Jet resolution plan hits turbulence


SC decision may derail scheme; 15 more planes grounded

Jet Airways’ resolution plan has hit turbulence, with the Supreme Court quashing the RBI’s February 12 circular based on which the airline’s financial restructuring was being worked out.

The Jet Airways board on March 25, 2019, had approved “the conversion of ₹1 of lenders’ debt into equity by the issuance of 11.4 crore equity shares, in accordance with the RBI circular of February 12, 2018. With this, the consortium of Indian lenders, led by State Bank of India will become majority shareholders of Jet Airways,” the airline had stated.

Now that the very circular on which the resolution plan was based has been made void, the plan will either be derailed or reworked, feel analysts. This, in turn, will further delay recapitalisation of the airline which is in dire need of cash infusion to stay afloat.

‘Challenge likely’

It is also believed that promoter Naresh Goyal, who was forced by the banks to resign, may challenge the decision.

Strategic investor Etihad Airways may also challenge the way the resolution plan is being drawn.

A Jet Airways official declined to comment. Etihad Airways could not be reached for comment.

Rajesh Narain Gupta, managing partner, SNG Parters, said, “If the banks have relied upon this circular which is now held to be void by the Supreme Court, then the borrower may get the right to unwind what has been done pursuant to the said circular, which may become a complex legal situation to deal with.”

Ashish Chhawchharia, partner, Restructuring Services, Grant Thornton Advisory Private Ltd., said, “I don’t think there would be any impact on the approach the banks are taking for the resolution of Jet Airways matter.”

Meanwhile, the airline on Tuesday grounded 15 more aircraft owing to non-payment of lease rentals to lessors. This leaves Jet with just 20 planes in operation.

Makarand Joshi, Partner, MMJC and Associates LLP – a corporate compliance firm said, “By virtue of this verdict, validity of action taken by banks under the circular (eg. allotment of shares at discount to bank) may be challenged. And if banks’ action is challenged, the validity of transfer of title done by banks under the circular can also be challenged.”

“Therefore, the verdict may compel banks to take corrective action to transfer valid title (shares or otherwise) to interested buyer. This might have impact on cases like Jet Airways.”

Jet Airways stock on Tuesday closed with a loss of 0.39% at ₹264.90 on the BSE.


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