Case Note & Summary
The case pertains to the Corporate Insolvency Resolution Process (CIRP) of Jet Airways (India) Limited, initiated by State Bank of India (SBI) under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC). The Resolution Plan submitted by the Consortium of Mr. Murari Lal Jalan and Mr. Florian Fritsch (Respondent No.1/SRA) was approved by the Committee of Creditors (CoC) with 99.22% votes. The plan required the SRA to pay a total consideration of approximately Rs. 4,783 Crore, including a first tranche of Rs. 350 Crore within 180 days from the Effective Date (fixed as 20.05.2022). The SRA furnished a Performance Bank Guarantee (PBG) of Rs. 150 Crore as security. Disputes arose regarding the adjustment of the PBG towards the first tranche payment, non-payment of airport dues to the Airports Authority of India (AAI), and non-payment of workmen and employees' dues. The NCLT held that the SRA had fulfilled all Conditions Precedent, but the NCLAT directed that the PBG could be adjusted towards the first tranche. The Supreme Court allowed the appeals by SBI, holding that the PBG cannot be adjusted against the plan consideration as per the express terms of the RFRP and the Resolution Plan, and that the SRA's failure to pay airport dues and employee dues constituted non-implementation of the plan, warranting liquidation under Section 33(3) IBC. The Court also emphasized that timely implementation is a key objective of the IBC.
Headnote
A) Insolvency and Bankruptcy Code - Resolution Plan Implementation - Performance Bank Guarantee Adjustment - Section 30, 31, 33 IBC, 2016; Regulation 36B(4A) IBBI Regulations, 2016 - The issue was whether the Performance Bank Guarantee of Rs. 150 Crore could be adjusted towards the first tranche payment of Rs. 350 Crore under the Resolution Plan. The Supreme Court held that the PBG cannot be set off against the resolution plan consideration as per the express terms of the RFRP and the Resolution Plan, and such adjustment would contravene the order of this Court dated 18.01.2024 and the provisions of law. (Paras 85-116) B) Insolvency and Bankruptcy Code - Liquidation - Non-Implementation of Resolution Plan - Section 33(3) IBC, 2016 - The issue was whether the failure of the SRA to pay airport dues and workmen/employees' dues as per the Resolution Plan constitutes non-implementation warranting liquidation. The Supreme Court held that the SRA had failed to implement the Resolution Plan, and the NCLAT erred in not directing liquidation under Section 33(3) IBC, 2016. (Paras 117-138) C) Insolvency and Bankruptcy Code - Timely Implementation - Objective of IBC - Section 12A, 30, 31 IBC, 2016 - The issue was whether timely implementation of the Resolution Plan is an objective of the IBC. The Supreme Court held that timely implementation is a key objective to ensure value maximization and avoid delays that defeat the purpose of the Code. (Paras 139-149)
Issue of Consideration
Whether the Performance Bank Guarantee of Rs. 150 Crore could be adjusted against the first tranche payment under the Resolution Plan; Whether non-implementation of the Resolution Plan by the SRA leads to liquidation under Section 33(3) of the IBC, 2016; Whether timely implementation of the Resolution Plan is an objective of the IBC, 2016.
Final Decision
The Supreme Court allowed the appeals, set aside the impugned order of the NCLAT dated 12.03.2024, and directed that the Corporate Debtor (Jet Airways) be liquidated under Section 33(3) of the IBC, 2016. The Court held that the Performance Bank Guarantee cannot be adjusted against the first tranche payment and that the SRA had failed to implement the Resolution Plan.
Law Points
- Performance Bank Guarantee cannot be set off against resolution plan consideration
- Non-implementation of resolution plan leads to liquidation under Section 33(3) IBC
- Timely implementation is an objective of IBC
- Conditions Precedent must be fulfilled strictly
