Market shares of beleaguered Jet Airways India Ltd fell by 10 per cent to Rs 56.60 after the National Company Law Tribunal (NCLT) admitted the State Bank of India (SBI)-led lenders' insolvency application against the debt-laden airline. Jet stocks had risen a whopping 122 per cent to close at Rs 73.55 last week on hopes that NCLT may not admit the insolvency plea, but that didn't turn out to be the case.
NCLT's Mumbai bench not only accepted the petition, but also suggested a timeline of 90 days for the resolution of the case, citing it as a matter of national importance. The corporate insolvency resolution process is normally supposed to be completed in 180 days, with a provision for extension by another 90 days.
NCLT directed Jet Airways' Insolvency Resolution Professional (IRP) to submit fortnightly progress reports on the case, with the first such report to be submitted before July 5. SBI had filed insolvency petition on June 18, under Section 7 of the Insolvency and Bankruptcy Code (IBC) and also proposed Ashish Chhawchharia of Grant Thornton as IRP.
SBI Chairrman Rajnish Kumar said the decision to refer the resolution of Jet Airways under IBC was taken after due diligence by all lenders. At SBI's annual general meeting, Kumar said, "There are cogent reasons for lenders. Every decision is taken after a lot of due diligence." Kumar also said that the possibility of liquidation could not be ascertained at this stage. He added, "How can I foresee what will happen in NCLT, this is the first case of aviation sector bankruptcy that will be tested."
After trying to sell the company for the past five months, Jet's lenders have failed to find buyers. They wanted to avoid the insolvency court to recover maximum dues. With the airline now going to NCLT, the banks will be staring at a huge haircut on the loans given to the company. Jet owes over a total of £850 million to 26 banks, £1 billion to its hundreds of vendors, primarily aircraft lessors, and £300 million to around 23,000 staff who haven't been paid since March.