The Supreme Court issued an order on Thursday for the liquidation of Jet Airways after concluding that the ruling from the National Company Law Appellate Tribunal (NCLAT) contravened the apex court’s decision made in January 2023. This ruling followed a series of appeals, including one from the airline’s lenders, who contested the NCLAT’s endorsement of the airline’s takeover by a consortium led by UK’s Kalrock Capital and UAE-based entrepreneur Murari Lal Jalan.
The highest court asserted that liquidation serves the best interests of Jet Airways’ creditors and employees. Justice JB Pardiwala, while delivering the judgment, characterized the airline’s legal ordeal as an ‘eye-opener’ that imparts critical lessons for India’s Insolvency and Bankruptcy Code (IBC).
Jet Airways crisis: NCLAT’s judgment found faulty
The apex court condemned the NCLAT for neglecting its prior ruling. In particular, the court pointed out the NCLAT’s endorsement of applying a Rs 150 crore performance bank guarantee (PBG) against a necessary capital infusion of Rs 350 crore from the Jalan-Kalrock Consortium (JKC), the resolution applicant. The court determined that the performance bank guarantee should have remained intact until the completion of the insolvency process, emphasizing that the consortium’s failure to provide the promised funds further warranted the airline’s liquidation.
Failure to meet conditions for revival
Theq ruling from the top court concluded that the consortium did not meet the essential conditions required to revive Jet Airways, rendering liquidation the sole feasible alternative. Lenders, headed by the State Bank of India, contended that JKC’s failure to inject the necessary capital eliminated any chance for the airline’s revival.
In its ruling, the Supreme Court established a vital precedent for insolvency resolution within India’s aviation industry.
Jet Airways grounded
Jet Airways was grounded in 2019 as a result of mounting financial troubles. Its principal lender, the State Bank of India, initiated insolvency proceedings against the airline before the National Company Law Tribunal (NCLT) in Mumbai, which led to the airline’s entry into the resolution process.
In 2021, a consortium comprising UAE-based non-resident Indian Murari Lal Jalan and Florian Fritsch, represented by his investment holding company Kalrock Capital Partners Ltd (based in the Cayman Islands), emerged as the successful bidder for the revival of Jet Airways. Nevertheless, the consortium encountered challenges in assuming control of the airline.
Jet Airways row: Sale of aircraft
As part of the resolution process, both the Committee of Creditors (CoC) and JKC were assigned the responsibility of selling three Boeing 777-300 aircraft that were formerly operated by Jet Airways. The Malta-based Challenge Group successfully bid for the aircraft and executed Letters of Intent in October 2022 through its special purpose vehicle, Ace Aviation, to acquire the three B777-300 aircraft.
India’s Aviation Expansion in Challenging Times
Despite challenges such as the collapse of Jet Airways, India’s aviation industry has undergone a significant transformation in the past decade. The increasing demand for air travel, alongside government reforms, has established India as the world’s third-largest domestic aviation market, following the United States and China. This sector’s growth has been enhanced by a variety of strategic initiatives designed to make air travel more inclusive, affordable, and environmentally friendly.
The Government’s Influence in Reshaping Aviation
The Indian government has played a crucial role in propelling the aviation sector’s growth, implementing numerous policies and initiatives that have fortified the industry. Prime Minister Narendra Modi, speaking at the 2nd Asia Pacific Ministerial Conference on Civil Aviation in September 2024, underscored the necessity of making air travel more accessible to the broader population. He pointed out that what was once an elite service aimed only at the affluent has now evolved into a more inclusive sector, linking individuals from diverse socio-economic backgrounds.
“Our goal is to ensure that air travel is within reach of the common man. We must prioritize safety, affordability, and accessibility for everyone,” Modi remarked. He also noted the increasing presence of women pilots in India, which currently stands at 15%—significantly higher than the global average.
Enhancing Regional Connectivity and Airport Development
A major catalyst for the expansion of India’s aviation sector has been the Ude Desh ka Aam Nagrik (UDAN) initiative, which was introduced in 2016. The Regional Connectivity Scheme (RCS) seeks to link underserved and unserved airports, facilitating better access to air travel for residents of smaller towns and remote areas. As of August 2024, the UDAN scheme has successfully inaugurated 583 routes and linked 86 airports, which includes 13 heliports and two water aerodromes.
With over 1.43 crore passengers reaping the benefits of the scheme, UDAN is not solely focused on enhancing connectivity but also on nurturing regional economic growth. The government’s emphasis on improving infrastructure is reflected in the rise of operational airports—India now boasts 157 operational airports, up from 74 in 2014. The nation aims to expand this count to 350-400 by the year 2047.
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