The National Company Law Appellate Tribunal (NCLAT) on Monday said it will pass an order on the plea challenging the admission of Go First’s insolvency on May 22.
Aircraft lessors challenged the order of the National Company Law Tribunal (NCLT), Delhi admitting the cash-strapped airline’s plea for voluntary insolvency.
The appellate tribunal told all the parties in the matter to file their written submissions regarding the case in 48 hours.
At the start of the argument, the bench of Chairperson Justice Ashok Bhushan and Member(Technical) Barun Mitra asked Senior Advocate Maninder Singh, appearing for Go First, “What is of the hearing? Either we interfere or we don’t interfere (with the NCLT order).”
Singh said that the deregistration process of aircraft is not completed. “Even if deregistration takes place, it is my occupation(to operate aircraft),” he told the tribunal.
On the other hand, the counsel for Interim Resolution Professional (IRP) said that the lessors of the airline terminated their leases after Go First announced its plans to declare insolvency. He said that as per the Civil Aviation Requirements, the Corporate Debtor (in this case Go First) is responsible for flight operations, including maintenance. “The termination was to defeat the purpose of the Insolvency and Bankruptcy Code (IBC).
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He said it was the duty of the IRP to look after the airlines. “If allowed to operate, 80 engines (from Pratt & Whitney) will change the fortunes of the company,” he said.
An IRP is a professional who is the whole and sole of the firm after the insolvency application is admitted.
The airline had told the NCLT that it had won an arbitral award in Singapore against Pratt & Whitney (P&W), directing P&W to supply 10 serviceable engines by April 27 this year and 10 serviceable engines each month till December 2023.
He also questioned the intentions of the lessors, arguing that the lessors had not terminated the leases when the dues to them increased, but they terminated the leases immediately after the airline announced insolvency plans.
He also took an expectation to the arguments by the lessors saying the IRP would ‘cannibalise the aircraft’ when it is under their case. “The lessors were not concerned about the cannibalisation of the aircraft when it was under the care of Go Air but they now fear for it under the care of the IRP?”
Meanwhile, Senior Advocate Arun Kathpalia, appearing for SMBC Aviation Capital, said that Go First’s insolvency application should not have been admitted by the NCLT, Delhi on the first day itself. He said it was a ‘brutal denial of opportunity for the lessors to not allow them to file their objections in the case’.
“I came to the court at the inception. NCLT has denied me an opportunity to file a Section 65 application (malicious intent for filing insolvency application) under the Insolvency and Bankruptcy Code against the airline. No notice was given to me,” he said.
The lessors also said that Go First created a 'sense of false urgency’ by suddenly halting its operations and approaching the NCLT for insolvency, even when the aircraft were flying.
At this juncture, the court asked Kathpalia, “Can mere termination (of leases) and filing of insolvency application (by Go First) be termed as malicious? It might indicate that there was a default.”
Replying to this, Kathpalia said, “I terminate the leases for my aircraft, he wants to hang on to them. Is it not malicious?”
SMBC Aviation Capital told the court in a submission on May 11 that the Indian aviation sector is being seen as a risky jurisdiction in light of the fate of Kingfisher and Jet Airways. "Due to such difficulties, lessors and international aircraft owners see India as a risky jurisdiction for aircraft leasing. Therefore, Indian operators have to pay a premium to take aircraft on lease. Thus, the admission of the petition (of Go First) will further shake the confidence of the International Aviation Industry," SMBC told the appellate tribunal.
When the Jet Airways case was brought up, he said that in the case of Jet Airways, it was a financial lease, meaning that Jet owned the assets.
He said it is different from the leases of Go First. “How can they fly my assets when they can’t even operate them? Everyday the value of assets is deteriorating?”
NCLT on May 10 accepted Go First’s insolvency plea, resulting in the airline being put under moratorium as per the IBC.
A moratorium period is the suspension of all or certain legal remedies against debtors. This means that lessors of Go First will not be able to take possession of the aircraft.
SMBC Aviation Capital, SFV Aircraft Holdings, and GY Aviation Lease moved the appellate tribunal after NCLT accepted Go First’s insolvency plea.