Liquidation of Jet Airways: Are 1.43 lakh retail investors at a complete loss?

In a major development, India’s Supreme Court has ordered the liquidation of troubled airline Jet Airways after successful bidder Jalan Kalrock Consortium failed to meet financial obligations.

The Supreme Court’s liquidation order means that the future of Jet Airways shareholders, including around 1.43 lakh retail investors, is bleak.

When a company goes into liquidation, it essentially means ceasing operations, selling assets, and distributing proceeds to pay off debts and liabilities.

In this case, retail investors, who bet on the airline’s revival, may face losses, as equity shareholders are usually the last in line to receive any funding. In most liquidation cases, there is often nothing left for the equity shareholders, resulting in a complete loss of their investment.

A bench headed by Chief Justice DY Chandrachud and Justices JB Pardiwala and Manoj Mishra ordered that necessary steps be taken to initiate the liquidation process of the grounded airline.

Lenders granted by SRA to creditors of Rs. 150 crore has been permitted to encash the performance bank guarantee.

The NCLAT on March 12 upheld the resolution plan of the grounded air carrier and allowed its ownership to be transferred to JKC. SBI, Punjab National Bank and JC Flowers Asset Reconstruction Pvt Ltd challenged the NCLAT judgment.

The Appellate Tribunal further directed the Jet Airways Monitoring Committee to complete the transfer of ownership within 90 days. In addition, the NCLAT has asked the lenders of Jet Airways to pay Rs. 150 crore was also directed to be adjusted.

The banks said that under the JKC resolution plan, within a stipulated 180-day period from the effective date of Rs. 350 crore has failed to meet its financial obligations including investment.

Jet Airways, which has been grounded since April 2019, said in September, 2023 that the newly proposed promoters – the Jalan-Calrock Consortium – had completed an additional investment of Rs 100 crore in the carrier.