SBI-Led Consortium To Move NCLT Against Jet Airways To Seek Proceedings Under Insolvency And Bankruptcy Code

An SBI-led consortium of banks is set to take Jet Airways to the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code (IBC) after efforts to seek resolution outside that provision failed, according to a statement released by the consortium.

“After due deliberations, the lenders have decided to seek resolution under IBC since only a conditional bid was received,” the statement said.

Jet Airways, which had stopped operations on April 17 after it ran out of cash, has a debt of Rs 8,500 crore on its books, with liabilities adding up to Rs 25,000 crore.

Incidentally, the Mumbai bench of the NCLT is already scheduled to hear insolvency petitions by two suppliers of Jet Airways on June 20.

These two suppliers of Jet Airways, namely Shaman Wheels Pvt Ltd and Gaggar Enterprises Pvt Ltd, had filed separate insolvency pleas on June 10 against Jet Airways at the Mumbai bench of the National Company Law Tribunal, for recovery of their outstanding dues.

However, it may be recalled that the National Aviators’ Guild (NAG), which is the pilots union of Jet Airways (India) Ltd, also plans to file a plea with the National Company Law Tribunal (NCLT) very soon.

The plea will be filed at the NCLT for non-payment of dues as well as not providing a provision for gratuity payment to its staff.

The grounded airline which stopped operations in April has not paid salaries to its senior employees including its pilots, engineers as well as senior management since January 2019, while other Jet Airways employees have not received their salaries since March this year.

It is significant that If Jet Airways heads to liquidation, then the pilots union is expected to jump the queue ahead of secured creditors, since under insolvency and bankruptcy code, once a case heads for liquidation, what is known as the ‘waterfall mechanism’ comes into effect.

Under such a mechanism, the dues of workmen are settled first before all secured creditors and the Jet Airways pilots union stands a good chance of recovering their dues, especially if they approach the court as pilot workmen.

If the Jet Airways case is admitted to the NCLT under bankruptcy resolution, lenders are likely to recover only a fraction of the Rs 8,400 crore, which the airline owes them.

As a matter of fact, banks tried to keep the Jet Airways out of court monitored insolvency proceedings so far, purely because they wanted to maximize the money they could recover from the debt-ridden airline.