SC directs Jalan-Kalrock Consortium to deposit Rs 150 crore in escrow account for Jet Airways revival

The Supreme Court issued a directive on Thursday to the Jalan-Kalrock consortium, the newly appointed custodians of the financially beleaguered Jet Airways. The consortium has been instructed to deposit Rs 150 crore in the State Bank of India's escrow account by January 31, underlining the critical adherence to the terms outlined in the resolution plan aimed at reviving the airline.

The bench, headed by Chief Justice D Y Chandrachud, alongside justices JB Pardiwala and Manoj Misra, highlighted that non-compliance with the deposit deadline would render the consortium in violation of the resolution plan's terms. Simultaneously, the court declined a separate plea from the Jet Aircraft Maintenance Engineers Welfare Association, seeking payment of provident fund and gratuity dues. The court reasoned that any additional financial burden would make the resolution plan "unworkable."

Legal representatives for the workmen asserted that the consortium is obligated to settle over Rs 200 crore in dues related to provident fund and gratuity. The court scrutinized the decision of the insolvency appellate tribunal NCLAT, challenging its approval of adjusting Rs 150 crore from the performance bank guarantee (PBG) towards the consortium's payment of Rs 350 crore to lenders, primarily led by the State Bank of India.

Escrow, a legal concept facilitating secure transactions, involves a third party holding assets or funds on behalf of transacting parties. The court, disputing the NCLAT's ruling, stated, "We have come to the conclusion that the NCLAT was not justified in holding in its order dated August 28, 2023, that the last tranche of Rs 150 crores would be adjusted against the PBG."

Out of the total Rs 350 crore to be paid by the consortium, Rs 200 crore was deposited in two equal instalments, while the remaining Rs 150 crore was controversially adjusted from the performance bank guarantee, prompting objections from lender banks.

The court, sending the case back to the NCLAT for swift resolution, mandated the consortium to deposit Rs 150 crore to SBI's escrow account by January 31. It firmly stated that any failure to do so would lead to non-compliance with the resolution plan.

Refusing to extend the deposit deadline to February 15, the court affirmed that the NCLAT would adjudicate on the compliance of the resolution plan's terms. It further emphasized the need for the consortium to restore the performance bank guarantee of Rs 150 crore.

The legal proceedings revealed the consortium's obligation to recover Rs 7,800 crore for financial institutions, including the State Bank of India, which had lent money to Jet Airways. The court acknowledged the financial challenges faced by the workmen but underscored that the sought-after amount would jeopardize the viability of the resolution plan.

The Jalan-Kalrock Consortium had secured the bid to revive Jet Airways, which had ceased operations in April 2019 and subsequently underwent insolvency resolution proceedings. Solicitor General Tushar Mehta and Additional Solicitor General N Venkataraman, representing the SBI-led consortium of banks, highlighted the financial institutions' need to recover substantial amounts, including ongoing expenses for maintaining aircraft.

This latest directive from the Supreme Court adds another layer of complexity to the ongoing efforts to revive Jet Airways, with the resolution plan hanging in the balance. The consortium now faces a critical deadline to meet the court-mandated deposit, crucial for the airline's potential resurgence.