Shares of Jet Airways India Ltd jumped as much as 10% on Monday, marking third day of gains, after the airline informed the stock exchanges that the insolvency proceedings have formally begun. “Pursuant to an order dated June 20, 2019 of NCLT Mumbai Bench, Corporate Insolvency Resolution Process (CIRP) has been initiated for Jet Airways (India) as per the provisions of Insolvency and Bankruptcy Code, 2016,” Jet Airways said in a regulatory filing Sunday.
Jet Airways shares were trading at Rs 74.70 a piece, up 3%, at 2.04pm on BSE. The stock, which had hit a low of Rs 26.55 on Thursday, has rallied over 140% in the last three trading sessions amid heavy volumes.
Jet Airways employees have also received a letter stating that the Corporate Insolvency Resolution Process (CIRP) for the airline, under the Insolvency and Bankruptcy Code (IBC), has commenced with effect from 20 June 2019.
According to a report in the Hindu Business Line, the Insolvency Resolution Professional (IRP) appointed by the National Company Law Tribunal (NCLT) has told the pilots and staff of Jet Airways that their salary dues may not be settled fully as the company is undergoing the insolvency process. The report said that in a meeting with the Jet management, IRP Ashish Chhawchharia, charted out two possible scenarios for clearing dues.
If the insolvency process is successful and the IRP is able to bring in a new investor, then the past dues will depend on the amount or percentage of the amount that the successful bidder is willing to pay, which may or may not be in full. However, if the resolution process is not successful, the company will go into liquidation and the employees’ dues will be paid as per the waterfall mechanism.
This means that NCLT expenses will be the first priority. Workmen’s compensation, pending for 24 months, and the dues of secured lenders come next. The dues of other staff, pending for 12 months, and the payment to the unsecured creditors will be the third priority.
The Mumbai bench of NCLT had, on Thursday, admitted the State Bank of India’s (SBI’s) insolvency petition and suggested a timeline of 90 days for the resolution of the case. NCLT directed Jet Airways’ IRP to submit fortnightly progress reports on the case, with the first such report to be submitted before 5 July.
On 18 June, SBI had filed insolvency petition under Section 7 of the Insolvency and Bankruptcy Code (IBC) and also proposed Ashish Chhawchharia of Grant Thornton as IRP.