SBI gave unsecured loans to firms and is now floundering: JKC tells SC

JKC argued that SBI had previously granted loans to companies without sufficient security, which led to their financial troubles

The Supreme Court on Wednesday reserved its verdict over the fate of now-grounded Jet Airways after month-long hearing, during which lenders of bankrupt airline, led by the State Bank of India (SBI), called for its liquidation while successful bidder Jalan Kalrock Consortium (JKC) argued against it.

A Bench comprising Chief Justice of India (CJI) DY Chandrachud and Justices JB Pardiwala and Manoj Misra heard submissions of both the parties on merits before reserving judgment.

The National Company Law Appellate Tribunal (NCLAT) had on March 12 upheld the resolution plan of the grounded airline and approved the transfer of its ownership to the JKC. NCLAT had told JKC to obtain an air operator’s certificate within 90 days. It had also given it more time to pay Rs 175 crore to SBI as 107 days had passed since NCLAT’s order allowing the transfer of ownership.

The lenders led by State Bank of India, and also comprising Punjab National Bank and JC Flowers Asset Reconstruction Private Limited challenged the NCLAT verdict.

During the hearing in the apex court, JKC alleged that SBI has given loans to previous companies without security and that is why they are floundering now.

SBI, meanwhile, said the Performance Bank Guarantee (PBG) of Rs 150 crore should not be used even if expressly mentioned in the resolution plan.

“Respondents can adjust the PBG upon execution of the mortgage of all the three Dubai properties, which the respondents have failed to do even today,” Additional Solicitor General N Venkataraman said.

NCLAT had also directed the lenders of Jet Airways to adjust the Rs 150 crore paid by JKC as PBG.

The bank said out of Rs 350 crore payment, which is the first tranche, only Rs 200 crore has been paid. They said their Air Operator Certificate(AOC) expired in September 2023 and never was extended.

SBI asked the court for the liquidation of the airline and said they don’t know what to do when the resolution plan is not working.

The bank has also asked JKC to pay airport dues and said it has no plan to execute the resolution plan.

The airline was grounded in 2019 and underwent an insolvency resolution process thereafter. In 2021, JKC emerged as the successful bidder of Jet Airways.