Fractured/Earth

On November 10, 2022, came startling news.

As a part of an investigation into suspected fraud and money-laundering, prosecutors in Liechtenstein, Switzerland and Austria had raided multiple properties belonging to Florian Fritsch. The investigation was based, said the Liechtenstein prosecutor, on “several complaints by suspected victims”.

The news created ripples in distant India. Fritsch is the promoter of Kalrock Capital Partners which, along with UAE-based businessman Murari Lal Jalan, has bought Jet Airways through bankruptcy proceedings.

Kalrock was quick to dismiss any suggestions of impropriety. “The investigation…has been initiated based on anonymous complaints filed in relation to certain businesses where Florian is one of the financial investors in his personal capacity,” it said, adding the disputes are “commercial in nature”.

The firm also said neither it nor Jet had any connection with these charges. “These investigations have no impact (on) the acquisition of Jet Airways, and Jalan-Kalrock Consortium remains committed towards Jet Airways,” it said.

Kalrock’s statement notwithstanding, the raid underscored how poorly Jet Airways’ tryst with bankruptcy proceedings is progressing.

Once India’s leading airline, Jet entered bankruptcy courts in April, 2019, after attempts to save it failed. Its resolution process saw established firms in the aviation sector drop out early and a bevy of unknown firms, like Russia’s Treasury RA Creator, throw their hats in the ring instead.

In October 2020, it was eventually sold to a consortium of UAE-based businessman Murari Lal Jalan and Cayman Islands-based Kalrock Capital Partners despite Jalan’s links to the infamous Gupta brothers of South Africa. Adding to the puzzlement, the Consortium bagged Jet despite offering banks, employees and operational creditors – who had pegged their dues from the airline at Rs 24,888 crore – all of Rs 475 crore.

That is just the start.

Two years have passed since the Consortium bagged Jet Airways. This period has been one of stasis, with banks, employee associations and the new management locked in court battles. Last November, citing financial pressure, the consortium reduced pay for a third of its employees and put a smaller percentage on leave without pay. In this period, Jet 2.0 has also lost key executives and missed multiple deadlines to resume operations (see this, this, this and this).

As this article gets written, matters stay intriguingly poised. On one hand, NCLT has given the consortium six months to pay banks – but directed banks to transfer ownership in the meantime. Bankers are mulling an appeal. In the meantime, worried about unpaid gratuity, an employee association has gotten four Jet Airways Boeings impounded.

This disarray needs to be understood. Its causal factors extend beyond the blame-game underway between Jet’s ex-employees, banks and the Jalan-Kalrock Consortium. Take a closer look at its bankruptcy saga and you will see several of the deficiencies that haunt India’s Insolvency and Bankruptcy Code.

Apart from producing low loan-recoveries for banks, it is also resulting in consequential – but little-discussed – changes in ownership over India’s private sector.

And so, drumroll, we have my first reported story for 2023. The first part takes a look at Jet’s suboptimal tryst with insolvency proceedings. The second part, looking at how India’s insolvency code was drafted — and the winners and losers it has engendered — will be published on Friday.