NCLAT asks for proceeds from sale of Jet Airways aircraft to be kept in escrow pending resolution of Mumbai airport dues

The National Company Law Appellate Tribunal (NCLAT) on Thursday directed Jet Airways liquidator to keep the proceeds from the sale of three grounded Boeing 777-300ER aircraft to Malta-based Ace Aviation in an escrow account until a dispute over dues payable to Mumbai International Airport Ltd (MIAL) is resolved.

The bench, led by Justice N. Seshasayee (Judicial Member) and Barun Mitra (Technical Member), asked the National Company Law Tribunal, Mumbai, to decide the issue related to MIAL’s airport dues and gave liberty to the lenders and the liquidator to approach the NCLT or NCLAT for any clarification.

The appellate court clarified that it had not ordered the authorization of funds and the order was merely to keep the money in escrow, leaving the liquidator free to decide the status of MIAL’s dues under the waterfall mechanism of the Insolvency and Bankruptcy Code; Under this mechanism, the corporate debtor’s debts are paid to various stakeholders following a structured and predictable hierarchy.

“Keep this amount in the escrow account until the issue is finally resolved. Final point,” the bank said.

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MIAL, owned by Adani Group, had approached the NCLAT to clarify its share of the aircraft sale, demanding parking charges and related dues for aircraft parked at the Mumbai airport since 2018. The airport operator moved the NCLAT in response to the defamation claim filed by Ace Aviation at NCLT Mumbai, alleging that MIAL had failed to comply with the September 17 NCLT order requiring it to provide its banking details, obtain a no-objection certificate and cooperate with the sale within seven days.

Pursuant to the August 7 consent order, MIAL had agreed to waive all claims, liens, or encumbrances relating to the aircraft; but this was valid only for buyers and only for the period before the sale.

Future parking fees

According to the agreement, Ace Aviation or its subsidiary Challenge Air Cargo Ltd. ₹14 crore with MIAL to cover future parking and airport expenses — ₹4 crore each of the two aircraft and ₹6 crore for the third. Buyers must pay to remove two aircraft within four months and the third within six months ₹1 crore per month per aircraft over a long period of time. MIAL will deduct the fees from the deposit and facilitate the transfer of the aircraft.

According to the approval order, if the buyers fail to make payments on time or do not remove the aircraft, MIAL will be able to take legal action, including exercising its legal lien right. Once all dues are paid, MIAL will issue the no-objection certificate for export and the remaining deposit will be refunded.

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Three Boeing 777-300ER aircraft parked at Mumbai airport since 2018 are embroiled in a long-running legal dispute over unpaid dues. Ace Aviation received an offer to purchase the aircraft in 2022. ₹400 crore, but the sale was postponed due to impasse in the monitoring committee.

While Jet Airways’ lenders supported the sale, a group of former employees opposed it, citing garnishment for unpaid gratuities and provident fund dues.

Ace Aviation approached the NCLT, which directed the committee to complete the sale in October 2023 and deemed Ace Aviation as a qualified bidder. The Supreme Court also instructed the monitoring committee to complete the sale in 2024.

MIAL continued its objection, claiming that the aircraft would be seized due to unpaid dues.

According to the resolution plan prepared by Jet Airways’ Jalal Kalrock Consortium (JKC), airport dues and parking fees are initially estimated as follows: ₹475 crore — increased to approximately 475 crore ₹1000 crore.

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However, circumstances changed when the Supreme Court, exercising its special powers under Article 142 of the Constitution, ordered the liquidation of Jet Airways on November 7 after finding that JKC had not complied with the terms of the resolution plan, including the payment of airport dues.

MIAL expressed concerns regarding the validity of the aircraft sales agreement. Although the airport operator initially refused to give up possession until the dues were paid, it later acquiesced to the August 7 order, but subsequent disputes led to the current NCLAT proceedings.