The Supreme Court exercised its exceptional authority under Article 142 of the Constitution to mandate the liquidation of Jet Airways, citing the "peculiar and alarming" situation where the resolution plan had remained unimplemented for five years.

The Court set-aside the NCLAT's order that had permitted the transfer of ownership of the financially struggling Jet Airways to the Successful Resolution Applicant (SRA) without full payment as per the resolution plan.

The Court directed the NCLT Mumbai Bench to immediately appoint a liquidator. Additionally, the Rs 200 crore paid by the Successful Resolution Applicant (SRA) was ordered to be forfeited.

The bench, comprising CJI DY Chandrachud and Justices JB Pardiwala and Manoj Misra, had reserved the judgment on October 16. The NCLAT order was challenged by the SBI-led consortium of lenders representing the cash-strapped airline.

Illegalities in the NCLAT order allowing ownership transfer

"This litigation is an eyeopener, has taught us many lessons about the IBC and the functioning of NCLAT," Justice Pardiwala orally said before the pronouncement.

The Court ruled that the NCLAT's decision to allow the adjustment of the first tranche of Rs 350 crores against the Performance Bank Guarantee (PBG) was in "flagrant disregard" of the Supreme Court's order passed on January 18 and described it as "perverse."

"We have no doubt that the NCLAT acted contrary to settled legal principles...NCLAT incorrectly interpreted our order," the Court observed in the judgment.

The Performance Bank Guarantee (PBG) had to remain intact until the completion of the resolution plan, as it could only be forfeited in the event of a breach. By failing to infuse the first tranche, the Successful Resolution Applicant (SRA) defaulted on the payment obligations. The SRA's argument that the adjustment of the payment was permissible under the resolution plan was rejected. The Court found that the SRA had failed to implement the resolution plan due to its inability to infuse the first tranche of payment.

The Court observed, "Since the resolution plan is no longer feasible, we must ensure that liquidation remains a viable option for the corporate creditor." It emphasized that the primary concern was not only to achieve substantial justice but also to ensure the speedy resolution of the dispute.

Additional Solicitor General (ASG) N Venkataraman appeared for the SBI- the lead lender of Jet Airways, while Senior Advocates Mukul Rohatgi and Gopal Sankaranarayanan represented the Successful Resolution Applicant (SRA) Jalan KalRock Consortium (JKC).