A high-stakes legal battle is unfolding in India’s corporate insolvency landscape, with Adani Group-controlled Mumbai International Airport Ltd (MIAL) challenging a tribunal’s decision that significantly curtails its recovery of substantial dues from the defunct Jet Airways. This dispute, now escalated to the National Company Law Appellate Tribunal (NCLAT), transcends a mere financial claim; it probes the foundational principles of India’s Insolvency and Bankruptcy Code (IBC), potentially redefining the financial security and bargaining power of critical infrastructure providers in future corporate insolvencies within the nation’s dynamic aviation sector.
The core of the contention revolves around MIAL’s claims exceeding ₹860 crore, stemming from years of parking, storage, and hangar charges for Jet Airways aircraft that remained grounded at Mumbai’s Chhatrapati Shivaji Maharaj International Airport following the airline’s operational collapse in April 2019. These charges accumulated as a fleet of planes, including three Boeing 777-300ERs, occupied valuable apron and hangar space, incurring significant opportunity costs and operational burdens for one of Asia’s busiest aviation hubs. However, the Mumbai bench of the National Company Law Tribunal (NCLT), in its ruling on February 13, admitted only a fraction of MIAL’s total claim, specifically ₹510.75 crore, while downgrading the airport’s status to that of an unsecured operational creditor. This classification, central to the IBC’s "liquidation waterfall" mechanism, places MIAL considerably lower in the priority queue for repayment, significantly diminishing its prospects of full recovery.
The NCLT’s judgment was not an isolated incident; GMR-operated Delhi International Airport Ltd (DIAL) faced a similar outcome, with only ₹244 crore admitted against its ₹352 crore claim from Jet Airways. This dual verdict highlights a systemic interpretation of the IBC that views airport charges, despite their critical nature to aviation operations, as standard operational liabilities rather than secured claims. The tribunal’s reasoning posited that while airport regulations permit the detention of aircraft for non-payment of dues, such provisions do not inherently create a legal charge or lien over the assets, thus precluding airports from being treated as secured creditors. Once a company enters liquidation, the IBC’s strict hierarchy for distributing assets takes precedence over any pre-existing contractual or regulatory provisions that do not explicitly confer a secured status.
Under Section 53 of the IBC, which governs the order of priority for distribution of liquidation proceeds, the pecking order is clear: insolvency resolution process costs are paid first, followed by secured creditors and workmen’s dues. Further down the ladder come unsecured financial creditors, then operational creditors—a category that includes airports for services rendered—followed by government dues and, finally, equity holders. This "waterfall mechanism" is designed to provide clarity and predictability to the insolvency process, but it often results in meager, if any, recoveries for those at the lower end of the hierarchy. For an operational creditor like MIAL, being relegated to an unsecured status means competing with a multitude of other service providers, suppliers, and vendors, often yielding recovery rates in the single digits or low double digits, far below the admitted claims.
The implications of this NCLT ruling, if upheld by the NCLAT, are profound for India’s aviation infrastructure. It could fundamentally weaken the bargaining power of airports in future airline insolvencies. Historically, airports have leveraged their control over essential infrastructure and the ability to ground aircraft to negotiate better terms or ensure priority payments. Losing the implicit threat of a "secured" claim or a preferential position in the repayment queue might force airports to adopt more stringent financial practices with struggling airlines, potentially demanding larger upfront deposits or bank guarantees, which could in turn strain the already precarious finances of carriers in a highly competitive and capital-intensive industry. Furthermore, the ruling could disincentivize airports from accommodating grounded aircraft for extended periods, raising questions about space utilization, maintenance liabilities, and the overall efficiency of airport operations during prolonged insolvency proceedings.
The broader economic impact extends beyond individual airport balance sheets. India’s aviation sector is on a significant growth trajectory, with ambitious plans for infrastructure development and fleet expansion. However, it has also been plagued by high-profile collapses, from Kingfisher Airlines to Jet Airways and, more recently, Go First. Each collapse leaves a trail of unpaid dues and complex legal battles. If essential service providers like airports consistently face substantial write-offs, it could deter investment in critical aviation infrastructure or lead to increased charges for financially stable airlines to offset risks. Globally, while specific mechanisms vary, insolvency regimes often grapple with balancing creditor rights with the need to preserve essential services and facilitate orderly resolution. The Indian approach, as interpreted by the NCLT, firmly prioritizes the defined IBC waterfall, even for claims arising from essential services.
Central to this dispute was also the protracted sale of three Jet Airways’ Boeing 777-300ER aircraft, which had been parked at Mumbai Airport since 2018. These wide-body jets, valuable assets in any liquidation, were eventually sold to Malta-based Ace Aviation for approximately ₹400 crore in 2022. However, the monetization of these assets was significantly delayed due to the ongoing litigation over airport dues. In a crucial interim directive in October 2025, the NCLAT had instructed the liquidator to hold the sale proceeds in an escrow account, pending the NCLT’s decision on the dues dispute. The NCLT’s subsequent clarification that MIAL did not qualify as a secured creditor effectively meant that the funds from the aircraft sale, while secured in escrow, would ultimately be distributed according to the lower priority assigned to MIAL. Counsel for MIAL has now informed the NCLAT that these aircraft have been successfully flown out, indicating the completion of the sale process and the finalization of the escrow funds, which await the NCLAT’s verdict on their distribution.
Jet Airways, once a beacon of Indian aviation and a dominant full-service carrier, ceased operations in April 2019 and was formally admitted into insolvency proceedings in June of the same year. A much-anticipated revival plan, spearheaded by the Kalrock-Jalan consortium, was approved in 2021, offering a glimmer of hope for the airline’s resurgence. However, this complex plan faltered amid a myriad of regulatory hurdles, disagreements over payment schedules, and the sheer operational complexities of restarting a grounded airline. After prolonged legal battles and repeated attempts to salvage the revival, the airline was ultimately pushed into liquidation in November 2024, following directives from the Supreme Court. This definitive move underscores the challenges of airline insolvency in India and sets the stage for the final distribution of assets, making the current appeal by MIAL all the more critical for its financial recovery.
MIAL’s appeal to the NCLAT, led by Chairperson Justice Ashok Bhushan, has secured a crucial interim assurance: the liquidator, Satish Kumar Gupta, has pledged that no disbursal of funds to other creditors will occur until the appellate tribunal renders its decision, with the next hearing scheduled for April 24. This temporary injunction offers MIAL a vital window to argue its case for a higher admitted claim and, potentially, a reclassification of its creditor status. The NCLAT’s forthcoming judgment will be meticulously scrutinized by all stakeholders across India’s corporate landscape. Its resolution will not only determine the extent of MIAL’s recovery from Jet Airways but, more significantly, establish a critical precedent for how claims from essential service providers are treated within India’s evolving insolvency framework, shaping the financial resilience of the nation’s vital infrastructure in an increasingly volatile economic environment.
