Jet Airways Ownership Transfer Faces Legal Challenges as Creditors Seek Fund Source Clarity

The ownership transfer of India’s Jet Airways to the Jalan Kalrock Consortium (JKC) has hit another legal roadblock as creditors, led by the State Bank of India, raise concerns about the source of the funds used by JKC. Despite JKC fulfilling its obligation by paying INR 3.5 billion (USD 42 million) to take over the airline, creditors insist on clarity regarding the origin of the funds, suggesting that JKC might have obtained them from external sources.

In a recent session at the National Company Law Appellate Tribunal (NCLAT) in Delhi, counsel for the creditors’ committee expressed their desire to understand the source of the funds, particularly the two tranches of INR 1 billion (USD 12 million) each that were paid by JKC. While JKC directed the creditors to use a previously lodged INR 1.5 billion (USD 18 million) bank guarantee to access the remaining amount, the creditors are now demanding transparency regarding the origin of the two INR 1 billion payments.

After extensive delays, JKC recently made the agreed-upon payment to creditors, following an NCLAT-approved resolution plan. However, the creditors contend that the funds should originate directly from the consortium rather than from an external third party. Counsel for JKC accused the lenders of intentionally impeding the ownership transfer despite JKC fulfilling its obligations under the court-approved resolution plan.

“We highly question the lenders’ intent to transfer the ownership of the company in favour of JKC after JKC has executed all its obligations under the court-approved resolution plan by paying the full amount of INR 3.5 billion,” stated counsel for the consortium. “This is in light of the latest application filed by the committee of creditors to stay the implementation of the approved resolution plan recently in the NCLT.”

The NCLAT has requested the creditors’ counsel to submit any objections to the ownership transfer before the next scheduled appearance on October 19. Simultaneously, counsel for JKC will provide details on the source of the funds, aiming to address the concerns raised by the creditors and facilitate the smooth transition of Jet Airways’ ownership.