There was much euphoria when the Mumbai Bench of the National Company Law Tribunal (NCLT) approved the resolution plan submitted by the Kalrock Capital and Murari Lal Jalan consortium (JKC) to acquire the debt-laden Jet Airways in June 2021. The potential new owners unveiled the Jet 2.0 plan promising to start operations of the airline by 2022. In April this year, a new management under veteran aviation executive Sanjiv Kapoor was put in place. Other operational aspects, such as arrangements with overseas airports and inking up leasing, maintenance, and IT contracts, were set in motion with a target of starting services at the earliest.


However, underneath this euphoria, discontent was brewing between the lenders of Jet Airways and the new owners. While the lenders had pointed out minor issues earlier, the first major indication of disagreement came on July 14 this year at a meeting of the Monitoring Committee of Jet Airways. This meeting was attended by lender representatives, including Yes Bank and SBI, officials from Jalrock Kalan, and other key people involved in the debt resolution of the airline. Several issues that were discussed at this meeting include the selling of some assets, the appointment of key personnel, and fund allocation for immediate expenses among 20 other items. There were some minor questions asked on why the consortium had not settled dues related to leasing aircraft for trial runs. There were other issues related to exceeding the budget, deferred payments, and payment tranches.

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But things started going south when item 18 on the agenda came up for discussion. The item titled ‘To discuss the way forward on implementation of approved resolution plan’ brought out the differences between the consortium and the lenders. According to documents accessed by businessline, JKC had submitted a status report on the proposed resolution plan in the NCLT wherein it claimed that it had met all the conditions (technically called condition precedent -CP) including getting the AOC, approval of the business plan from the Directorate General of Civil Aviation (DGCA) and the Ministry of Civil Aviation (MoCA), slot allotment approval, international traffic rights, and approval of the demerger of the ground handling business into Airjet Ground Services Ltd (AGSL), a subsidiary of Jet Airways AGSL.

At this point, SBI invited AZB & Partners (Counsel of Monitoring Committee) to present the status of CP compliance before the Joint Lenders Meeting (JLM). According to the minutes of meeting, all lenders concurred to the fact that the conditions precedents weren’t met. AZB’s analysis stated JKC had received the AOC on May 20 but it rejected other claims made by the consortium. For example, the consortium was supposed to submit and take approval for the business plan from the MoCA and DGCA. AZB said there was no confirmation on the approval of the business plan by the MoCA and DGCA.

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Jalan-Kalrock’s approved resolution plan had said that it intended to restart Jet’s operations with six routes from Mumbai and a single route to/from Delhi immediately upon achievement of the Effective Date, leading to 14 routes comprising 8 routes from Mumbai and 6 routes from Delhi by the end of year 1 from the Effective Date.

Deviation in compliance

AZB, in its comment, said: “We note that Successful Resolution Applicant (SRA) has obtained approval for slots from Hyderabad airport, Bengaluru airport, Nagpur airport, and Cochin airport. The city pairs and routes proposed for starting the operations currently only include pairs between these four airports. However, the city pairs and slots proposed to be operated by Jet 2.0 under clause 10.11.2 and Appendix 12 of the Resolution Plan are much wider than the slots which have been currently allotted to the SRA,” hence, it was considered as ‘not satisfied.

According to AZB, the other condition, regarding international traffic rights, too, was unfulfilled, and it had sought clarity from the JKC. Regarding the demerger of the ground handling business into AGSL, it said that the demerger scheme had been approved by the NCLT. However, it was yet to be filed with the RoC.

In all, the AZB’s presentation “concluded that two of the CPs are complied with, other two are partially complied with while one is not complied as described/stipulated in the resolution plan approved by CoC”.

During the meeting, the CoC also discussed the legal opinion provided by Tushar Mehta, Solicitor General of India in respect of the safeguards and measures that may be taken by the Lenders vis-à-vis compliances relating to the Conditions Precedent.

In his opinion on July 14, 2022, Mehta observed that “the compliance of the Conditions Precedent by the Successful Resolution Applicant (Jalan Kalrock Consortium) is doubtful and the deviations in relation to compliance of such CPs may substantially affect the generation of revenue that may result in the Successful Resolution Applicant not being able to fulfil its obligations towards the Lenders in a manner as contemplated in the Resolution Plan.”

The Solicitor General also opined that the Lenders and JKC could jointly agree to make any addition or changes in the Resolution Plan which would protect the payment to the Lenders. Such additional assurance would, however, require the consent of the NCLT.

Based on the suggestions of the Solicitor General, the lenders said they would consider the reliefs sought by JKC, but would require an undertaking from them that it would ensure effective implementation of the resolution plan in the future.

Funds for expenses

The other issue raised during the meeting was regarding expenses. The consortium was supposed to implement the resolution plan in full and ensure the availability of sufficient and requisite funds to make payments and meet its obligations. In case the consortium was unable to meet the said prerequisites, it shall make available necessary funds in such manner as is acceptable to the lenders including by infusing such funds into the airline

Yes Bank, which is the second largest lender to Jet Airways after State Bank of India had said as an additional security, JKC was “to provide three properties based at Dubai as security to secure deferred payments. Valuation & TIR of Dubai properties have been carried out. Further, Lenders pursuant to their discussion with SRA understood that till date RBI clearance for the creation of mortgage over the properties based at Dubai was yet to be obtained, and lenders deliberated the issue and treated it too as deviation in approved Resolution Plan.”

Only once these undertakings were met, Jalan and Kalrock could approach the NCLT, seeking revisions and reliefs to the resolution plans.

The dispute has now snowballed into the courtrooms wherein JKC has approached NCLT to pass orders that ratify that all five conditions precedent under the resolution plan stands completed, and secondly, to direct the Monitoring Committee Lenders (SBI, PNB, and YES Bank) to allow JKC to infuse money in Jet Airways so that creditors can be paid, and plan can be implemented, in its application.

Meanwhile, Jet Airways, which was shut down in 2019, awaits on the tarmac for its first flight under the new owners.