The Supreme Court on Thursday directed Jalan-Kalrock consortium, the new owners of the cash-strapped Jet Airways, to deposit Rs 150 crore in SBI’s escrow account by January 31, saying failure to do so will mean that the consortium is not in compliance with the terms of the resolution plan for reviving the airline.
Photograph: Punit Paranjpe/Reuters
The top court, meanwhile, also refused to allow the separate plea of the Jet Aircraft Maintenance Engineers Welfare Association seeking payment of provident fund and gratuity dues, observing if additional money is awarded, the resolution plan will become “unworkable”.
The consortium, as per the lawyers for the workmen, has to pay over Rs 200 crore towards dues on account of PF and gratuity.
A bench comprising Chief Justice D Y Chandrachud and justices JB Pardiwala and Manoj Misra said the insolvency appellate tribunal NCLAT was not correct in permitting adjustment of Rs 150 crore from the performance bank guarantee (PBG) towards payment of Rs 350 crore by the consortium to the lenders led by the State Bank of India.
The amount was to be deposited in SBI’s escrow account.
Escrow is a legal concept whereby an asset or money is held by a third party on behalf of two other parties that are in the process of completing a transaction.
“In the circumstances, we have come to the conclusion that the NCLAT (National Company Law Appellate Tribunal) was not justified in holding in its order dated August 28, 2023 that the last tranche of Rs 150 crores, which was to be paid, would be adjusted against the PBG,” the bench said.
Out of the Rs 350 crore, which was to be paid by the consortium, Rs 200 crore was deposited in two equal instalments of Rs 100 crore and the remaining Rs 150 crore was adjusted from the performance bank guarantee (PBG) to which lender banks led by the State Bank of India objected.
Under a performance guarantee, monetary compensation has to be paid by the bank when there is any delay in delivering the performance or operation. Payment has to be made even if the service is delivered inadequately.
While referring the case back to the NCLAT for expeditious disposal, the top court said, “The SRA (successful resolution applicant- the Jalan-Kalrock consortium) shall on or before January 31, deposit an amount of Rs 150 crores to the SBI’s escrow account failing which the SRA shall be treated as non compliant to the resolution plan.”
Modifying the August 28, 2023 order of the NCLAT, the bench said the permission granted to the consortium to adjust the last tranche of Rs 150 crore against the PBG is substituted with the direction.
The top court refused to extend the time for deposit of Rs 150 crore from January 31 to February 15 as sought by the consortium.
It said the rights and contentions of rival parties with regard to the compliance of the terms of the resolution plan will be adjudicated upon by the NCLAT.
During the day-long hearing, the bench said the consortium “must restore the performance bank guarantee of Rs 150 crore”.
On Wednesday, the top court had asked the consortium how much have they paid towards provident fund and gratuity dues to the former employees of the troubled airline.
On Thursday, the bench said though it was aware of the plight of the workmen, the amount sought cannot be awarded as it would make the resolution plan to revive the Jet Airways “unworkable”.
On August 28, 2023, the NCLAT had extended till September 30 the time for Jalan-Kalrock consortium to pay Rs 350 crore to the lenders of the bankrupt Jet Airways.
The tribunal had accepted the consortium’s plea for extending the deadline and for adjustment of Rs 150 crore from performance bank guarantee (PBG) towards payment of Rs 350 crore.
Jalan-Kalrock Consortium had emerged as the winning bidder for the airline, which stopped flying in April 2019 and later underwent an insolvency resolution process.
Solicitor General Tushar Mehta and Additional Solicitor General N Venkataraman, appearing for the SBI-led consortium of banks which had lent money to Jet Airways, said the financial institutions have to recover Rs 7,800 crore.
They said they are also incurring expenses on maintaining aircraft.
