Lenders purposely delaying Jet revival: JKC tells NCLT

‘Can’t take off if relief not granted’

In a fresh twist to the long Jet Airways saga, the Jalan-kalrock Consortium (JKC), which won the bid to revive the grounded airline, has told the National Company Law Tribunal (NCLT) that the State Bank of India (Sbi)-led group of lenders never wanted the resolution plan to be implemented. In its submission dated December 1, the consortium alleged that the lenders are “contorting facts”, deploying “coercive methods” and “purposely delaying” the implementation of the Jet revival plan on some pretext or the other.

JKC has stated that revival of Jet Airways “shall not be possible” if the NCLT does not grant “reliefs”. All five conditions mentioned in the resolution plan have been fulfilled by JKC, the consortium has said, adding that the lenders should hand over the airline to JKC for fund infusion.

“If the reliefs as prayed for are not granted by this honourable adjudicating authority, then the implementation of the resolution plan by JKC and revival of Jet Airways shall not be possible, which is neither the intent of JKC and nor the spirit of the (Insolvency and Bankruptcy) Code,” it added. Neither SBI nor JKC responded to queries sent by Business Standard.

The NCLT had on June 22 last year approved JKC’S resolution plan for Jet Airways. A day after it received a revalidated air operator certificate from the Directorate General of Civil Aviation in May this year, JKC informed the lenders and the NCLT that it has fulfilled all conditions.

Sbi-led lenders had submitted an affidavit to the NCLT on November 25 stating that the conditions had not been fulfilled and the control cannot be passed to JKC. Subsequently on December 1, JKC submitted its rejoinder to lenders’ affidavit.

While lenders stated in their affidavit to the NCLT that JKC did not fulfil a condition precedent (CP) that said Jet Airways should have slots in primary hubs of Delhi and Mumbai, the consortium’s rejoinder said that it “had in fact received slots approval for Delhi and Mumbai, subject to payment of pending airport dues, which approvals were shared and discussed with the lenders on various occasions”.

These pending airport dues are the "Corporate Insolvency Resolution Process (CIRP) costs" that cannot be paid unless the lenders allow the resolution plan to be implemented and hand over the airline to JKC, the rejoinder mentioned.

"As a result, Jet Airways has not received unconditional slots approval for Delhi and Mumbai," it added.

Among other things, lenders stated in their affidavit that JKC did not fulfil another CP related to obtaining international traffic rights. To that, JKC said: "In contending the above, the lenders have again contorted the facts. As per the resolution plan, JKC is required to commence its operations with six aircraft."

The Ministry of Civil Aviation (MOCA) had on May 10 this year clarified to JKC that international traffic rights clearance can only be granted as per the National Civil Aviation Policy, 2016, which states a domestic airline can fly international only when it has 20 planes in its fleet.

Moreover, per the resolution plan, the international traffic rights clearance has to be received "in compliance with applicable laws", JKC noted. Thus, the issue of international traffic rights clearance is currently not relevant and the same will be obtained by JKC "at the appropriate time in compliance with the applicable laws".

"The lenders are solely responsible for the delay in the implementation of the resolution plan, and it seems the lenders never wanted the resolution plan to be implemented," the consortium said. If that was not the intention of the lenders, they would have never refused to accept the infusion of capital investment from JKC in Jet Airways, the submission said.

As per the resolution plan, JKC was required to deposit with lenders a performance bank guarantee (PBG) of Rs 150 crore in two tranches: first tranche of Rs 47.5 crore when Committee of Creditors (lenders) approve the resolution plan and second tranche of Rs 102.5 crore on "effective date" when all CPS were fulfilled.

A refundable earnest deposit of Rs 15 crore was already made to the lenders in July 2020 when JKC submitted its resolution plan, the rejoinder noted.

The first performance bank guarantee tranche of ~47.5 crore was deposited in October 2020 when the Committee of Creditors approved the resolution plan. Therefore, the remaining amount of ~87.5 crore was deposited in the second PBG tranche on May 20 this year -- called the "effective date" -- when all CPS were fulfilled, JKC noted.

JKC stated that "conditions precedent (CP)", which were mentioned in the resolution plan, were fulfilled on May 20, which made it the "effective date".

"If at all there was a dispute concerning fulfilment of CPS, the lenders ought not to have accepted the deposit of the second tranche of PBG, which becomes payable only on the "effective date"," it added.

The lenders cannot be allowed to "approbate and reprobate" at the same time, wherein lenders are accepting full PBG amount that can be taken only when all CPS have been fulfilled, and on the other hand, they are not allowing JKC to take control of Jet Airways stating that the CPS have not been fulfilled, the rejoinder mentioned.

Lenders, since the approval of the resolution plan by the NCLT in June 2021, at multiple instances tried to re-negotiate the financial proposal under the approved resolution plan with "the sole motive to arm twist the applicant and delay the implementation of the resolution plan", JKC'S rejoinder mentioned.

JKC said that the lenders have been "purposely delaying" the implementation of the resolution plan "on some pretext or the other for reasons best known to them".

On June 4, lenders asked JKC to give an undertaking that lenders are "indemnified" against adverse legal proceedings and all claims and liabilities arising due to "outcome of any pending litigation" will be paid by JKC. These claims and liabilities will be "over and above the amount proposed" under the resolution plan.

JKC said it has over the last 12 months spent Rs 70 crore towards salaries of over 100 employees of Jet Airways and other expenses of the airline.

"Even after all hardships, JKC still stands committed to implement the resolution plan and revive Jet Airways.

However, such implementation should be without any modification to the financial proposal provided under the resolution plan," it added.

Given the issues raised by lenders around fulfillment of CPS, JKC sought the opinion of former Supreme Court Chief Justice Dipak Misra, who stated that "all CPS stand fulfilled". A copy of his opinion was shared with the lenders.

The lenders obtained the opinion of Solicitor General Tushar Mehta, who suggested "modification of the substantial terms of the resolution plan", the rejoinder mentioned. "It was not acceptable to JKC," it added. The Jalan Kalrock Consortium, in its rejoinder, stated that the implementation application was filed "at the behest" of the lenders. It said that lenders verbally requested the consortium at multiple occasions to file the application so that necessary confirmation from NCLT can be obtained to implement the plan.

On September 23, a meeting of the monitoring committee was held wherein the lenders "reiterated their stand and insisted JKC to approach" NCLT for "receiving approvals on CPS", JKC noted.

"However, from a review of the reply filed by the lenders, it appears that the lenders have done a complete volte-face, in an evident attempt to arm twist the applicant to concede to the unjustified demands of the lenders, which goes beyond the terms of the resolution plan approved by the NCLT," the consortium noted.