The National Company Law Appellate Tribunal (NCLAT) on Monday upheld the court order admitting Go First’s (Go’s) voluntary insolvency asked the lessors, who had challenged the moratorium on repossession of aircraft, to approach the adjudicating court.
Go will be able to retain its aircraft after NCLAT dismissed appeals filed by the cash-strapped airline’s lessors on Monday.
The appellate tribunal Bench of Chairperson Justice Ashok Bhushan Member (Technical) Barun Mitra upheld the National Company Law Tribunal’s (NCLT’s) decision of May 10 admitting Go’s insolvency plea.
“The order of May 10 admitting the Section 10 application is upheld,” held NCLAT.
After the plea was admitted by the NCLT, a moratorium was put in place, which meant lessors could not take possession of the aircraft during this time. A moratorium period is the suspension of all or certain legal remedies against debtors. This means that lessors of Go will not be able to take possession of the aircraft.
Go informed NCLAT at its previous hearing that an impression was being created (by lessors) that there was something “wrong malicious” about the airline seeking voluntary insolvency. SMBC Aviation Capital (SMBC), SFV Aircraft Holdings, GY Aviation Lease, Engine Lease Finance, who are the lessors of Go, had filed an appeal against the NCLT order to repossess their aircraft.
SMBC had told the tribunal that the insolvency application by Go was “malicious” a “smokescreen”. It also said the aircraft in possession of Go is its asset, which it is not able to access.
However, the appellate tribunal’s order said that the lessors could still file an application of malicious intent under the Insolvency Bankruptcy Code (IBC) against the airline in the NCLT.
“The appellant(s) are at liberty to file an appropriate application under Section 65 (malicious intent) of the IBC with appropriate pleadings material, the adjudicating authority (NCLT) while considering the said application shall not be influenced by any observations made in this order,” read the order.
The lessors had submitted to the court that the aircraft was neither the assets of Go nor the assets of the interim resolution professional (IRP), as they had cancelled their leases before the admission of the airline’s insolvency plea.
An IRP is a professional who is the ‘whole sole’ of the company after the insolvency application is admitted.
Meanwhile, the IRP refuted this submission said leases were terminated as soon as the airline voluntarily filed for insolvency on May 2.
“The filing of the application (on May 2) was widely circulated, thereafter the lessors, in a hurried manner, issued an order terminating the lease,” the IRP said.
The NCLAT said that the lessors, as well as the IRP, could file an application before the NCLT to gain clarity on the fate of the aircraft whose lease was terminated before the insolvency application of Go was accepted.
“The appellants (lessors), as well as IRP, are at liberty to make an appropriate application before the adjudicating authority (NCLT) for declaration with regard to the applicability of the moratorium on the aircraft with regard to which leases in favour of the corporate applicant (Go First) were terminated prior to admission of Section 10 (voluntary insolvency) application,” the order said.
The court said the NCLT would ultimately decide who would possess the aircraft, parties in the case could move the company tribunal with their claims.
“The appellant(s) the IRP are also at liberty to make an appropriate application with regard to the claim of possession other respective claims of both parties relating to the aircraft in question, which needs to be decided by the adjudicating authority in accordance with the law,” the order stated.
Some lessors are likely to approach NCLT for relief, said a lawyer privy to the matter.
What NCLAT said
Lessors can file ‘malicious intent’ application against Go First in NCLT
NCLT to decide fate of aircraft whose leases were terminated before its order
NCLT to decide on claims of possession of aircraft by parties
Way forward for lessors
Approach NCLT to repossess aircraft
Move SC against NCLAT order
If the NCLT accepts the claim of malicious intent, the moratorium against the airline may be lifted. Lessors also have the option of appealing the NCLAT decision to the Supreme Court.
As of now, the dues of Go towards its vendors are Rs 1,202 crore (net of advances) towards aircraft lessors Rs 2,660 crore.
The IRP of Go had told NCLAT earlier at the hearings that if the airline was allowed to operate, around 80 engines from Pratt & Whitney (PW) would “change the fortunes of the company”.
The airline had told the NCLT it had won an arbitral award in Singapore against PW, directing the American aerospace manufacturer to supply 10 serviceable engines by April 27 this year 10 serviceable engines each month until December.
Meanwhile, SMBC told the court in a submission on May 11 that the Indian aviation sector was being seen as a risky jurisdiction in light of the fate of Kingfisher Jet Airways.
“Due to such difficulties, lessors international aircraft owners see India as a risky jurisdiction for aircraft leasing. Therefore, Indian operators have to pay a premium to lease aircraft. Thus, the admission of the petition (of Go) will further shake the confidence of the international aviation industry,” SMBC told the appellate tribunal.
Advocates Maninder Singh, P Nagesh, Diwakar Maheshwari appeared for Go. Advocates Arun Kathpalia, Krishnendu Datta, Sathvik Varma, Pranaya Goyal appeared for the lessors.