NCLAT paves way for Kalrock-Jalan to take control of Jet Airways

In a big relief to the Kalrock-Jalan Consortium, the successful resolution applicant (SRA) for Jet Airways, the National Company Law Appellate Tribunal (NCLAT) has asked the lenders to handover the control of the airlines to the SRA.

In an order passed on 12 March 2024, the appellate tribunal said monitoring committee must handover the control of Jet Airways to the Kalrock-Jalan Consortium within 90 days from the date of the order.

The NCLAT came down heavily on the monitoring committee and the lenders for not taking positive steps for implementation of the Resolution Plan, and instead always pressing for directing the liquidation of Corporate Debtor, which is neither acceptable nor legal.

The tribunal directed the Monitoring Committee and Lenders as well as the SRA to take steps for creation of charge over the three Dubai Properties of the airline within a period of 30 days from the day of the order. The Kalrock-Jalan Consortium will bear all necessary expenses for creation of necessary charge.

Creating necessary security over Dubai properties was one of the conditions under the resolution plan, which the SRA had not fulfilled.

It also directed the lenders and the Monitoring committee to adjust the Performance Bank Guarantee of Rs 150 crore, which is lying with the Monitoring Committee/ MC Lenders, towards the first tranche payment of INR 350 crores as Rs 200 crores have already been paid by the SRA.

“By adjustment of PBG as per the Resolution Plan, the first tranche of payment of Rs 350 crores shall be completed,” said the NCLAT in its order.

Out of the first tranche payment of Rs 350 crores, payments should be made to the workmen and employees and the creditors as per the Resolution Plan, including the payment of CIRP cost as per the Resolution Plan.

It also directed the consortium to submit an application for re-issue of Air Operation Certificate which may be obtained within 90 days from the date of this judgment.

The NCLAT noted that the Resolution Plan provides that performance security be given by SRA for implementation of the Resolution Plan. As noted above, PBG of Rs 150 crores was already handed over by SRA to the Lenders. The BKC property has also been with the Lenders, whose security value have been noted in the Resolution Plan as Rs 246 crores. “We fail to see the reason for Lenders not proceeding to implement the Resolution Plan. The Lenders from the very beginning has taken the stand that unless the SRA execute Draft Undertaking, which was shared by Lender to SRA on 4 June 2022, the Plan implementation may not proceed,” the NCALT said.

It further noted that the above clearly indicates the mind-set of the Lenders, who wanted some more undertaking by the SRA in addition to what was contemplated in the Resolution Plan for Lender to proceed with the implementation.

Lenders opposition to resolution plan

The Monitoring Committee claimed that the successful resolution applicant did not fulfil the five conditions precedent prior to or before the expiry of the stipulated period of 270 days from the approval date of the resolution plan.

The Monitoring Committee further alleged that the consortium was continuously and on several occasions misleading the NCLT and the NCLAT with submissions on fulfilment of the conditions (despite being fully aware of the Monitoring Committee’s disapproval), and on that false premise, attempted to wrongly obtain control and management of Jet Airways.

The Monitoring committee has emphasised that these incomplete conditions are critical for and have a bearing not only on the successful recommencement of Jet Airways as an aviation business, but also for its continued operations, and payment of committed considerations due to the financial creditors as per the resolution plan.

The five conditions precedent were: i. Validation of Air Operator Certificate of Jet Airways by the Directorate General of Civil Aviation (DGCA) and Ministry of Civil Aviation (MoCA); ii) Submission of the business plan to DGCA & MoCA; iii) slots allotment approval; iv) International Traffic Rights clearance in compliance with applicable law; v) approval of demerger of ground handling business into Airjet Ground Services Ltd (AGSL).

Details of the resolution plan

The new management of Jet Airways – the consortium of Kalrock Capital and UAE-based Murari Lal Jalan – was supposed to infuse Rs 1,375 crore over the next 2-3 years, as per their resolution plan approved by the National Company law Tribunal (NCLT).

In the first 6 months, the management was to infuse Rs 350 crore as equity, which would go towards CIRP costs, contingency fund, payment to financial creditors, operational creditors, other creditors, and other stakeholders, working capital for business and Miscellaneous admin expenses.

In the next six months, the management would infuse another Rs 250 crore in the form of equity, and this amount will go towards working capital for business, acquiring Etihad’s stake in Jet Privilege Private Ltd; making payments to creditors if the successful resolution applicant is inclined in advancing any payment timelines.

The rest of the Rs 775 crore would be infused through debts in from the second year onwards. Most of this will go towards working capital requirements and remaining payment to financial creditors.

Also Read: Doubts lenders of Jet Airways have about Kalrock consortium’s revival plans