Failure to Implement Resolution Plan: NCLT Dismisses SRA’s Plea to Treat ₹350 Crore as CIRP Cost in Jet Airways Liquidation [Read Order]

The Mumbai bench of the National Company Law Tribunal (NCLT) has dismissed the special resolution applicant's (SRA) plea to treat Rs 350 cr as the Corporate Insolvency Resolution Process (CIRP) cost in the liquidation of Jet Airways.

In June 2021, the resolution plan submitted by the Jalan–Fritsch consortium was approved by the NCLT. The plan required the infusion of ₹350 crore as the first tranche payment and furnishing of a performance bank guarantee (PBG) of ₹150 crore. However, despite the effective date being fixed as 20 May 2022, the consortium failed to implement the plan.

The Supreme Court, in Civil Appeal Nos. 5023–5024 of 2024, observed:

“The SRA herein has failed to infuse the first tranche payment of ₹350 crore as envisaged in the Resolution Plan despite the Effective Date being fixed on 20.05.2022… More than five years have passed and the implementation of the Resolution Plan still seems to be a dim light at the far end of a long tunnel.”

Invoking Article 142 of the Constitution, the apex court directed liquidation of Jet Airways and ordered forfeiture of ₹200 crore infused as share capital, while permitting lenders to encash the ₹150 crore PBG.

In its application under Section 60(5) of the IBC, the consortium argued that the ₹200 crore infused as share capital and the ₹150 crore PBG should be treated as CIRP costs, entitling them to reimbursement or recognition as stakeholders in liquidation.

They also sought recognition of an additional ₹20.76 crore infused to keep the airline as a going concern during the resolution process.

The Applicant has placed reliance on Section 42 of the Companies Act, 2013 to canvass that the amount of Rs. 200 crores was infused as share application money, accordingly, the Corporate Debtor is obligated to return the monies received, in case of failure to allot the shares for which it received the money.

It was observed that in view of this specific observation of the Supreme Court that The SRA herein has failed to infuse the first tranche payment of Rs. 350 Crore as envisaged in the Resolution Plan despite the Effective Date being fixed on 20.05.2022, it cannot be said that the Applicant has not failed to implement the Resolution Plan.

It was further observed that the said encashment by the lender had taken place pursuant to a specific direction of the Supreme Court to the lenders after reaching to a conclusion that the Applicant herein has failed to implement the plan, and was encashed by the person authorised to do so.

It was observed that in view of the declaration by the Supreme Court in the facts of the case that the said amount shall stand forfeited, such interpretation as canvassed by the Applicant shall result into nullifying the decision of the Supreme Court, which takes colour of law in terms of Article 141, and the same had not been overruled or modified by enacting a new legislation. Further, it was ruled that the provision of Section 42 cannot override the effect of an order passed by the Supreme Court.

Accordingly, the two-member bench of Prabhat Kumar (Technical Member) and Sushil Mahadeorao Kochey (Judicial Member) did not find any merit in the Applicant's contentions that these amounts of Rs. 350 Crores be considered as CIRP costs.

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