Holding

The NCLAT was not justified in allowing the adjustment of the last tranche against the PBG; the SRA must deposit the remaining Rs 150 crore in cash and the PBG must remain in force pending final determination.

Summary

The Supreme Court examined a dispute arising from the resolution of Jet Airways Ltd., where the Successful Resolution Applicant (SRA) sought to meet its Rs 350 crore payment obligation by adjusting the last Rs 150 crore tranche against a Performance Bank Guarantee (PBG). The lenders, led by State Bank of India (SBI), had filed an affidavit stating they would not contest extensions or conditions precedent provided the SRA infused the full amount in cash by 31 August 2023. The National Company Law Appellate Tribunal (NCLAT) allowed the adjustment of the PBG, which the Court found inconsistent with the affidavit and the terms of the resolution plan. The Court held that the SRA must deposit the remaining Rs 150 crore in cash and that the PBG cannot be set‑off against the payment. Accordingly, the Court modified the NCLAT order, directed the SRA to pay Rs 150 crore by 31 January 2024, and kept the PBG operative pending the pending appeal. The appeals were disposed of.

Issues considered

The legality of NCLAT's interlocutory order permitting adjustment of the last Rs 150 crore tranche against the Performance Bank Guarantee.
Whether the SRA is obligated to infuse the entire Rs 350 crore in cash as per the resolution plan and SBI's affidavit.
Interpretation of clause 3.13.9 of the Request for Resolution Plans regarding the non‑set‑off of performance security.
Validity of the extension of time granted to the SRA in light of the conditions precedent and the lenders' affidavit.

Legislation cited

Insolvency and Bankruptcy Code, 2016

Subjects

Corporate Debtor (Jet Airways Limited)Conditions PrecedentDirector General of Civil AviationEffective DateSuccessful Resolution ApplicantConsortium of lendersPerformance Bank GuaranteeAdjustment of Performance Bank GuaranteeInfusing fundsEmployees payment obligations

Judgment

[2024] 1 S.C.R. 1045 : 2024 INSC 51

State Bank of India and Ors
v.
The Consortium of Mr Murari Lal Jalan and
Mr Florian Fritsch and Anr
(Civil Appeal Nos 3736-3737 of 2023)
18 January 2024
[Dr Dhananjaya Y Chandrachud*, CJI, J B Pardiwala and
Manoj Misra, JJ.]

Issue for Consideration
Consortium of lenders represented by the State Bank of India
filed affidavit stating that the lenders were agreeable that if
Successful Resolution Applicant (SRA) satisfied particular criteria,
including infusing Rs. 350 Crores by 31.08.2023, adhering to the
resolution plan terms, and meeting employee payment obligations
in accordance with the NCLAT order, they would abstain from
challenging extension of time issues. However, the inability to
meet these conditions would necessitate directing the Corporate
Debtor-Jet Airways Limited into liquidation. SRA sought extension
of time for the deposit of Rs 350 crores in two tranches of Rs
100 crores and the balance of Rs 150 crores by the adjustment
of the Performance Bank Guarantee (PBG) issued in favour of
the lenders. NCLAT whether justified in allowing the plea of the
SRA for adjustment and consequential release of the PBG at the
interlocutory stage.

Headnotes
Insolvency and Bankruptcy Code, 2016 – NCLAT permitted
the Successful Resolution Applicant (SRA) to adjust the last
tranche of Rs 150 crores by adjusting the Performance Bank
Guarantee (PBG) of Rs 150 crores – Correctness:
Held: The occasion for an extension of time to the SRA for the
deposit of Rs 350 crores arose as a consequence of the affidavit
which was filed by SBI before the NCLAT – SBI’s affidavit envisaged
that the lenders would not contest the issues pertaining to the grant
or exclusion of time; or extension in terms of the orders passed
by the NCLT on 13.01.2023 and 26.05.2023; and compliance of
the conditions precedent by the SRA – However, SBI’s offer was
subject to the fulfillment of three conditions that the SRA must infuse
* Author
1046 [2024] 1 S.C.R.

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Rs. 350 Crores by 31.08.2023, adhering to the resolution plan
terms, and meeting employee payment obligations in accordance
with the NCLAT order dtd. 21.10.2022 upheld by this Court –
Conditional on compliance with the three conditions, SBI stated
that it would be willing to withdraw the company appeals pending
before the NCLAT as well as the Civil Appeals pending before this
Court – The offer made by SBI on behalf of the lenders had to
be complied with as it stood in the event that the SRA sought the
benefit of the offer – According to the SRA, the PBG was liable to
be released on adjustment in terms of the Resolution Plan – This
is a matter which would have to await an adjudication by NCLAT
in the pending appeal – Impugned order allowing the plea of the
SRA for adjustment and consequential release of the PBG at the
interlocutory stage prima facie would not be in accordance with
the tenor of the affidavit filed by SBI – Infusion meant that the
third tranche has to be paid in the same manner – Adjustment of
the PBG was not permissible – NCLAT not justified in holding that
the last tranche of Rs 150 crores which was to be paid would be
adjusted against the PBG – The SRA having deposited the first two
tranches each of Rs 100 crores must comply with the remaining
obligation of depositing Rs 150 crores (to make up a total payment
of Rs 350 crores) – Having by its conduct accepted the terms
set up by SBI it must be obligated to comply with the entirety of
its obligations – It must do so in strict compliance with the time
schedule as set out – Directions issued. [Paras 20-22 and 25]

List of Acts
Insolvency and Bankruptcy Code, 2016.

List of Keywords
Corporate Debtor (Jet Airways Limited); Conditions
Precedent; Director General of Civil Aviation; Effective Date;
Successful Resolution Applicant; Consortium of lenders;
Performance Bank Guarantee; Adjustment of Performance
Bank Guarantee; Infusing funds; Employees payment
obligations
Case Arising From

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.3736-3737 of
2023.
[2024] 1 S.C.R. 1047

State Bank of India and Ors v. The Consortium of Mr Murari Lal Jalan
and Mr Florian Fritsch and Anr

From the Judgment and Order dated 03.03.2023 of the National
Company Law Appellate Tribunal, Principal Bench at New Delhi in
Company Appeal (AT) (Insolvency) Nos.129-130 of 2023.
With
Civil Appeal Nos.4131-4134 And 6427-6428 of 2023.
Appearances for Parties
R. Venkataramani, Attorney General for India, Tushar Mehta,
Solicitor General, N. Venkataraman, A.S.G., Mukul Rohatgi,
Krishnendu Datta, Saurabh Kripal, Amit Sibal, Sanjay Singhvi,
Ritin Rai, Sr. Advs., Vikas Mehta, Mayan Prasad, Ms. Anshula
Vijay Kumar Grover, Ms. Rashi Rampal, Ms. Nitika Grover, Sahil
Khan, Sanjay Kapur, Devesh Dubey, Ms. Isha Virmani, Ms.
Mahima Kapur, Ms. Mansi Kapur, Mrs. Shubhra Kapur, Aashish
Vats, Harish Nadda, Kumar Shashank, Anant Singh, Ms. Srishty
Kaul, Rajat Sinha, Ms. Pooja Mahajan, Ms. Arveena Sharma, Ms.
Shruti Pandey, Avinash B. Amarnath, Raghav Shankar, Rajendra
Barot, Dhirajkumar Totala, Suharsh Sinha, Ms. Liz Mathew,
Nishant Upadhyay, Vinay Tripathi, Mayank Bhargava, Darpan
Sachdeva, Mehul Bachhawat, Ankit Pal, Ms. Mallika Agarwal,
Nisarg Bharadwaj, Ms. Rohini Thyagarajan, Shakti Vardhan, Ms.
Amiy Shukla, Pawanshree Agrawal, Ms. Shubhangi Negi, Ms.
Ekta Choudhary, Divyank Dutt Dwivedi, Ms. Aditi Sharma, Ms.
Petrushka Dasgupta, Mridul Yadav, Ms. Tahira Kathpalia, Ms.
Pallavi Pratap, Advs. for the appearing parties.

Judgment / Order of the Supreme Court

Judgment
Dr. Dhananjaya Y Chandrachud, CJI
1. This batch of appeals arises from three orders of the National
Company Law Appellate Tribunal1. A Resolution Plan was submitted
under the Insolvency and Bankruptcy Code, 20162 by a consortium
of Murari Lal Jalan and Florian Fristch in respect of the Corporate

1 “NCLAT”
2 “IBC”
1048 [2024] 1 S.C.R.

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Debtor (Jet Airways Limited). The Plan was voted upon and approved
by the Committee of Creditors on 17 October 2020. The Resolution
Professional then filed an application before the Adjudicating Authority
to seek approval of the Resolution Plan. The Plan received the
imprimatur of the Adjudicating Authority – the National Company
Law Tribunal3 - on 22 June 20214.
2. Clause 7.6 of the Resolution Plan stipulates conditions for
implementation. Clause 7.6.1 spells out the “conditions precedent”:
“7.6.1. Conditions Precedent - The obligation of the Resolution
Applicant to re-commence operations as an aviation
company, being the business proposed to be acquired is
subject to the fulfilment of the following conditions after
the Approval Date (“Conditions Precedent”):
(a) Validation of AOP of the Corporate Debtor by DGCA &
MoCA - The AOP of the Corporate Debtor shall have
been validated by the DGCA, the MoCA and any other
relevant Government Authority and grant of all other
mandatory approvals to the Corporate Debtor to enable it
to re-commence flying operations (including commercial/
cargo operations) and related on-ground services.
(b) Submission and approval of the Business Plan to DGCA
& MoCA The Business Plan of the Resolution Applicant
shall have been submitted after the Approval Date to
the DGCA and MoCA for their review, and approval.
The Resolution Applicant agrees to modify its business
plan to incorporate all reasonable changes required by
the DGCA/ MoCA, which otherwise does not make the
business unviable for the Resolution Applicant.
(c) Slots Allotment Approval The DGCA and MoCA shall
have approved the reinstatement of all the suspended
slots (including the bilateral rights and traffic rights) back
to Jet Airways/ Corporate Debtor. The slots (along with
related bilateral rights and traffic rights) can be allotted
to the Corporate Debtor gradually as per its Business

3 “NCLT”
4 “Plan Approval Order”
[2024] 1 S.C.R. 1049

State Bank of India and Ors v. The Consortium of Mr Murari Lal Jalan
and Mr Florian Fritsch and Anr

Plan with immediate slots allotment approval (along with
related bilateral rights and traffic rights) for sectors on
which Jet 2.0 proposes to recommence operations after
the Effective Date.
(d) International Traffic Rights Clearance The Corporate
Debtor shall have received the International Traffic Rights
Clearance in compliance with Applicable Laws.
(e) Demerger - The Scheme filed as part of this Resolution
Plan shall have been approved under Applicable Laws
and the Demerged Employees shall have demerged
from the Corporate Debtor to AGSL along with all their
past dues, liabilities and outstanding’s with effect from
the Approval Date, without the requirement of any further
consent or approval of any other stakeholder of AGSL
(since we understand that AGSL currently does not
have any creditor) or any stakeholder of the Corporate
Debtor (including existing or past employee or workmen
or employees’ unions of the Corporate Debtor).”
3. Clause 7.6.4 contains a stipulation for “automatic withdrawal”:
“Automatic Withdrawal - The Resolution Applicant is
confident of completing all the Conditions Precedent (as
set out in Clause 7.6.1 above) within 90 (ninety) days
from the Approval Date. In the unlikely event that all the
Conditions Precedent cannot be fulfilled within 90 (ninety)
days, the Resolution Applicant takes the responsibility of
completing the outstanding Conditions Precedent at the
earliest and seeks to extend the Conditions Precedent
fulfilment period by another term of maximum 180 (one
hundred and eighty) days. If all the Conditions Precedent
are not fulfilled within such period (i.e. 270 (two hundred
and seventy) days from the Approval Date), then this
Resolution Plan shall automatically stand withdrawn without
any further acts, deeds, or things. On such withdrawal,
the members of the Resolution Applicant in the Monitoring
Committee shall resign, and the remaining members of
the Monitoring Committee shall assume absolute control
of the Corporate Debtor.”
1050 [2024] 1 S.C.R.

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4. In terms of Clause 7.6.1 of the Resolution Plan, the SRA is obligated
to re-commence operations as an aviation company subject to the
fulfilment of five conditions precedent, namely- (i) Validation of Airline
Operator Permit of the Corporate Debtor by the Director General
of Civil Aviation (DGCA) and Ministry of Civil Aviation (MoCA); (ii)
Submission and Approval of Business Plan by DGCA and MoCA, (iii)
Slot Allotment Approval, (iv) International Traffic Rights’ Clearance;
and (v) Approval of Demerger of ground handling business into a
company, namely AGSL. The date of completion of the Conditions
Precedent was defined as the ‘Effective Date’. Given the uncertainty
surrounding the Effective Date, the NCLT, in its Plan Approval Order,
mandated the completion of Conditions Precedent and the attainment
of the Effective Date within the first 90 days from the Approval Date.
The Order also granted the flexibility to request an extension of the
180-day timeline, allowing for an outer limit of 270 days, in accordance
with the provisions outlined in the Resolution Plan.
5. These conditions precedent had to be fulfilled, in any event, within
an outer limit of 270 days failing which the Resolution Plan would
automatically stand withdrawn. Upon this eventuality taking place, the
members of the Resolution Applicant in the Monitoring Committee
are to resign, and the remaining members of the committee are to
assume absolute control over the Corporate Debtor. Following the
Effective Date, the SRA is then required to infuse funds and fulfil
specified payments to stakeholders, including disbursements to
Employees, Workmen, and other Operational Creditors, within 180
days from the Effective Date.
6. The Successful Resolution Applicant5 and the consortium of lenders
represented by the State Bank of India6 were not ad idem on whether
the conditions precedent were fulfilled. The SRA took the position
that all conditions precedent had been duly fulfilled. Consequently,
on May 20 2022, the DGCA reissued an Air Operation Certificate,
confirming the authorization for the Corporate Debtor to engage in
commercial air operations. The SRA communicated via email to the
Lenders, affirming compliance with all prerequisites and proposing
that May 20 2022, should be recognized as the effective date

5 “SRA”
6 “SBI”
[2024] 1 S.C.R. 1051

State Bank of India and Ors v. The Consortium of Mr Murari Lal Jalan
and Mr Florian Fritsch and Anr

under the Resolution Plan. However, the lenders took a position to
the contrary. On 15th November 2022, the SRA filed I.A. No. 3398
of 2022 (Implementation Application) and I.A. No. 3508 of 2022
(Exclusion Application) before the NCLT seeking a determination in
accord with its position.
7. By an order dated 13 January 2023, the NCLT came to the conclusion
that the SRA was compliant with the conditions precedent. It allowed
the Implementation Application, thereby inter alia permitting the
SRA to take control and management of the Corporate Debtor. The
period of six months for implementation would commence from 16
November 2022. The tribunal reasoned that:
(i) On 21 October 2022, the NCLAT confirmed SRA’s compliance
with necessary conditions precedent (CPs) to the satisfaction
of MC. Despite the lenders seeking clarification through IA
4771 of 2022, the NCLAT’s findings were reaffirmed on 20
December 2022;
(ii) There is no dispute regarding compliance with CPs at serial no.
(i) and (v) as per the approved plan, including the validation of the
Air Operator Certificate by DGCA and MoCA, and the approval
of the demerger of the ground handling business into AGSL;
(iii) Concerning CP at serial no. (ii), the business plan’s submission
and approval to DGCA and MoCA were deemed as complete,
with the issuance of the Air Operator Certificate (AOC),
considered as implicit approval;
(iv) Regarding slot allotment approval, aligned with the plan approval
order, confirming slots were granted as per the plan;
(v) For International Traffic Right Clearance, the requirement was
deemed satisfied after successfully recommencing operations,
adhering to applicable laws, and plan approval order conditions.
Consequently, all Conditions Precedent were duly complied
with; and
(vi) Regarding the Exclusion Application, it was deemed appropriate
to grant an exclusion for 180 days until November 16, 2022,
in the interest of justice and to achieve the primary objective
of maximizing assets and resolving the insolvency of the
Corporate Debtor.
1052 [2024] 1 S.C.R.

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The order of the NCLT has been challenged by SBI in appeal. The
appeal is pending before the NCLAT.
8. On 3 March 2023, the NCLAT declined to stay the order of the
NCLT, which has given rise to the first in the three sets of appeals
being Civil Appeal Nos 3736-3737 of 2023. By a subsequent order
dated 26 May 2023, the NCLAT allowed an extension commencing
from 3 March 2023 until 31 August 2023. This order has given rise
to the second in the batch of appeals being Civil Appeal Nos 4131-
4134 of 2023.
9. The Resolution Plan envisaged that with an intent to settle the
total outstanding claims made by domestic banks, foreign banks
and financial institutions, the assenting financial creditors would be
entitled to the benefit of payments and securities. This is described
as “Summary of payments and security package”. Clause 6.4.4 of
the Resolution Plan is titled as “Treatment of Financial Creditors”
and is reproduced below, insofar as it is relevant:

“Head Amount Security Value of Date of Date of Release of
payable Offered Security Creation of Security
Security

Cash Up to Rs.185 PBG of Rs. Rs. 393.5 cr Effective Date PBG adjusted
payment crores 47.5 crores (with BKC)
or
BKC Property Rs. 147.5 Cr To be released on
(if given) (without BKC) sale of BKC

Mortgage over Year 5 or on
Dubai Property complete payment,
No. 1 valued at whichever is earlier
more than Rs.
100 crores

Cash Rs. 195 Crores BKC Property Rs. 445 Cr Effective Date To be released on
payment (if given) (with BKC) sale of BKC
or
Mortgage over Rs. 200 Cr Effective Date Year 5 or on
Dubai Property (without BKC) complete payment,
No. 1 valued at whichever is earlier
more than Rs.
100 crores

Mortgage over Effective Date
Dubai Property
No. 2 valued at
more than Rs.
100 crores
[2024] 1 S.C.R. 1053

State Bank of India and Ors v. The Consortium of Mr Murari Lal Jalan
and Mr Florian Fritsch and Anr

Cash NPV of Rs. 391 Mortgage over Rs. 600 Crores Effective Date Year 5 or on
payment Crores (using Dubai Property complete payment,
the discount No. 1 valued at whichever is
rate specified more than Rs. earlier”
in the 100 crores
Evaluation
Mortgage over Effective Date
Matrix)
Dubai Property
No. 2 valued at
more than Rs.
100 crores
Mortgage over Effective Date
Dubai Property
No. 1 valued at
more than Rs.
50 crores

10. In an effort to resolve the imbroglio, on 16 August 2023, an affidavit
was filed on behalf of SBI, by its Chief Manager. The affidavit stated
that the lenders were agreeable to a certain course of action. In other
words, the lenders had agreed that if SRA satisfies particular criteria,
including infusing Rs. 350 Crores by 31 August 2023, adhering to the
resolution plan terms, and meeting employee payment obligations
in accordance with the NCLAT order dated 21 October 2022, they
would abstain from challenging exclusion/extension of time issues.
However, the inability to meet these conditions necessitates directing
the Corporate Debtor into liquidation, as stipulated in Paragraphs
8(a) to (c). Paragraph 8 is reproduced below:
“8. In the present appeal, the lenders are agreeable that in
case;
a) SRA infuses Rs. 350 Crores by 31.08.2023, the date by
which said payment is to be made as per the Resolution
Plan, read with Order dated 26.05.2023 passed by this
Hon’ble Tribunal; and
b) SRA Undertakes to scrupulously follow the other terms
and conditions of the resolution plan and
c) SRA complies with the liabilities relating to payment to
the employees as per order of NCLAT dated 21.10.2022
which has been upheld by the Hon’ble Supreme Court in
its order dated 30.01.2023,
the Lenders would not contest the issues relating to
granting of exclusion/extension of time (in terms of the
orders dt. 13.01.2023 passed by NCLT and order dt.
1054 [2024] 1 S.C.R.

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26.05.2023 passed by this Hon’ble Tribunal) as well as
on the issue relating to compliance of condition precedent
by the SRA and accordingly undertakes to withdraw the
present Company Appeal (AT) Ins 129-130 of 2023 which
is pending adjudication before this Hon’ble Tribunal along
with Civil Appeal Nos. 4131-34 of 2023 & 3736-37 of 2023
filed before the Hon’ble Supreme Court, on the said two
issues. In other words, lenders would not contest the
granting of exclusions as well as on the issue regarding the
compliance of Conditions Precedent, in case the aforesaid
steps are taken by SRA without any further delay. Failing
to comply with the conditions mentioned in Para 8(a) to
(c) above, the Corporate Debtor should be directed to go
into liquidation.”
11. Following the affidavit, which was filed by SBI, an application was
moved by the SRA on 18 August 2023 seeking liberty to pay the
amount of Rs 350 crores as envisaged in the affidavit of SBI in the
following manner:
(i) The first tranche of Rs 100 crores by 31 August 2023;
(ii) The second tranche of Rs 100 crores by 30 September 2023; and
(iii) The balance of Rs 150 crores by the adjustment of the
Performance Bank Guarantee7 issued by the SRA in favour
of the lenders.
12. Permission to do so was granted by the NCLAT on 28 August 2023
extending time until 31 August 2023 for the payment of Rs 100
crores; till 30 September 2023 for the payment of Rs 100 crores and
for the balance of Rs 150 crores by adjusting the payment against
the PBG issued by the SRA.
13. The reference to the PBG was contained in the tabulated statement
in clause 6.4.4 of the Resolution Plan, which is set out above.
Apart from the above stipulations, it would be material to make a
reference, at this stage, to certain provisions of the Request for
Resolution Plans8. Clause 3.13 of the RFRP provides for performance
security. It stipulates that (i) the SRA must furnish an unconditional

7 “PBG”
8 “RFRP”
[2024] 1 S.C.R. 1055

State Bank of India and Ors v. The Consortium of Mr Murari Lal Jalan
and Mr Florian Fritsch and Anr

and irrevocable PBG, either INR 150 Crores or 10% of the upfront
amount, within seven days of declaration; (ii) The PBG, following
Format VIII-A, remains valid for 180 days or until Resolution Plan
completion, extendable by SRA as directed by the CoC; (iii) Failure
to provide the Performance Security upon accepting the Letter of
Intent may lead to its cancellation at the discretion of the CoC :
“3.13 Performance Security
3.13.1 The Successful Resolution Applicant shall furnish or
cause to be furnished, an unconditional and irrevocable
performance bank guarantee or a demand draft, issued
by any scheduled commercial bank in India or a foreign
bank which is regulated by the central bank of a jurisdiction
outside India which is compliant with the Financial
Action Task force Standards and is a signatory to the
International Organisation of Securities Commissions
Multilateral Memorandum of Understanding, provided that
it is acceptable to the Resolution Professional (acting for
the CoC) (“PBG Bank”), of an amount of INR 150 Crores
(Indian Rupees Hundred and Fifty Crores only) or 10%
of upfront amount (payable as per the resolution plan
by the Successful Resolution Applicant), whichever is
higher in favour of “State Bank of India, (that is, SBI) (in
its capacity as an agent of the CoC (and acting on behalf
of the Company), within 7 (seven) days of declaration of
the Successful Resolution Applicant, or by way of a direct
deposit by way of the real time gross settlement system
into a bank account held by the SBI Bank, the details
of which shall be shared separately with the Successful
Resolution Applicant (“Performance Security”)
3.13.2 If the Performance Security is being provided as a
performance bank guarantee, it shall be in accordance
with Format VIII-A of this RFRP (“PBG”). The PBG shall
be valid, till the later of (i) a period of 180 days from the
date of the PBG; and (ii) the date of completion of the
implementation of the Resolution Plan (as determined by
the RP and the (CoC) and shall be subject to re-issuance
or extension by the Successful Resolution Applicant as may
be required by the CoC (as assisted by the Resolution
Professional) (“PBG Validity”).
1056 [2024] 1 S.C.R.

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3.13.3 It is hereby clarified that non-submission of the Performance
to permit the Resolution Applicant, along with the
acceptance of the Letter of Intent, shall lead to cancellation
of Letter of Intent issued by the CoC, unless otherwise
determined by the CoC at its sole discretion...”
14. Clause 3.13.7 empowers SBI as an agent of the Committee of
Creditors to invoke the performance security on the occurrence of
certain eventualities:
“3.13.7 SBI, in its capacity as an agent of the CoC (and acting
on behalf of the Company), shall have the right to invoke
the Performance Security on behalf of the CoC (and upon
receiving approval from the CoC), (by issuance of a written
demand to the Bank to invoke the Performance Security,
if provided as a PBG). The Performance Security can be
invoked and appropriated at any time, upon occurrence
of any of the following conditions, without any reference
to the Resolution Applicant.
i. any of the condition under the Letter of Intent or the
Successful Resolution Plan are breached;
ii. if the Resolution Applicant fails to re-issue or extend the
Performance Security (if provided as a PBG), in accordance
with the terms of this RFRP; or
iii. failure of the Successful Resolution Applicant to implement
the Approved Resolution Plan to the satisfaction of the
CoC, and in accordance with the terms of the Approved
Resolution Plan.”
15. Clause 3.13.9 specifies that the performance security shall not be
set off against or used as part of the consideration which the SRA
proposes to offer in relation to the company:
“3.13.9 The Performance Security shall not be set-off against or used
as part of the consideration that the Successful Resolution
Applicant proposes to offer in relation to the Company, even
if expressly indicated as such by the Successful Resolution
Applicant in the Successful Resolution Plan.”
[2024] 1 S.C.R. 1057

State Bank of India and Ors v. The Consortium of Mr Murari Lal Jalan
and Mr Florian Fritsch and Anr

16. Clause 9.4 of the Resolution Plan specifically contemplates that the
performance guarantee provided by the Resolution Applicant can be
invoked in terms of RFRP. NCLAT has permitted the SRA to adjust
the last tranche of Rs 150 crores by adjusting the PBG of Rs 150
crores. This forms the subject matter of appeal in this Court.
17. Mr N Venkataraman, Additional Solicitor General appearing on behalf
of SBI, submitted that:
(i) By its affidavit dated 16 August 2023, SBI had clearly stipulated
three conditions, among them being that the SRA must infuse
Rs 350 crores by 31 August 2023;
(ii) The plain meaning of the expression “infuse” is that the SRA
was liable to pay three tranches of a total amount of Rs 350
crores and the NCLAT was not justified at the interim stage in
permitting an adjustment of the PBG of Rs 150 crores against
the obligation to deposit the last tranche;
(iii) The SRA had to undertake to comply with the other terms and
conditions of the Resolution Plan besides complying with the
liabilities relating to the payment to the employees. As regards
the payment to the employees, an appeal filed by the SRA
before this Court against the order of the NCLAT dated 21
October 2022 was dismissed on 30 January 2023. Yet there is
no compliance towards the employees and staff; and
(iv) There has been a default on the part of the SRA in complying
with the conditions precedent spelt out in clause 7.6 and on
various other aspects, including the payment of workmen’s
dues, airport dues and other matters.
18. The submission which has been urged on behalf of the lenders has
been opposed on behalf of the SRA by Mr Krishnendu Datta, senior
counsel. On behalf of the SRA, it has been submitted that:
(i) The Resolution Plan specifically contemplates the adjustment of
the PBG (originally of Rs 47.5 crores, subsequently enhanced
to Rs 150 crores). In support of this submission, reliance has
been placed on the summary of payments and security package
forming a part of clause 6.4.4 of the Resolution Plan;
(ii) The SRA was in the first tranche required to pay an amount of
up to Rs 185 crores against the creation of securities, namely,
(i) PBG of Rs 47.5 crores; (ii) BKC Property (if given); and (iii)
1058 [2024] 1 S.C.R.

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Mortgage over Dubai Property No 1 valued at over Rs 100
crores. In the last column of the table, it has been stipulated
that the securities would be released, as indicated;
(iii) The PBG was liable to be adjusted against the cash payment
of the first tranche of Rs 185 crores;
(iv) No specific date for the release of the security in relation to the
PBG has been mentioned;
(v) Moreover, in respect of the second tranche comprising of Rs
195 crores, there was no requirement to furnish any security
in the form of a PBG;
(vi) The securities, in other words, were of a revolving nature, but
significantly on the release of the PBG against a cash payment
of Rs 185 crores, the PBG is not required to be renewed as a
fresh security for the following tranches; and
(vii) As regards the creation of security in respect of the Dubai
property, at all material times, the SRA has been ready and
willing to effect the security and, as a matter of fact, this is
evident in the 37th Meeting of the Monitoring Committee of the
Corporate Debtor held on 9 October 2023.
19. While considering the rival submissions, it must be noted, at the
outset, that the appeal, stemming from the NCLT’s January 13
2023 order holding that the SRA is compliant with the conditions
precedent is pending before the NCLAT. Hence, the observations
in the present judgment are confined to the arrangement which
must operate during the pendency of the appeal without this Court
expressing a final view on the merits of the appeal, which will fall
for consideration before the NCLAT.
20. The occasion for an extension of time to the SRA for the deposit of
Rs 350 crores arose as a consequence of the affidavit which was
filed by SBI before the NCLAT on 16 August 2023. SBI’s affidavit
envisaged that the lenders would not contest the issues pertaining
to (a) the grant or exclusion of time; or (b) extension in terms of the
orders which were passed by the NCLT on 13 January 2023 and
26 May 2023; and (c) compliance of the conditions precedent by
the SRA. SBI’s offer was, however, subject to the fulfillment of three
conditions. The three conditions were:
[2024] 1 S.C.R. 1059

State Bank of India and Ors v. The Consortium of Mr Murari Lal Jalan
and Mr Florian Fritsch and Anr

(i) The SRA must infuse an amount of Rs 350 crores by 31 August
2023 (the date by which the payment was to be made in terms
of the Resolution Plan read with the order dated 26 May 2023
of NCLT);
(ii) The SRA must undertake to scrupulously follow the other terms
and conditions of the Resolution Plan; and
(iii) The SRA must comply with the liabilities in regard to the
payment to the employees in terms of the order of the NCLAT
dated 21 October 2022 which has been upheld by this Court
on 30 January 2023.
21. Conditional on compliance with the three conditions set out above,
SBI stated that it would be willing to withdraw both the company
appeals which were pending before the NCLAT as well as the Civil
Appeals which were pending before this Court, details of which
were set out in the affidavit. The offer which was made by SBI on
behalf of the lenders had to be complied with as it stood in the
event that the SRA sought the benefit of the offer. According to the
SRA, the PBG was liable to be released on adjustment in terms of
the Resolution Plan. This is a matter which would have to await an
adjudication by NCLAT in the pending appeal. The impugned order
of the NCLAT, on the other hand, allowed the plea of the SRA for
adjustment and consequential release of the PBG at the interlocutory
stage. This prima facie would not be in accordance with the tenor
of paragraph 8 of the affidavit which was filed by SBI in which it
stated that the lenders would not contest the issues in the pending
appeal conditional on compliance with the three conditions which
were set out in the affidavit. Infusion of Rs 350 crores, as envisaged
in the affidavit, could not have been substituted with a direction for
adjustment of the PBG, at that stage. Infusion meant that the third
tranche has to be paid in the same manner. Adjustment of the PBG
was not permissible.
22. In the circumstances, we have come to the conclusion that NCLAT
was not justified in holding, in its order dated 28 August 2023, that
the last tranche of Rs 150 crores which was to be paid would be
adjusted against the PBG. The SRA having deposited the first two
tranches each of Rs 100 crores must comply with the remaining
obligation of depositing Rs 150 crores (to make up a total payment
of Rs 350 crores). Having by its conduct accepted the terms set
1060 [2024] 1 S.C.R.

Digital Supreme Court Reports

up by SBI it must be obligated to comply with the entirety of its
obligations. It must do so in strict compliance with the time schedule
set out hereafter.
23. The lenders have submitted that:
(i) The admitted claim of the Financial Creditors is Rs 7800 crores,
while the package offered by the SRA in the Resolution Plan
is Rs 4783 crores payable in tranches in five years;
(ii) Instead of infusing Rs 350 crores, being the first tranche of
payment, which was to be paid in 180 days, the SRA has
infused a sum of Rs 187 crores after two years, in addition to
Rs 13 crores paid by a third party; and
(iii) The lenders have already incurred Rs 386.72 crores during the
CIRP and after the approval of the Plan towards maintaining
the Corporate Debtor, excluding airport dues. In addition, the
lenders are incurring Rs 22.26 crores on a monthly basis towards
expenses/carrying cost for maintaining the Corporate Debtor.
24. SBI has stated that the lenders have been saddled with huge recurring
expenditure every month to maintain the remaining airline assets of
the Corporate Debtor. The lenders have been embroiled in litigation
before the NCLT and NCLAT with little progress on this ground towards
implementing the resolution plan. Such a state of affairs cannot be
permitted to continue interminably as it defeats the very object and
purpose of the provisions of and timelines under the IBC. The timely
resolution of insolvency cases is vital for sustaining the effectiveness
and credibility of the insolvency framework. Therefore, concerted
efforts and decisive actions are imperative to break the deadlock
and ensure the expeditious implementation of the resolution plan.
25. The lenders have argued in the appeals that there has been a failure
on the part of the SRA to comply with the conditions precedent. If the
SRA were to comply with the terms as envisaged in SBI’s affidavit
dated 16 August 2023, evidently issues pertaining to compliance with
the conditions precedent were not to be pressed thereafter. In order
to furnish this SRA a final opportunity to comply and consistent with
the above position, we issue the following directions:
(i) The SRA shall peremptorily on or before 31 January 2024,
deposit an amount of Rs 150 crores into the designated account
of SBI, failing which the consequences under the Resolution
Plan shall follow;
[2024] 1 S.C.R. 1061

State Bank of India and Ors v. The Consortium of Mr Murari Lal Jalan
and Mr Florian Fritsch and Anr

(ii) The PBG of Rs 150 crores shall continue to remain in operation
and effect, pending the final disposal of the appeal before
NCLAT, and shall abide by the final outcome of the appeal and
the directions that may be issued by NCLAT; and
(iii) Whether or not the SRA has been compliant with all the
conditions of the Resolution Plan as well as of the conditions
set out in paragraph 8 of the affidavit dated 16 August 2023
shall be decided by the NCLAT in the pending appeal.
26. The order dated 28 August 2023 of the NCLAT is modified in part
in terms of the above directions and, hence, the permission which
was granted to the SRA to adjust the last tranche of Rs 150 crores
against the PBG shall stand substituted by the above directions.
27. The NCLAT is requested to endeavour an expeditious disposal of
the appeal by the end of March 2024.
28. The appeals are accordingly disposed of.
29. Pending applications, if any, stand disposed of.

Headnotes prepared by: Divya Pandey Result of the case:
Appeals disposed of.