State Bank of India (SBI) on Tuesday moved the National Company Law Tribunal (NCLT) to initiate insolvency proceedings against Jet Airways, only days after two operational creditors — Shaman Wheels and Gaggar Enterprises — filed similar petitions before the tribunal under Section 9 of the Insolvency and bankruptcy Code, 2016. SBI, represented by Cyril Amarchand Mangaldas, has filed a petition under Section 7 of the IBC, that allows financial creditor to file an application against the corporate debtor.
The NCLT’s Mumbai bench has adjourned the matter to June 19, while two applications filed by operational creditors were set to be heard on June 20. SBI’s move to refer Jet Airways under the IBC comes as no surprise, after SBI in a statement released on Monday said, “After due deliberations, the lenders have decided to seek resolution for Jet Airways under the bankruptcy code since only a conditional bid was received.
The statement further stated the move was necessitated as the prospective investor wants some Sebi exemption, which can be worked out better under the IBC.
Abu Dhabi-based Etihad Airways, which owns a 24% stake in the airline, was the sole party to show interest in response to an offer by bankers in April seeking buyers for the now defunct airline. However, Etihad’s interest was accompanied by several conditions including its ability to bring in fresh funds only to the extent of Rs 1,700 crore, exemption from any open offer, and asking lenders to look for other investors who could bring in funds.
At a later stage the Hinduja Group expressed its interest, though no formal proposal was made to the lenders. The prospective buyers also sought substantial haircut on the dues of the airline to the banks.
Ongoing investigations by the Enforcement Directorate and Serious Fraud Investigation Office on the affairs of Jet Airways were also cited as one of reasons keeping away serious buyers from taking on a majority stake in the airline. The grounded airline owes more than Rs 8,000 crore to the consortium of banks led by SBI, while it has a much larger debt pile by way of accumulated losses to the tune of Rs 13,000 crore, and vendor dues of over Rs 10,000 crore and salary dues of over Rs 3,000 crore.
Jet Airways halted operations on April 17 after lenders rejected its request to provide emergency funding. The civil aviation ministry has allotted a significant portion of the airline’s slots in major airports to other scheduled carriers. Matters complicated further for the airline with the series of resignations from the top management since May 13.
Source: Financial Express, June 19, 2019