Jet Airways ceased operations on 17 April, 2019, after 26 years of service, due to financial difficulties. Seeking revival, Jet Airways filed for insolvency in June 2019 with the National Company Law Tribunal (NCLT) in Mumbai. However, the process was derailed by the covid-19 pandemic and legal complexities raised by various stakeholders.
In October 2020, the Murari Lal Jalan-Kalrock Capital consortium emerged victorious in the bid, earning approval from the Committee of Creditors (CoC) and the NCLT. Their revival plan involves injecting ₹475 crore within the first two years and raising ₹125 crore through the sale of non-core assets by the end of the first year. However, the revival process has been stuck since.
Mint examines the prevailing legal disputes that are obstructing Jet Airways’ efforts to revive and resume operations.
Challenging the Winning Bidder and Pending Dues
The successful bidder, Kalrock Capital Murari Lal Jalan consortium (JKC), faced opposition from former lenders led by SBI in the NCLAT. SBI contested the NCLT Mumbai bench declaration of the consortium as the winning bidder, arguing that the consortium hadn’t fulfilled the outlined conditions in the resolution plan, including settling dues of approximately ₹800 crore.
The successful bidder for Jet Airways, JKC, is facing legal challenges from the airline’s workers and employees, all of whom are seeking to recover their pending dues. Both the workmen and lenders took their grievances to the Supreme Court, pursuing the recovery of amount from the consortium.
Adding to the legal web, a Malta-based aviation company, Ave Aviation, sought NCLAT’s permission to purchase aircraft from Jet Airways. However, the NCLT Mumbai bench dismissed their plea in July, with Ave Aviation accusing lenders of obstructing the aircraft sale.
The Crucial NCLAT Extension Plea
At the heart of the matter lies the extension plea filed by the successful bidder, JKC, which has requested a 90-day extension from the NCLAT to pay pending dues amounting to ₹350 crore. The SBI-led lenders set a deadline for JKC to deposit ₹350 crore by August 31, as a condition for ownership transfer.
JKC proposed paying the dues in two installments, with ₹150 crore by August 31 and the remaining ₹150 crore by September 30. JKC has accused lenders of deliberately blocking ownership transfer through legal roadblocks and seeks the tribunal’s intervention to ensure a smooth transition.
While the NCLAT reserved its decision for 28 August regarding the extension, lenders expressed willingness to extend support to JKC. However, they contested JKC’s attempt to modify the resolution plan’s terms, including the addition of a performance bank guarantee of ₹150 crore.
Workers’ Plea and Aircraft Purchase Dispute
Workers of Jet Airways took their plea to the NCLAT in October 2022, leading to a favourable ruling. The NCLAT directed JKC to pay around ₹224 crore in remaining dues along with provident and gratuity funds to the grounded airline’s employees.
The Supreme Court upheld this NCLAT order in February, instructing the airline to reinstate 169 workers with full wages. These workers were deemed temporary by the airline, despite fulfilling the 240-day service requirement on a fixed-term contract.
Regarding the dispute involving Ace Aviation, NCLAT postponed the matter until the dues issue between JKC and lenders was resolved. The next hearing for the Ace Aviation case is scheduled for 6 September.
Regulatory Hurdles and Stalled Operations
The Directorate General of Civil Aviation (DGCA) on 28 July renewed Jet Airways’ air operator certificate (AOC) that had lapsed in May 2022 due to JKC’s failure to resume operations. However, despite AOC renewal, legal obstacles continue to prevent the airline from resuming flights.
The airline’s spat with DGCA over slot allocation further compounds the situation. In June 2021, DGCA asserted that old slots wouldn’t be reinstated based on the airline’s 25-year operational history. NCLT’s final order also rejected Jet Airways’ claim for pre-allowed slots under the ‘use it or lose it’ rule.
What lies ahead
With these intricate legal proceedings in play, the fate of Jet Airways’ revival hangs in balance. The NCLAT’s forthcoming decision is anticipated to shed light on the extension plea, payment date, and the viability of a performance bank guarantee. The airline also saw key executives like CEO-designate Sanjiv Kapoor and airline’s accountable manager P.P. Singh leave the airline since the new promoters were not even being able to pay full salaries and all keep executives were working on pay cut. The airline, sources say, currently has a very low number of employees in the operational departments, a key prerequisite for any airline. Amidst this legal maze, the future of Jet Airways and its revival aspirations remain uncertain.