Go First Insolvency: NCLAT Rules In Favour Of Airline, Upholds NCLT Order

The appellate tribunal Bench of Chairperson Justice Ashok Bhushan and 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 and malicious” about the airline seeking voluntary insolvency. SMBC Aviation Capital (SMBC), SFV Aircraft Holdings, GY Aviation Lease, and 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” and 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 and 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 and material, and 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 and sole’ of the company after the insolvency application is admitted.

Meanwhile, the IRP refuted this submission and 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, and 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, and parties in the case could move the company tribunal with their claims.

“The appellant(s) and the IRP are also at liberty to make an appropriate application with regard to the claim of possession and 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.

• 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

 As of now, the dues of Go towards its vendors are Rs 1,202 crore (net of advances) and 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 and 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 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 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, and Diwakar Maheshwari appeared for Go. Advocates Arun Kathpalia, Krishnendu Datta, Sathvik Varma, and Pranaya Goyal appeared for the lessors.