Fully grounded: NCLT bans Rs 370 cr refund as Jet Airways enters final liquidation phase

India’s domestic aviation sector was rocked earlier this month when hundreds of IndiGo flights were canceled following the implementation of new crew composition regulations, causing widespread disruption at major airports. Passengers faced long delays, overcrowding and uncertainty, sparking public outrage and renewed debate over operational resilience and passenger care.

On social media, many travelers nostalgically remember airlines such as Jet Airways and Kingfisher, arguing that the absence of traditional full-service carriers is felt during times of system stress.

Jet Airways, once considered the benchmark for full-service aviation in India, officially reached the end of its turbulent journey in November 2024 when the Supreme Court ordered its liquidation.

Earlier this week, the National Company Law Tribunal (NCLT) in Mumbai rejected a plea by the Jalan-Kalrock Consortium seeking refund of over Rs 370 crore paid during Jet Airways Ltd’s insolvency proceedings. In an order dated December 15, the court ruled that the amount was not considered as costs of the Corporate Insolvency Resolution Process (CIRP) and therefore could not be returned to the consortium.

The tribunal, comprising judicial member Sushil Mahadeorao Kochey and technical member Prabhat Kumar, held that the consortium had failed to meet the legal criteria required for such reimbursement. The move comes amid a protracted and complex insolvency and liquidation process for the grounded airline, which has faced repeated legal and financial hurdles since ceasing operations.

Take wings and reach the top

Founded in 1993 by Naresh Goyal following the liberalization of air transport in India, the airline began as an air taxi operator before becoming a dominant private carrier. Its expansion onto international routes in 2004 and the acquisition of Air Sahara in 2007 reflect the ambition to build a globally competitive airline.

In its heyday, Jet Airways symbolized premium service, punctuality and extensive connectivity.

In 2016, the airline operated over 300 daily flights to around 74 destinations in India and abroad. Mumbai served as the primary hub, supported by secondary hubs in Delhi, Bengaluru, Chennai, Kochi and Kolkata. As of October 2017, Jet had a passenger market share of almost 18%, ranking just behind IndiGo and consolidating its position as one of the largest airlines in the country.

What led to the chaos, to the fall

However, beneath the surface, structural weaknesses have accumulated. According to a case study by IIT Ropar, Jet Airways began full-scale operations in 1995 and expanded to international services in 2004. The airline went public around the time it acquired Air Sahara in 2007. In the years that followed, intensifying competition, particularly from low-cost carriers such as SpiceJet and IndiGo, forced Jet to cut fares, reduce margins and to weaken its financial performance.

Despite its early successes, a sustained price war and rising costs took a toll on the airline, ultimately plunging it into serious financial difficulties. The downward spiral culminated with bankruptcy in 2019, leading to the suspension of all flight operations.

A costly full-service model in a market increasingly dominated by low-cost carriers has eroded Jet’s competitiveness. Intense price competition from IndiGo and SpiceJet forced the airline to cut fares, squeezing margins and triggering lasting financial losses. The acquisition of Air Sahara, renamed Jet Lite, failed to generate the hoped-for synergies and instead increased the airline’s debt burden.

At the start of 2019, Jet Airways was in deep financial difficulty. Cash flow had dried up, negotiations with lenders and aircraft lessors had become acrimonious, and trust among key stakeholders was rapidly crumbling. Lessors began repossessing planes, leading to widespread flight cancellations and operational chaos. The airline struggled to pay banks, employees and suppliers, while emergency financing options were closed.

On April 17, 2019, Jet Airways conducted its last flight, from Amritsar to Mumbai, ending nearly 25 years of operation. More than 20,000 employees were affected and passengers were left stranded with unrefunded tickets. At the time of the grounding, the airline owed more than Rs 8,000 crore (around $1.1 billion) to banks, aircraft lessors and other creditors. Managing the insolvency was particularly complex, given the airline’s fleet of more than 100 largely leased aircraft and competing claims from lenders, employees, suppliers and customers.

Insolvency proceedings

Insolvency proceedings were initiated under Section 7 of the Insolvency and Bankruptcy Code, marking the start of a protracted legal and financial battle. An insolvency resolution professional has been appointed in a bid to revive the airline. The process faced numerous hurdles, including aircraft evaluation and management, regulatory approvals, coordination among stakeholders, and persistent cash flow constraints.

In 2021, the Jalan-Kalrock consortium became the winning bidder, raising hopes for Jet’s return. The airline even carried out a test flight in May 2022, a necessary step for the renewal of its air operator license. However, repeated delays, missed milestones and disputes with lenders have hampered the recovery. What was once projected as a comeback has gradually lost credibility.

Ultimately, the court intervened and invoked its powers under Section 142. It allowed the lenders to encash a performance bank guarantee of Rs 150 crore and ordered forfeiture of the Rs 200 crore injected by the Jalan-Kalrock Consortium, concluding that the stimulus package was no longer viable.