Section 7 of IB Code initiated against Jet Airways

Background: State Bank of India had filed a Section 7 Application under the Insolvency and Bankruptcy Code, 2016 (“IB Code”) against jet airways, which was subsequent to the Dutch court declaring Jet Airways insolvent, and appointing a bankruptcy trustee in the Netherlands. The Hon’ble National Company Law Tribunal (“NCLT”) while admitting the said Section 7 passed directions to the stakeholders to look towards insolvency resolution within 180 days so as to preserve the assets of Jet Airways and to ensure a quick turnaround.

1. With a green light from the Committee of Creditors (CoC), when is Jet Airways likely to restart its operations? Also, in light of the Jet Airways’ employee union ‘JAMEWA’ (Jet Aircraft Maintenance Engineers Welfare Association) filing an interlocutory application with the Hon’ble NCLT to be made party to the resolution process, what maybe the stance of the Hon’ble Adjudicating Authority pertaining to information sharing?

Once the approval for the Resolution Plan is given by the Hon’ble NCLT, when Jet Airways will restart its operations depends on one of two things; a) the infusion of capital which will go not only towards payment to creditors, but also as working capital to restart operations and b) the status of litigation post approval of the plan by the Hon’ble NCLT, including appeals to the Hon’ble National Company Law Appellate Tribunal (“NCLAT’) and/ or the Supreme Court of India (“SC”).
Regarding the disclosure of the Resolution Plan submitted by Jalan-Kalrock to the employees of Jet Airways, natural justice warrants that a resolution plan submitted before a judicial forum must be shared with all the stakeholders/ directly affected parties, which in this instance, includes the 500+ employees of Jet Airways, and any decision taken by the Hon’ble Adjudicating Authority should take this into account.

2. Prior to a potential revival of the airlines, what are some of the key issues that need to be addressed?

Before Jet Airways can see a revival and restarting of business in reality, the Resolution Plan approved by the CoC needs to pass muster before the Hon’ble Adjudicating Authority, which has the power to analyse the plan for its compliance of the provisions of Section 30(2) of the IB Code.
The Resolution Plan may also face objections and hurdles from different stakeholders, who may appear and demand copies of the Resolution Plan and plead for a better protection of their interest, which may or may not be covered under the successful Resolution Plan.
Even if the Resolution Plan gets approved by the Hon’ble Adjudicating Authority, it may still face further litigation in the form of appeals before the Hon’ble NCLAT and/ or the Hon’ble Supreme Court of India, on various legal and/ or factual issues. The successful Resolution Applicant may or may not be able to implement the Resolution Plan until such challenges are dealt with.

3. What is the importance of the Jet Airways case for Indian insolvency law? What are the gaping holes in India’s Insolvency regime that the Jet Airways case highlights and what can be done to address them?

The Jet Airways case is a laudable attempt by Hon’ble Judges in the country to read the UNCITRAL Model Law structure into India’s insolvency framework. Last year, a jurisdictional clash arose when a court in the Netherlands appointed a Dutch bankruptcy trustee to control Jet Airways’s assets in the Netherlands, for which the Hon’ble NCLAT allowed the Dutch administrator to be a member of the CoC, and participate in the meetings within the bounds of the Corporate Insolvency Resolution Process (“CIR Process”) postulated under the IB Code. The model worked as the parties came up with a creative cross border insolvency protocol and proposed a model for international coordination and cooperation between the various stakeholders while maintaining regard for the sovereignty of both jurisdictions.
This setup was successful in resolving the insolvency of Jet Airways because the said ‘cross border insolvency protocol’ was founded on the principles of the model law, which identified India as the centre of main interest and the Dutch proceedings as the secondary interest.

However, the Jet Airways case brings several unanswered questions to the fore as well. For example: in cases where insolvency process has commenced in India for a specific debtor who owns assets abroad, there is no mechanism yet to ensure that said assets will not be subject to parallel insolvency proceedings in that country/ jurisdiction. The striking question which remains unanswered as on date in the Indian insolvency regime is in the aforesaid eventuality, where multiple insolvency proceedings are initiated in different jurisdictions, due to the lack of a comprehensive cross border insolvency framework which can be applied to a particular multi-national debtor. A possible solution to these issues is a certain level of uniformity in the insolvency laws around the globe, which will include a solid cross-border insolvency framework.

 

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