Time and Speed are of the essence under the 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.
Justice Pardiwala, who authored the 169-page judgment on behalf of the bench, said granting this relief to the appellants’ would not run counter to the timelines and predictability that are central to IBC.
“On the contrary, it would be in furtherance of it. Ensuring that liquidation commences as soon as possible would also be in the best interests of the Corporate Debtor and the creditors including the workmen/employees who are yet to receive their rightful dues”, said the bench.
The bench added that to be precise, it would not be necessary for the parties to again approach the adjudicating authority for a determination under Section 33(3) of the IBC, 2016 on the ground that the provisions of the approved Resolution Plan have been contravened.
Justice Pardiwala said the NCLAT order was "perverse as it misled evidence on record since the performance bank guarantee of Rs 150 crore could not have been adjusted against the payment of Rs 350 crore". “We have reached the conclusion that the impugned order passed by the NCLAT is perverse and unsustainable in law. It has led to further complications. As a result, the appeals succeed and are allowed. The impugned order passed by the NCLAT is set aside”, said the bench.
Justice Pardiwala said the amount of Rs 200 crore already infused by the successful resolution applicant (SRA) stands forfeited. “The Lenders/ Creditors are further permitted to encash the performance bank guarantee of Rs. 150 Crore furnished by the SRA. We accordingly order so”, said Justice Pardiwala.
“In the peculiar and alarming circumstances as discussed in this judgment and also keeping in mind the fact that almost five years have elapsed since the Resolution Plan was duly approved by the NCLAT and there being no progress worth the name, we are left with no other option but to invoke our jurisdiction under Article 142 of the Constitution and direct that the corporate debtor be taken in liquidation”, said Justice Pardiwala.
The apex court said the NCLT, Mumbai shall now take appropriate steps for the appointment of the liquidator and all other necessary formalities for the commencement of liquidation of the corporate debtor.
The apex court also found several shortcomings in the functioning of the NCLT and NCLAT and asked Parliament to consider its suggestion in consultation with the Insolvency Bankruptcy Board of India and the Ministry of Finance, to improve their functioning.
“The appointment of new members must be done in a manner such that it coincides with the date of retirement of the sitting members seamlessly to avoid such operational inefficiencies. Persons with high ideals & impeccable integrity should be appointed as Members of the NCLT as well as the NCLAT. There should not be any political appointment”, said Justice Pardiwala.
Read More
