Jet Airways, the airline company that was grounded two years ago, would be able to fly again, thanks to Insolvency and Bankruptcy Code. The Committee of Creditors (CoC) of Jet Airways went to the National Company Law Tribunal under IBC to resolve the case of Jet Airways and recover the loans.
Now the CoC, led by the State Bank of India, has agreed to the bid submitted by the consortium of the UK’s Kalrock Capital and the UAE-based entrepreneur Murari Lal Jalan which has agreed to pay 1,200 crore rupees over the next five years to creditors and employees. “The Consortium maintains its stand that it wants to work alongside the Ministry of Civil Aviation, the Directorate General of Civil Aviation (DGCA) and all its competitors to put Jet Airways back in the skies,” the Jalan-Kalrock consortium said in a press statement.
NCLT has told the Ministry of Civil Aviation and Director General of Civil Aviation to allot slots at airports. Although Delhi and Mumbai slots are full, the company might face some hurdles but the resolution professionals are confident that enough slots are available to take Jet Airways to the skies.
“I am confident that the DGCA and Ministry of Civil Aviation will give fair consideration to the business proposal for Jet’s revival,” Ashish Chhawchharia, Jet Airways’ Resolution Professional (RP) and partner, Grant Thornton, said. “Apart from airports such as Delhi and Mumbai, on preliminary analysis, it appears that other airports have sufficient slots, whereas some are likely to expand their capacity.”
The resolution of Jet Airways is being seen as another major success of NCLT under the Insolvency and Bankruptcy Code.
India had ‘socialism without entry’ before economic liberalization in the early 1990s. This had a negative impact on the economy and gave a ‘Hindu rate of growth’ to the country. The problem was solved in the early 1990s as the country moved towards a capitalist economy with the advent of economic liberalization.
However, the larger framework of the political economy of the country remained ‘capitalism without exit’. The lack of a proper framework for insolvency amassed huge Non-Performing Assets (NPAs) which hampered the health of the banking sector as well as the growth of the economy. The Modi government has brought a path-breaking policy as an Insolvency and Bankruptcy Code (IBC) to solve capitalism without an exit problem.
The Insolvency and Bankruptcy Code (IBC) is proving to be the most powerful weapon against the NPA problem, even the Economic Survey 2018 mentioned that the new Insolvency and Bankruptcy Code (IBC) was helping to improve the health of the banking sector. Earlier several Indian companies were defaulting on their loans intensely because initially there was no law to dissolve their companies.
The promoters were sure that the management of the company would not go out of their hands. They were taking loans from the government banks by bribing the employees with the intention of never returning the loans back. Since India brought the Insolvency and Bankruptcy Code, companies are now running after the banks to pay back their dues, because the IBC rules barred promoters of companies that are classified as non-performing assets (NPAs) from bidding for these companies.
So far, more than 1,000 professionals have registered under the IBC regime and it is proving moderately successful in solving corporate bankruptcy. Before the implementation of IBC in 2016, all the previous steps of corporate insolvency like the Board for Industrial and Financial Reconstruction (BIFR) under SICA (Sick Industrial Companies Act 1985), Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (also known as the SARFAESI Act) and various rules framed ruled by RBI failed. But, thankfully IBC is emerging as a major success and the resolution of Jet Airways is the latest example of this.