Why NCLT allowed new promoters take control of Jet Airways despite objections
Brushing aside doubts of Monitoring Committee and financial creditors, the Mumbai bench of the National Company Law Tribunal (NCLT) has finally paved the way for the new promoters to take control of Jet Airways, and infuse required funds as part of the resolution plan to make the airlines up and running.
The NCLT also allowed the petition filed by the successful resolution applicants — the Consortium of Murari Lal Jalan and Kalrock Capital – for the exclusion of 180 days) till 16 November 2022) from effective date for infusion of funds in the form of equity against fresh issuance of shares by Jet Airways to the successful bidders.
The NCLT rejected most of the objection raised by the Monitoring Committee and financial creditors.
The objections were with regards to non-fulfilment of certain conditions precedent (CPs) by the successful resolution applicant before being allowed to take control of the management of the company and infuse capital.
The five conditions precedent were:
- Validation of Air Operator Certificate (AOC) of the Corporate Debtor by the Directorate General of Civil Aviation (DGCA) and Ministry of Civil Aviation (MoCA)
- Submission of the Business Plan to DGCA & MoCA
- Slots allotment approval
- International Traffic Rights clearance in compliance with applicable law
- Approval of Demerger of ground handling business into Airjet Ground Services Ltd (AGSL)
While the consortium of Murari Lal Jalan and Kalrock Capital pleaded that it had fulfilled all the conditions by 20 May 2022 and that the same date should be treated as effective date for making payments and taking control of the management, the Monitoring Committee was not convinced that it the consortium had fulfilled all the criteria for triggering the takeover of the management.
Note: Under the terms of the Resolution Pan, the successful resolution applicant (the consortium of Murari Lal Jalan and Kalrock Capital) was to infuse certain funds into the Jet Airways within 170 days from the Effective Date, make payments as per the terms of the Resolution Plan and take control of the CD within the first 180 days from the Effective Date.
The Monitoring Committee comprising financial creditors and the resolution professional — Ashish Chhawchharia – had argued that the consortium has been unable to fulfil all the conditions prior to or before the expiry of the stipulated period of 270 days from the Resolution Plan Approval Date as approved by this Tribunal, as per the stipulation in the Plan Approval Order dated 22nd June 2021.
It further charged the consortium of misleading, on several occasions, the tribunal and the NCLAT with submissions on fulfilment of the conditions (despite being fully aware of the Monitoring Committee’s disapproval of the CP compliances), and on that false premise, attempted to obtain control and management of the Corporate Debtor.
However, the NCLT disagreed with the argument of the Monitoring Committee.
The tribunal, after considering submissions from both sides and on perusal of record with regards to satisfactory compliance of conditions precedent (CPs), noted that there is no dispute on satisfactory compliance of two CPs — Validation of Air Operator Certificate by Directorate General of Civil Aviation (DGCA) and Ministry of Civil Aviation (MoCA) and Approval of demerger of ground handling business into all capital AGSL.
On the condition of submission and approval of business plan to DGCA and MoCA, the NCLT noted that the business plan was submitted to the authorities to fulfil compliance of DGCA’s Show Cause Notice (SCN) to Jet Airways on April 2019. “SCN states that Air Operator Certificate will be issued after MoCA approves the business plan. Thus, with issuance of Air Operator Certificate, it is implied that the business plan has been approved. Even otherwise, guidelines for issuance of Air Operator Certificate being CAP 3100 clearly states that the DGCA will review the detailed business plan of the Applicant before issuance of Air Operator Certificate and with issuance of Air Operator Certificate there is implied approval of MoCA. In the background of above we find that this CP is satisfactorily complied with the issuance of AOC,” argued the NCLT.
On the issue of Slots Allotment Approval, the tribunal noted that the plan approval order of the NCLT on 22 June 2021 stipulated that no historic slots will be granted to Het Airways.
“There is no dispute that slots for which Jet Airways applied were granted to them by the concerned Competent Authority including the slots in Delhi and Mumbai, on settling the old dues and as such it cannot be considered as non-allotment of slots,” said the NCLT.
On the issue of International Traffic Right Clearance, the tribunal found that no blanket approval can be granted upfront to the airline as it has to approach the concerned authorities for grant of such approval as per applicable laws. “…the plan approval order has reached its finality, thus, accepting the fact that all the approval issued upfront cannot be reinstated. Accordingly, this condition precedent needs to be read with plan approval order. Even otherwise there is no dispute that under the approved plan, SRA has to re-commence with operation of six air crafts. The International Traffic Rights clearance is required to be obtained in compliance with the applicable laws which stipulates that minimum twenty air crafts are required to be deployed before applying for such clearance,“ said the Tribunal.
Also Read: What Jet Airways resolution plan has for its employees, workmen
