Deadlock over carrier's revival: Banks not keen on sharing Jet's liability

Deadlock over carrier's revival after NCLAT order

Lenders to Jet Airways are not keen to share the additional liability of the carrier as demanded by the Kalrock-Jalan consortium, towards gratuity and provident fund, following last month’s National Company Law Appellate Tribunal (NCLAT) order.

The Kalrock-Jalan consortium had won the bid for Jet Airways in October 2020.

According to banking industry sources, the consortium demanded that all creditors share the additional liability — which is around Rs 200 crore — following the NCLAT order.

“This (liability) was not in the original resolution plan. If the original plan changes, it is like reopening the issue all over again,” said a senior officer from a bank having an exposure to the grounded airline.

On October 21, the NCLAT directed the consortium to pay gratuity and provident fund to the airline’s employees till the date of insolvency commencement in June 2019.

The tribunal also directed the erstwhile resolution professional to compute payments due within a month and communicate it to the consortium.

Gratuity claim of Rs 276 crore was admitted by the resolution professional after the airline’s closure. However, actual dues payable now could be lower as all employees may not be entitled to their claim.

The NCLAT order was passed in response to appeals against Jet Airways revival plan that was approved by the National Company Law Tribunal (NCLT) last July.

According to the revival plan, the consortium proposed a total infusion of Rs 1,375 crore. This includes Rs 900 crore towards capex and working capital and Rs 475 crore to settle claims of all creditors.

The approved plan has a clause that states that the amount infused by the consortium for settlement of claims of all stakeholders would be limited to Rs 475 crore.

“The new promoters have not brought in any additional capital so far, though they have agreed for the infusion,” the official said. To fly again, the airline will need a no-objection from the creditors.

“The consortium had made certain assumptions while preparing its revival plan and it was approved by banks and later cleared by NCLT. The additional liability of PF and gratuity dues has come now. The NCLAT order has made the issue challenging and that will lead to some delays,” said a second person familiar with the situation.

According to the revival plan, Kalrock-Jalan was also supposed to pay around Rs 185 crore to lenders within six months of the plan, effective from November. Till now, that amount has not been paid.

The consortium has made an application giving an update about the revival plan but its details are not known. Kalrock-Jalan declined comment.

While the NCLAT has ruled in favour of employees, not all are happy. Unions are also considering challenging the order.

“The tribunal partly allowed our appeal but rejected our demands on retrenchment compensation and continuity of service. We are considering moving the Supreme Court,” said advocate Rahul Oak, who represented employee unions.

One of the grounds of appeal is the tribunal decision, which said that entitlement of those employees and workmen, who were demerged into AGSL (a ground-handling subsidiary of Jet) shall not be there. This is because demerger has not been treated as termination of their service.

Under the plan, the consortium retained only 50 employees. The remainder have been transferred to AGSL, which unions point out exists only in paper.