Jet Airways Liquidation: NCLT Directs Distribution Of Sale Proceeds Despite Pending Workmen Claims

The National Company Law Tribunal (NCLT) at Mumbai has directed the liquidator of Jet Airways (India) Ltd to proceed with the distribution of liquidation proceeds under the Insolvency and Bankruptcy Code, holding that indefinite deferment of distribution defeats the objective of timely value realisation.

“Indefinite deferment of distribution, particularly in a liquidation that has already witnessed significant delay, runs contrary to the object of timely value realisation and distribution embodied in the Code.,” the tribunal observed.

A coram of Judicial Member Sushil Mahadeorao Kochey and Technical Member Prabhat Kumar heard an application filed by State Bank of India on behalf of the assenting financial creditors. The application sought directions to the liquidator to distribute proceeds realised from the sale of Jet Airways' assets, including its Bandra-Kurla Complex property in Mumbai.

Jet Airways is presently undergoing liquidation pursuant to a November 7, 2024 order of the Supreme Court of India, which set aside the earlier revival plan after finding that the consortium had failed to fulfill its obligations under the plan.

The liquidation order brought the corporate insolvency resolution process to an end. The liquidator subsequently proceeded to sell the company's asset, and the proceeds from the sale of a BKC property were deposited in the company's bank account. 

During the process, groups of former employees and workmen sought exclusion of provident fund and gratuity dues from the liquidation estate and asked that distribution be deferred until their claims were decided.

Citing these pending applications and differing stakeholder views, the liquidator postponed distribution.

Rejecting the plea to halt the process, the tribunal said liquidation cannot be allowed to come to a standstill merely because disputes over priority or exclusion are pending.

“The interests of workmen, employees, and financial creditors must be balanced in a manner that neither prejudices pending claims nor paralyses the liquidation process. In this context, the Tribunal holds that the liquidation process cannot be brought to a standstill merely because issues of priority and exclusion are pending before it,” the tribunal said.

It accordingly directed the liquidator to move ahead with distribution under the statutory waterfall mechanism, subject to any restraint orders passed by the NCLAT or the Supreme Court.