What Jet Airways resolution plan has for its employees, workmen
What does the Jet Airways resolution plan – put forth by the successful bidders Kalrock Capital and NRI businessman Murari Lal Jalan – offer to the employees and workmen of the airline?
The successful resolution applicant proposes to pay a fixed sum of Rs 52 Crores to the workmen snd Employees towards settlement of all the claims made by them, including to the Authorized Representatives of Employees and Workmen (Admitted Workmen and Employees dues).
The airlines currently has large number of employees and workmen on its payrolls, who are otherwise not required for the day-to-day affairs of the Corporate Debtor and hence the resolution professional – Ashish Chhawchharia — did not account the salaries and other benefits due to such employees (estimated at around Rs 715 Crores as of September 2020) as CIRP cost.
However, the new management has made this offer to the employees (subject to approval from the employees):
(i) Welfare Trust: The Jet Airways resolution plan proposes that all the people who are/were the employees and workmen of the Corporate Debtor on and from the insolvency commencement date, form an employees’ trust. The union leaders of the employees and workmen of the Corporate Debtor can be the trustees of such Trust and all such employees and workmen be the beneficiaries of such Trust. Such Trust can be formed by the employees and workmen any time after the approval of the Jet Airways resolution plan and the details of such Trust be shared with the successful resolution applicant.
(ii) Equity Stake in the airlines: The new management will transfer an equity stake of 0.50% to the Trust, if formed, in the reconstituted share capital of the Corporate Debtor, through conversion of their outstanding claims. The shares will have the same rights as attached to the shares held by the SRA in the Corporate Debtor and the beneficiaries of the Trust will be entitled to enjoy all the benefits of such shares. The SRA estimates that the NPV of 0.5% Equity Stake based on the market capitalization at a conservative P/E Ratio of 10 for each year (from Year 3 onwards) at the year 5 is Rs 183 Crores. The SRA proposes that if and when the Trust sells the shares held by it in the Corporate Debtor, the value derived from such sale be distributed in the following manner:
- 60% to Workmen
- 15% to employees on salary of up to 12 lac p.a.
- 15% to employees on salary between 12-15 lac p.a.
- 10% to employees on salary above 15 lac p.a
The above ratio is a proposal from the SRA and the beneficiaries of the Trust can vary it.
(iii) Equity Stake in Airjet Ground Services Limited (AGSL): As a part of Jet Airways resolution plan, SRA has sought the demerger of third-party ground handling business of the Corporate Debtor to its wholly owned subsidiary – AGSL. The SRA will transfer 76% equity stake in, and management control of AGSL to the Trust after the Approval Date. Therefore, the Trust will own majority stake and control in AGSL and its business.
(iv) Cash Payment for Employees and Workmen: In addition to the amounts proposed to be paid to the Operational Creditors (Workmen and Employees, including Authorized Representatives of Workmen and Employees) for claims up to insolvency commencement date, the SRA proposes to make the following payments to employees and workmen of the Corporate Debtor. Such payments will be made within 180 days from the Effective Date and the manner of payment and process will be detailed on the website of the Corporate Debtor.
Cash payment for employees: The SRA proposes to pay a token sum of Rs 11,000 in cash to each employee of the Corporate Debtor.
Cash payment for workmen: The SRA proposes to pay the following to each workman of the Corporate Debtor:
i. Rs 11,000 to each workmen of the Corporate Debtor.
ii. Rs 5,100 as medical expense reimbursement for the parents of the workmen of the Corporate Debtor.
iii. Rs 5,100 cash as school fee reimbursement for children of the workmen of the Corporate Debtor. iv. Stationary (notebooks, school bags etc.) collectively valued at Rs 1,100 for children of the workmen of the Corporate Debtor.
v. One-time mobile phone recharge of Rs 500 for the workmen of the Corporate Debtor.
c. The above-mentioned cash payment will be made out of the Contingency Fund (₹. 8 Crores) reserved by the SRA. Additional amounts, if required, will be utilized out of the proceeds of sale of assets received by the Corporate Debtor.
(v) IT Assets: The SRA proposes to give to each workman, one IT equipment (phone or iPad or laptop) out of the existing IT assets of the Corporate Debtor. The IT assets will be given within 180 days from the Effective Date and the manner of process will be detailed on the website of the Corporate Debtor. Further, if any of the IT assets are left after completing the distribution to the workmen in the manner described above, then the SRA will give such remaining assets to each employee, one IT equipment (phone or iPad or laptop) out of the existing IT assets of the Corporate Debtor. Priority in such distribution shall be given to the employee with lowest last drawn salary up to the highest drawn salaried employee. The said IT assets will be given on lottery / chit / random identification basis to ensure the distribution process is fair, neutral and unbiased. It is also submitted that the SRA accepts no responsibility or liability for the condition or value of IT assets and any such allocated IT assets must be collected within 30 days from completion of such draw of lots.
(vi) Free Tickets: The SRA proposes to give credits for future tickets worth ₹. 10,000 to each employee and workmen of the Corporate Debtor. Such credits will be extended within 180 days from the Effective Date and the process will be detailed on the website of the Corporate Debtor. The credit for future tickets will be issued in the form of redeemable vouchers in the multiples of Rs 1,000 (equivalent to ₹ 1,000 worth of credit for future tickets). The vouchers will be transferable in nature (prior to issuance of any ticket). No tickets will be transferable in nature. Vouchers can be redeemed against more than 1 (one) ticket. Booking of tickets against redemption of such vouchers must be completed within 30 days of the Corporate Debtor recommencing its domestic operations. Tickets can be availed during April-June Quarters and August-October Quarters on sectors where the Corporate Debtor flies.
(vii) Key Terms: It is stated in the Resolution Plan that this proposal to Employees and Workmen is valid only if at least 95% of the employees and workmen of the Corporate Debtor support this Resolution Plan by not contesting or challenging its approval by the Adjudicating Authority (the Authority) and/or its implementation in the manner approved by the Authority. If the above proposal is not accepted by the employees and workmen within 30 days from the Approval Date, then no other creditor will have the right to seek such benefits or any part thereof and such proposal shall stand withdrawn. After expiry of the said period of 30 days from the Approval Date, the equity stake of 0.50%, and cash payments of up to Rs 8 Crores currently earmarked for employees and workmen will be given to the financial creditors. The proposal with respect to ticket credits, equity stake in AGSL and handover of IT assets shall revert to the Corporate Debtor and no other creditor will be entitled to it. After expiry of 30 days from the Approval Date or upon non-receipt of necessary approvals, the SRA will have the discretion to deal with its equity stake in AGSL in the manner deemed appropriate by it without causing any prejudice to implementation of the Resolution Plan.
Proposal for absorption of the Employees
i. To retain 50 employees and workmen forming part of the APT. Such employees will be given the option to resign and seek re-employment by the airline on fresh employment terms as agreed between the SRA and such employees, commencing from the Approval Date. An employee who refuses to exercise such option will not be retained.
ii. Excluding the Retained Employees, all employees and workmen on the payrolls of the Corporate Debtor (Demerged Employees) as on 15 September 2020 (Record Date) will be demerged from the Corporate Debtor and absorbed into AGSL with effect from the Approval Date.
iii. It is further submitted that as part of such demerger, all the past dues towards salaries and other benefits (such as PF dues, leave encashment, retirement benefits, notice pay, termination dues etc.) of the Demerged Employees for the period after the ICD and until the Approval Date and/or retirement benefits accruing to Demerged Employees which have arisen after the ICD, will also stand demerged from the Corporate Debtor to AGSL with effect from the Approval Date and the Corporate Debtor will absorb no liability or responsibility for such payments as the RP has not accounted such salaries and other benefits as CIRP cost.
iv. The Corporate Debtor will offer 76% of its shareholding in AGSL to the Employees’ Trust and retain the remaining 24% shareholding. If the Trust fails to exercise or refuses to accept such offer within 30 days from the Approval Date or challenges the implementation of this Resolution Plan, then the Corporate Debtor will retain 100% shareholding in AGSL.
Also See: A deep dive into the resolution plan of Jet Airways
