After five years of trials and tribulations, the grounded airline Jet Airways’ wings have been clipped. Any hopes of a revival of the airline, which went defunct in 2019, were dashed after the Supreme Court recently ordered liquidation of the company. This was after the successful bidder—Jalan-Kalrock Consortium—failed to make even the full payment of the first tranche of Rs 350 crore, raising doubts over the commercial wisdom of the lenders. It appears that the lenders and the resolution professional did not do proper due diligence before approving the bid; they seem to have considered only the bid amount (over Rs 1,300 crore) rather than the viability of the bid.
This is not the first time a successful resolution applicant (SRA) has failed to make the ‘promised’ payments to lenders. In the past, UK-based Liberty House had failed to pay the resolution amount in Amtek Auto and Adhunik Metaliks insolvency case. However, the SRA’s failure in such a large insolvency case like Jet Airways’—where over Rs 7,800 crore creditors’ money was involved—raises questions about the efficacy of the whole process.
Jet Airways is the second airline after Go Air—which is on the verge of liquidation—that failed to get resolved through the Insolvency and Bankruptcy Code. It is the stated goal of the IBC to seek the revival of a company in distress through sale to a financially stronger bidder. However, the process has been marred not only by delays and frivolous litigation but also by unscrupulous resolution applicants who try to game the system. IBC has been touted as one of the biggest reforms implemented in the last decade. While it has successfully resolved many large bad debt cases and helped the banking system rid itself of huge non-performing assets, it has seen its own share of flaws. The law completes eight years this December but the regulator and the government have been unable to iron out the kinks. The failure to resolve Jet Airways’ insolvency case despite the approval of the resolution plan is a big blow to the IBC, and it calls for a course correction.