2021 (6) TMI 1089 - Tri - Insolvency and Bankruptcy

Jet Airways' Consortium Plan Approved with Conditions | CIRP, Creditors, Employees Addressed

Ashish Chhawchharia Resolution Professional for Jet Airways (India) Ltd., State Bank of India Versus Jet Airways (India) Ltd.

The Resolution Plan submitted by the Jalan Fritsch Consortium for Jet Airways (India) Limited was approved by the Tribunal with certain conditions and ... Seeking approval of the Resolution Plan - Section 30(6) of the Insolvency and Bankruptcy Code, 2016 - seeking directions for reinstatement of slots (including bilateral rights and traffic rights) to the Corporate Debtor - slots are present economic resource or are asset? - potential of generating income - HELD THAT:- Admittedly the Corporate Debtor ceased its operations from 17.04.2019. On the date of insolvency commencement i.e. on 20.06.2019, the Corporate Debtor was not in operation. It is not in dispute that the Corporate Debtor was not run as a going concern during the CIRP. Therefore, the protection of the licenses and concessions from termination or suspension would not be available to the Corporate Debtor. In the case of IN THE MATTER OF: UNION OF INDIA VERSUS VIJAYKUMAR V. IYER, VIJAY KUMAR IYER VERSUS GTL INFRASTRUCTURE LTD., GTL INFRASTRUCTURE LTD. VERSUS VIJAY KUMAR IYER, STATE BANK OF INDIA VERSUS GTL INFRASTRUCTURE LTD., INDUS TOWER LTD. VERSUS VIJAYKUMAR IYER RESOLUTION PROFESSIONAL OF AIRCEL LTD. AND DISHNET WIRELESS LTD. & ANR., TELECOM REGULATORY AUTHORITY OF INDIA VERSUS AIRCEL LTD. & ANR. TATWA TECHNOLOGIES LTD. VERSUS VIJAY KUMAR IYER & ANR., TELECOM REGULATORY AUTHORITY OF INDIA VERSUS DISHNET WIRELESS LTD. &ANR. [2021 (4) TMI 1300 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] the spectrum continued to be with the Telecom Company during the CIRP. In the instant case the slots cannot be regarded as ‘present economic resource’ of the Corporate Debtor. That being an important factor, is squarely lacking in the case of the Corporate Debtor. Whether the slots could be considered as an ‘asset’ of the Corporate Debtor? - HELD THAT:- Slots are airport specific and are dependent upon the Airline’s operating rights. The mechanism of allotment of slots, though integral to an operating airline, is a very complex and dynamic process upon which the entire flight schedule of an airport depends. The allotment of slots and their usage is like a constantly changing jigsaw puzzle. A single slot therefore could not be left or kept idle. The slots vacated by one Airline would have to go to another Airline for optimum utilisation of the slots and the capacity of the airport - As the guidelines would indicate the allotment of slots is not automatic and needs to be sought by the Airline twice a year respectively for the summer and winter seasons. Once the slots are not used by particular Airline or vacated by it, the same is immediately allotted to another in order to optimize airport capacity. As already indicated a slot in a Level-3 Airport could not be left idle. No documents however been placed to substantiate and to verify the terms and conditions expressed in relation to the transfer, if any, of the slots, presently held by Air India. Even otherwise the entity / company that would take it over would inherit what the Air India presently has. It can have no claim over what Air India, or for that matter any entity, does not have dominion over. The analogy could not be extended to the Corporate Debtor, in as much as the Corporate Debtor had been divested of these slots w.e.f. 17.04.2019 when it ceased operations and was not operating / using them on the date of the insolvency commencement - The facts and circumstances would indicate that presently the slots cannot be restored to the Corporate Debtor on a historic basis. The thumb rule being ‘use it or lose it’. Be that as it may, we must remember that running an Airline, much less reviving one, is not a facile business. It involves entire gamut of complex and diverse activities from land to sky and everything in between. In the present day air travel has rather become a necessity, than a luxury considered merely a decade back. Increase in the number of Airlines would encourage healthy competition and provide a level playing field to the operators. The result would only benefit the consumer. Considering the peculiar nature of slots allotment and its usage, the principle of slots allotment could not come within the commercial wisdom of the CoC. As already held the slots being not assets of the Corporate Debtor, the CoC’s decision on protection of historicity would not be of any help to the Corporate Debtor - The success of the Resolution Plan and its implementation is contingent upon certain future events as provided under Clause 7.6 of the Resolution Plan. Since the revival of the Corporate Debtor is dependent upon these factors, the CoC has approved the Resolution Plan taking into consideration the necessity of the conditions which are integral to the successful implementation of the Plan. Thus, the effective date also depends upon the conditions being fulfilled. Despite the effective date being uncertain the CoC has approved the same. Considering the peculiarity of the facts and totality of the circumstances, we feel it appropriate to agree with such decision of the CoC and its fiscal prudence, subject to the following. The Resolution Plan doesn’t take into account the dues of the employees and workmen during the CIRP period in view of the fact that except for 50 employees retained as ‘Asset Preservation Team’ of the Corporate Debtor none of the other employees or workmen were under the employment of the Corporate Debtor nor did they work for the Corporate Debtor during that period. Decision in that regard appears to be reasonable based on the principle of ‘no work no pay’. The instant Resolution Plan meets the requirements of Section 30(2) of the Code and Regulations 37 and 38 of the Regulations. The Resolution Plan is not in contravention of any of the provisions of Section 29A of the Code and is in accordance with law. The same needs to be approved as provided under Section 31 of the Code - Application allowed. Issues Involved:1. Approval of the Resolution Plan under Section 30(6) of the Insolvency and Bankruptcy Code, 2016.2. Treatment of Corporate Insolvency Resolution Process (CIRP) costs and claims.3. Treatment of Assenting and Dissenting Financial Creditors.4. Treatment of Employees and Workmen.5. Treatment of Operational Creditors.6. Allocation and reinstatement of airport slots.7. Compliance with mandatory contents of the Resolution Plan under the Code and Regulations.8. Approval of various waivers, extinguishments, and reliefs sought by the Successful Resolution Applicant (SRA).Detailed Analysis:Approval of the Resolution Plan:The application was filed by the Resolution Professional (RP) seeking approval of the Resolution Plan submitted by the consortium of Mr. Murari Lal Jalan and Mr. Florian Fritsch (Jalan Fritsch Consortium). The Corporate Insolvency Resolution Process (CIRP) for Jet Airways (India) Limited was initiated on 20.06.2019. Multiple rounds of Expression of Interest (EoI) were conducted, leading to the final approval of the Resolution Plan by the Committee of Creditors (CoC) with a 99.22% majority.CIRP Costs and Claims:The Resolution Plan provided for the payment of CIRP costs, including operating and process costs, interim finance costs, and airport parking charges. The SRA set aside Rs. 25 Crores towards CIRP costs and proposed a mechanism to handle any excess costs. The payment of CIRP costs was to have precedence over other payments.Assenting and Dissenting Financial Creditors:The total admitted claims of the Financial Creditors were Rs. 7807.74 Crores. The Resolution Plan proposed various payouts, including upfront payments, Zero Coupon Bonds, Non-Convertible Debentures (NCDs), equity stakes in Jet 2.0 and Jet Privilege Private Limited (JPPL), and upsides on the sale of aircraft and spares. Dissenting Financial Creditors were to be paid liquidation value in priority.Employees and Workmen:The Corporate Debtor had a large number of employees and workmen on its payrolls. The SRA proposed the formation of an employees' trust, transfer of equity stake, cash payments, IT assets, and free tickets. The SRA also proposed to demerge employees to Airjet Ground Services Limited (AGSL) and offered a fixed sum of Rs. 52 Crores towards settlement of claims.Operational Creditors:The liquidation value due to Operational Creditors was presumed to be NIL. However, the SRA proposed a fixed sum of Rs. 15,000 to each Operational Creditor, and options for ticket refunds or future ticket credits for claims classified as 'Ticket Refund.' The Dutch Administrator's claims were to be settled with a maximum sum of Rs. 10,000.Allocation and Reinstatement of Airport Slots:The SRA sought directions for the reinstatement of slots, bilateral rights, and traffic rights. The Tribunal discussed the guidelines for slot allocation and concluded that the slots could not be regarded as assets of the Corporate Debtor. The slots vacated by Jet Airways were allocated to other airlines on a temporary basis. The Tribunal emphasized the need for a holistic approach to assist the SRA in obtaining slots as and when required.Compliance with Mandatory Contents of the Resolution Plan:The Resolution Plan was found to be in compliance with Section 30(1) & (2) of the Code and Regulations 38 and 39. The Plan provided for the payment of CIRP costs, debts of operational creditors, management of the Corporate Debtor's affairs, implementation and supervision of the Plan, and a declaration of compliance with applicable laws.Waivers, Extinguishments, and Reliefs:The SRA sought various approvals, waivers, and extinguishments, including tax and stamp duty exemptions, business and government contracts, and reconstitution of share capital. The Tribunal directed the SRA to approach respective authorities for such reliefs, which should be considered favorably.Conclusion:The Resolution Plan submitted by the Jalan Fritsch Consortium was approved by the Tribunal, subject to certain conditions and modifications. The Plan was binding on all stakeholders, and the moratorium under Section 14 of the Code ceased to have effect. The Monitoring Committee was tasked with supervising the implementation of the Plan, and the RP was directed to forward all records to the Insolvency and Bankruptcy Board of India (IBBI).