MUMBAI: The recent decision by the Supreme Court to liquidate the assets of Jet Airways as a last resort to a long-drawn resolution process under the much hyped Insolvency and Bankruptcy Code (IBC) has raises questions about the very efficacy of the process itself.
Intended to offer a faster, more structured resolution to insolvent companies, the five-year delay in Jet Airways’ case left creditors with escalating maintenance costs. Lenders reportedly incurred more than Rs300 crore in maintenance expenses, with a monthly outflow of Rs22.6 crore to upkeep grounded aircraft and other assets.
“Prolonged insolvency cases can not only strain the financial resources of creditors but also devalue assets over time, undercutting the core purpose of the IBC – a quick resolution,” stated a source close to the lenders while talking to businessbenchmark.news s.
He said Jet Airways’ liquidation, after years of negotiations and courtroom battles, underscores the need to refine and streamline the insolvency framework to meet timely resolution goals.
A journey through rough weather
The journey of Jet Airways from India’s premier full-service airline to its liquidation showcases a five-year-long saga marked by attempts at revival, extensive court proceedings, and eventually, the Supreme Court’s recent decision to liquidate its assets.
With the auctioning of assets estimated to recover only a fraction of the airline’s dues, creditors and former employees are hoping to salvage whatever they can from a once-iconic airline grounded by debt and operational hurdles.
JKC played ‘spoilsport’
Jet Airways, founded by Naresh Goyal, was a household name in Indian aviation but ceased operations in April 2019, weighed down by mounting debt.
After the airline was admitted to the Insolvency and Bankruptcy Code (IBC) proceedings, UK-based Kalrock Capital and UAE-based businessman Murari Lal Jalan, together forming the Jalan-Kalrock Consortium (JKC), emerged as potential buyers.
In October 2020, JKC proposed a resolution plan promising to revive the airline and pay creditors and employees within 180 days.
However, two years later, ownership transfer disputes prevented any movement, and by July 2023, banks had petitioned the Supreme Court for liquidation.
A ‘zero-sum’ game
The Jet Airways case ended up as a “zero-sum game,” especially when considering the financial outcomes for creditors, investors, and other stakeholders.
The airline’s insolvency process, stretching over nearly five years, was marred by litigation, delays, and an eventual failed attempt to revive the business through a new investor consortium, Jalan-Kalrock (JKC).
While the liquidation order allows the creditorsto recoup some funds through asset sales, the estimated recovery amount is minimal compared with the total outstanding debt, which significantly diminishes potential gains for creditors and other stakeholders.
For JKC, the failed acquisition bid resulted in forfeited funds (approximately Rs350 crore), adding to the financial toll without any return. Neither the airline could be revived, nor could the consortium benefit from its planned investment.
For employees and vendors, the outcome is similarly disheartening, as they face unpaid dues and a prolonged period of uncertainty. In essence, the prolonged resolution process, combined with the eventual liquidation.
