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State Bank of India vs. The Consortium of Mr. Murari Lal Jalan and Mr. Florian Fritsch

Not available · 2024 INSC 852Decided 7 Nov 2024
Not available

Background

Jet Airways (India) Ltd. was pushed into the Corporate Insolvency Resolution Process (CIRP) in 2019 on an application by State Bank of India (the lead lender). A resolution plan submitted by a consortium (the "Successful Resolution Applicant" or SRA, led by Murari Lal Jalan and Florian Fritsch) was approved by the NCLT, requiring the SRA to meet various conditions (including payment of workmen's dues, airport dues, and infusing funds) before an "Effective Date" for handover of the airline. Years later, the SRA had still not implemented the plan properly (failing to pay outstanding dues in full and defaulting on the first tranche payment), yet the NCLT and NCLAT held that the Conditions Precedent had been fulfilled and even allowed the SRA's Performance Bank Guarantee to be adjusted against its own payment obligation.

Decision Breakdown

The Supreme Court held that the NCLAT and NCLT had erred: the Conditions Precedent had not actually been satisfied by the SRA (airport dues and workmen's dues remained unpaid, contrary to the Resolution Plan and an earlier Supreme Court order), so the "Effective Date" itself could not have been validly fixed, and the Performance Bank Guarantee could not lawfully be adjusted against the SRA's own payment obligation. Given the SRA's prolonged and substantial failure to implement the approved plan, the Court ordered that the Corporate Debtor (Jet Airways) be sent into liquidation under Section 33(3) of the IBC, forfeited the Rs. 200 crore already infused by the SRA, and permitted the lenders to encash the Rs. 150 crore Performance Bank Guarantee. The Court also flagged broader shortcomings in the IBC framework around resolution-plan implementation and non-compliance, sending suggestions to the Finance Ministry and the Insolvency and Bankruptcy Board of India.

Lesson Learnt

Winning a bid to take over a bankrupt company under the IBC comes with binding obligations: a resolution applicant that persistently fails to honour the terms of its own approved plan (paying dues, meeting deadlines) risks having the company sent into liquidation and losing the money it has already put in, rather than being allowed to renegotiate its way out of default.

Official source (sci.gov.in)View Judgment (PDF)

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