Prolonged tussle may delay Jet 2.0 take-off


NEW DELHI : Lenders to grounded Jet Airways (India) Ltd and the winning Jalan-Kalrock bidder consortium are expected to engage in a prolonged legal battle over the rental income of an Airbus A330 leased to Air Serbia and the payment of pending provident fund and gratuity dues to the airline employees, two officials said.

Jet Airways 1.0 had leased an Airbus A330 to Etihad Airways, which later subleased the plane to Air Serbia. The rental income from this aircraft from Air Serbia has become one of the key points of contention between the two parties with lenders offering the view that the distribution of the rental income should be among the financial creditors, whereas the winning bidder has argued that this instead should cater to the working capital of the airline, said one of the two officials cited above. The rental income for this aircraft stood at 180 crore between January 2021 and August 2022, amounting to over 6 crore per month.

As per an October order by appellate tribunal NCLAT, the winning consortium has also been asked to clear provident fund and gratuity dues of Jet employees, expected at about 200 crore. “This is a material amount and was not part of the resolution plan approved by the National Company Law Tribunal (NCLT) on 22 June 2021 following an insolvency process that began in June 2019. So, both parties are trying to find a recourse. That is likely to lead to a long legal tussle,” the second official said.

On the issue of paying provident fund and gratuity dues, the NCLAT has recently provided clarity that the successful bidder has to clear the dues. However, the official cited above said since this additional liability was not taken into account under the resolution plan approved by the NCLT in June 2021, the consortium is expected to appeal against this ruling in the Supreme Court. When contacted, a spokesperson for Jalan-Kalrock consortium said, “As per the resolution plan approved by the committee of creditors and subsequently by the NCLT, our liabilities are capped at 475 crore. We are exploring our options at the moment.”

Jet’s relaunch has been anticipated ever since it received the air operator certificate from the Directorate General of Civil Aviation (DGCA) on 20 May.

The lenders and winning consortium, however, have not yet reached a consensus on whether the conditions for transferring ownership of the airline have been met.

So far, the Jalan-Kalrock consortium has deposited bank guarantees worth 150 crore with the lenders, but the lenders are of the view that the winning bidder has been unsuccessful in making cash payment of 185 crore to the financial creditors within 180 days from the effective date. The effective date in this case is the date of fulfilment of all the conditions and is believed to be 20 May.

However, the consortium has stated in recent statements that it will only infuse more funds in the airline once the transfer of ownership takes place.

“Jalan-Kalrock Consortium has told the lenders that they are willing to infuse 200 crore in the airline immediately but before that, the lenders need to appoint three nominees with limited powers to make regulatory filings in the Registrar of Companies, get in-principle approval of Sebi for restructuring of share capital of Jet, and issue fresh stocks. The consortium has also stated in the NCLT that they are ready with the money,” the official added.

The lenders have also stated concerns in the NCLT on the fulfilment of conditions by the winning consortium before the transfer of ownership. This includes attainment of slots at domestic airports, international traffic rights and business plan approval from the ministry of civil aviation and DGCA. In the NCLT hearing on 19 Dec as well, the lenders stated their concerns over the conditional approvals secured by the Jalan-Kalrock Consortium for slots at Delhi and Mumbai.

“The consortium has stated that they already received conditional and confirmed approvals at a total of 48 slots at domestic airports for operation of six aircraft under the summer schedule but to activate those slots, they needed to pay the pending dues to airports. Since, they have not received the ownership of the airline, they could not act on these pending dues. The interpretation of the resolution plan seems to be different for the two parties and hence, both await clarity from the court on whether the conditions have been met,” he said.

As per the approved resolution plan, the Jalan-Kalrock consortium had proposed a total cash infusion of 1,375 crore, including 475 crore for payment to stakeholders from this. The remaining 900 crore was to be infused for capital expenditure and working capital requirements. At 380 crore, the lenders took a steep haircut on their admitted claims of over 7,807.7 crore under the approved resolution plan.

The NCLT will next hear the matter on 20 Dec as both parties await a ruling on whether the conditions have been met by the consortium for ownership transfer of the airline.

The winning bidder of Jet Airways, Jalan Fritsch Consortium, consists of UAE-based non-resident Indian Murari Lal Jalan who will hold shares in Jet Airways in his personal capacity. The consortium also includes Florian Fritsch who will hold shares through his investment holding company Kalrock Capital Partners Ltd, Cayman.

“Despite which way this ruling works, the issue of pending dues to employees will be taken up by the consortium to the Supreme Court. The rental income from Air Serbia will also be severely contested. The consortium has five months before the AOC expires and, in that case, it will have to start that process for attaining AOC all over again,” the official added

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