NCLT Mumbai Dismisses Jet Airways Plea Seeking $92M Refund From Boeing Over Undelivered Aircraft

The Mumbai Bench of the National Company Law Tribunal (NCLT) has dismissed the Liquidator of Jet Airways' plea seeking a refund of $92.129 million, or about ₹500 crore, paid to Boeing as advance and pre-delivery payments for aircraft that were never delivered.

The tribunal comprising Judicial Member Sushil Mahadeorao Kochey and Technical Member Prabhat Kumar held that the dispute revolved around the parties' aircraft purchase agreements and could not be adjudicated in its limited jurisdiction under the Insolvency and Bankruptcy Code (IBC).

The tribunal observed that the dispute centred on the agreements between Jet Airways and Boeing. The claims first had to be adjudicated and crystallised before the parties' contractual rights could be determined.

Section 60(5) of the IBC allows the NCLT to decide questions arising out of or in relation to insolvency proceedings. The tribunal, however, held that its jurisdiction in such proceedings could not be extended to a full-fledged trial of disputed contractual claims requiring examination of agreements, evidence, and questions of law and fact.

The dispute dates back to 2013, when Jet Airways and Boeing entered into agreements for Boeing 737-8 and Boeing 787-9 aircraft. Jet Airways paid $92,129,387 to Boeing as advance or pre-delivery payments. The agreements were not placed before the tribunal because of concerns over Boeing's confidential proprietary information.

Jet Airways later failed to make certain payments due under the agreements. Boeing issued a notice on May 22, 2019, purporting to suspend its obligations under the agreements. Jet Airways entered the corporate insolvency resolution process (CIRP) in June 2019.

Boeing subsequently terminated the agreements in December 2020. The aircraft were never supplied. After Jet Airways went into liquidation, the Liquidator sought the return of the advance payments.

Boeing opposed the claim. It contended that the advance payments had already been adjusted against its outstanding claim against Jet Airways. The tribunal noted that Boeing's claim had been admitted during the insolvency process and was later increased during liquidation due to currency fluctuation.

The Liquidator argued that Boeing had participated in the insolvency process by filing its claim. According to the Liquidator, this brought the dispute within the NCLT's jurisdiction.

The Liquidator also relied on Regulation 29 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, which concerns set-off arising from mutual dealings.

The tribunal did not accept this contention. It held that whether Boeing was entitled to retain, forfeit, set off or adjust the advance payments depended on the terms of the purchase agreements. Those issues could not be decided without examining the contracts and taking evidence.

“These questions require evaluation of Agreements between the Parties, leading of evidence by the Parties and a full-fledged Trial,” the tribunal observed.

The tribunal also declined to decide whether the claimed set-off was applicable. It held that this issue required examination of the purchase agreements and adjudication of the competing claims.

The tribunal further rejected the argument that Boeing had submitted to NCLT jurisdiction merely by filing its claim during the insolvency process. It held that jurisdiction would be governed by the terms of the contract.

The tribunal ultimately held that the dispute was independent of the insolvency process.

The Liquidator was seeking to enforce contractual rights without placing the underlying agreements or their terms before the tribunal. The tribunal held that it could not exercise its Section 60(5) jurisdiction to decide such a dispute.

The Liquidator's plea was accordingly dismissed.

For Applicant: Advocates Malhar Zatakia, Advocate a/w Nishant Upadhyay, Vasudha Jain and Mayank Jain i/b AZB & Partners

For Respondent: J.P. Sen, Sr. Advocate a/w Advocates Misha a/w Abhilash Chaudhary and Moulshree Shukla i/b Shardul Amarchand Mangaldas & Co.