Jet Airways’ Final Descent: How India’s Bankruptcy Code Fell Short

In a blow to revival hopes, Jet Airways, once one of India’s top airlines, is headed for liquidation after years of legal and financial struggles. This week, the Supreme Court’s decision to order the liquidation marks a sad conclusion for the airline that had been grounded since 2019. It also shines a spotlight on the shortcomings of India’s insolvency process.

Jet Airways was expected to take off again under the stewardship of the Jalan Kalrock Consortium (JKC), which had won the bid to acquire the defunct airline. However, the Supreme Court found that JKC failed to meet its financial obligations. 

The consortium was supposed to infuse ₹350 crore as an initial investment but instead sought to adjust a ₹150 crore bank guarantee against this amount. This move was deemed a breach of the resolution plan, leaving the court with no choice but to order liquidation.

The National Company Law Appellate Tribunal (NCLAT) had earlier upheld the ownership transfer to JKC despite the consortium’s non-compliance. However, the Supreme Court’s reversal of this decision indicates a lack of faith in the acquirer’s ability to fulfil its financial promises. 

The lenders, who had taken control of Jet Airways following its insolvency, refused to hand over ownership until JKC met its financial commitments as outlined in the resolution plan. The resulting stalemate added years of delay and uncertainty, leaving employees, creditors, and other stakeholders in limbo.

The drawn-out process and Jet Airways’ eventual liquidation highlight significant flaws in India’s insolvency framework, introduced in 2016 with the promise of swift resolutions. The aim was to enable quick rescues of distressed businesses, preserve value, and protect jobs. 

However, the Jet Airways saga, filled with legal disputes and procedural delays, demonstrates a high-profile failure of the system. The bankruptcy code, which was supposed to offer clarity and speed, facilitated confusion and prolonged the pain for those awaiting dues.

Jet Airways’ failed revival serves as a wake-up call. It’s not just about one airline’s fate; it’s about India’s insolvency process’s credibility and ability to handle complex corporate failures effectively. For stakeholders across the board, the experience has been a turbulent ride.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.