NCLT clears Kalrock-Jalan resolution plan for Jet Airways with riders

DGCA, Aviation Min given 90 days from Tuesday to allot slots to Jet Airways (Photo: Bloomberg)
The National Company Law Tribunal (NCLT) has cleared the Kalrock-Jalan plan to revive Jet Airways, while rejecting the consortium’s demand for historicity of airport slots. The Naresh Goyal-founded airline was shut down in April 2019 under heavy debt.  

The tribunal order comes exactly two years after the start of the insolvency proceedings. Jet is the first airline to see resolution under the Insolvency and Bankruptcy Code (IBC). Even as the order paves the way for the grounded airline’s revival, the resumption of operations hinges on negotiations between the consortium and the government on the issue of airport slots.

On Tuesday, a Bench of Janab Mohhamed Ajmal and V Nallasenapathy approved the resolution plan with riders. The allocation of slots will be considered by the appropriate authority as and when these are applied for, and the historic slots will not be available, the Bench ordered. The consortium will have 90 days to seek all regulatory permissions and complete formalities for restarting the airline and can seek a further extension if required.

Jet Airways collapsed under a mountain of debt in April 2019. After two unsuccessful bidding rounds, the Kalrock-Jalan consortium was selected by a committee of creditors last October with over 99 per cent vote to restart the airline. Jalan is a Dubai-based NRI businessman and Kalrock Capital is a financial advisory and asset management company.

While Jet has admitted claims of over Rs 15,000 crore, the consortium proposed to pay nearly Rs 1,200 crore to creditors over the next five years and re-establish Jet Airways as a full service airline with 25 aircraft fleet. According to the resolution plan, banks will get a 9.5 per cent stake in the airline while public shareholding will reduce to 0.21 per cent. The consortium would hold 89.79 per cent in the airline. Employees will also get 0.5 per cent stake in the airline. 

The tribunal ruling on various aspects of the plan is awaited.

One of the key demands of the consortium has been grant of historicity of airport slots and traffic rights that were used by Jet Airways prior to its collapse. This was opposed by the civil aviation ministry and the consortium's plea on the matter was rejected by the tribunal.

“This was a unique case as it was the first corporate insolvency resolution plan in the aviation industry where numerous intricacies pertaining to aviation laws were involved and the role of Ministry of Civil Aviation was crucial as the resolution plan hinged upon the issue of slots and bilateral rights,” said advocate Ashish Mehta, who ppeared for the ministry.

A senior government official said representatives of the consortium had met the slot allocation team of Delhi and Mumbai airports -- the two largest and most slot-constrained airports in the country.

"While the Airports Authority of India has said that it has no issue of slot constraints, even Delhi and Mumbai have confirmed they will be able to offer slots to the new airline as and when provided with aircraft induction plan," the official said. He pointed out that before the Kalrock-Jalan consortium can provide concrete plans of aircraft induction, no airport will be able to guarantee slots as slots are perishable commodities.

"How can an airport confirm slots without a fleet plan? If not used, the airport will lose out financially. Due to the Covid-19 pandemic, currently there will be no constraint of slot at any airport," he said.

“It is a big relief that the resolution plan has been approved. However, it is a bit disappointing that historic rights over slots are not being made available. There are ongoing discussions between the consortium, the government and the airport authorities on the allocation of slots and traffic routes. These are preliminary in nature but I am hoping for a positive outcome and we will see Jet fly again soon,” said resolution professional Ashish Chhawchharia.

In a statement, the Kalrock-Jalan consortium said it would want to work alongside the civil aviation ministry, DGCA and all its competitors to put Jet Airways back in the skies. “Our team will study the written order once issued by the NCLT and we will provide a detailed response on the next steps subsequently,” the consortium said.

The Jet Airways stock has been locked in upper circuit for the past two days, and has gained over 10 per cent. It closed at Rs 99.45 on the BSE on Tuesday.

Jet Airways, founded in 1993, has been under insolvency for two years after it shut operations in April 2019.

The resolution professional had received claims of over Rs 44,000 crore from financial creditors and employees of which claims to the tune of Rs 15,400 crore were admitted. Financial creditors such as State Bank of India, Yes Bank and others claimed Rs 11,344 crore but only Rs 7,453 crore worth of claims were admitted.

In a separate matter, the tribunal rejected Sahara group’s application challenging the resolution plan. The Sahara group had
requested for exclusion of the airline's Bandra Kurla complex property from the assets in the resolution plan and sought to be considered as a secured creditor. However, the tribunal rejected the plea.

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