More than 365 days have passed since the National Company Law Tribunal (NCLT) allowed the ownership transfer to the winning bidder of Jet Airways – Jalan-Kalrock Consortium. However, in the past 12 months, this ownership transfer has not materialized.
Notably, top executives like CEO-designate Sanjiv Kapoor and Accountable Manager PP Singh have resigned during this period. Now, there are new challenges in front of the Jalan-Kalrock Consortium (JKC).
Jet Airways: Payment of Rs 150 Crore for Revival
The Supreme Court of India has directed the winning bidder of Jet Airways – Jalan-Kalrock Consortium to make a payment of Rs 150 crore in the escrow account managed by the State Bank of India (SBI). According to the court, this is in line with the NCLT-approved resolution plan, which aims to revive the bankrupt airline.
The bench headed by Chief Justice of India D Y Chandrachud warned the consortium of consequences if the payment is not made before January 31. He said that non-compliance with this order would be considered a violation of resolution plan terms.
The consortium requested this deadline to be extended to February 15. This appeal was rejected by the court. It stated that NCLAT will review the resolution plan’s compliance. If you are wondering why is the consortium asked to pay this amount? Here is the answer.
Why The Additional Payment to Jet Airways Lenders?
In order to fulfill the conditions precedent for taking ownership of Jet Airways, the consortium had to make a payment of Rs 350 crore to the banks. Jalan-Kalrock Consortium paid the first tranche of Rs 100 crore in August end. Subsequently, in September, it paid another Rs 100 crore. The consortium plan included payment of Rs 200 crore in cash and settling the remaining amount using the Performance Bank Guarantee (PBG) worth Rs 150 crore. The whole matter became stagnant here.
When Jalan-Kalrock Consortium settled the last installment with the help of Performance Bank Guarantee, it faced protests from the banks. While the National Company Law Appellate Tribunal (NCLAT) initially ruled in favor of the consortium, the Supreme Court has now overturned the Appellate Tribunal’s decision. JKC will now have to pay Rs 150 crore in cash to SBI.
Legal proceedings have uncovered the consortium’s responsibility to recover Rs 7,800 crore for financial institutions, including the State Bank of India, which had provided loans to Jet Airways.
Resignation of Directors
In July 2023, Jet Airways announced the appointment of three Directors. These consisted of two Whole Time Directors and one Non-Executive Director. Gautam Acharya was appointed as the Whole Time Director for Jet Airways. Mr Rajesh Prasad took charge as Non-Executive Director. Sundaram Ramesh has two responsibilities with the roles of Chief Financial Officer as well as Whole Time Director.
Now, two of these directors have issued their resignation letters. As Jet Airways is a listed company, it has to inform about every top-level exit to the Stock Regulator. In an exchange filing, the airline announced that Gautam Acharya and Rajesh Prasad have resigned with immediate effect. They have left their offices on January 19.
This is not the first time that such high-level exits have happened in Jet Airways. Earlier, in April 2023, CEO-Designate Sanjiv Kapoor had resigned from the company. Soon after him, the Accountable Manager Captain P P Singh resigned. Captain Jatinder Singh Dhillon replaced him.
What About Gratuity & PF Dues?
An Employee Union of Jet Airways namely Jet Aircraft Maintenance Engineers Welfare Association filed a plea in the Supreme Court asking for payment of their Provident Fund (PF) and Gratuity Dues from the consortium. The union counsel told the court that the consortium is obligated to settle the Rs 200 crore in dues to the employees.
However, the court refused to entertain this plea. It believes that any additional payment burden on the consortium will make the resolution plan ‘unworkable’. In the NCLT-approved resolution plan, there is no mention of Rs 200 crore worth of PF dues of former employees. The court understood the financial conditions of the employees but it chose to side itself with the Resolution Plan.
In summary, Jet Airways faces up with significant challenges and complex legal matters as it proceeds with the ownership transfer procedure to the Jalan-Kalrock Consortium. Even after the NCLT approved the ownership transfer more than a year ago, it has not taken place. The consortium must deposit Rs 150 crore by January 31 in accordance with the NCLT-approved settlement plan, per the Supreme Court’s recent decision.
The airline is experiencing more turbulence due to the resignation of top executives, including CEO-designate Sanjiv Kapoor, and the departure of freshly appointed directors. The intricate nature of the Jet Airways revival is highlighted by legal arguments over the consortium’s commitment to recover Rs 7,800 crore for banking institutions, notably the State Bank of India.
The court’s decision to reject requests concerning Provident Fund and Gratuity Dues underscores the importance of adhering to the approved resolution plan and emphasizes the careful coordination needed for the airline to successfully recover in the face of organizational and financial difficulties.
Source: Business Today