Creditors To Lead Go Air Insolvency

A day after the airline said it sought voluntary insolvency resolution citing persistent problems with engines, its chief executive Kaushik Khona told a television channel that the “promoters are still committed" and that the company is ready to restart operations as soon as a moratorium is available under the insolvency.

These moratoriums are normally on any asset sales or lawsuits against the debtor, among other things. “As commencement of insolvency impacts pay out to creditors on account of moratorium that kicks in on admission, creditors would prefer being consulted as the they would like to be in the driver’s seat on decision-making," said Ajay Shaw, Partner DSK Legal.

Others said that at the time of submission of a resolution plan, promoters can submit their own rescue plan if they are not disqualified under Section 29A of the Insolvency and Bankruptcy Code. “For instance, if the company account has been declared wilful defaulter or account has been a non-performing asset for more than the stipulated period, then the promoters will not be able to submit the resolution plan," said Ashish Pyasi, partner, Dhir & Dhir Associates. “Legally, there is no difference in the treatment of promoters or their rights once the process commences. Once the corporate insolvency resolution process commences, it is creditor-driven and all decisions are made by the Committee of Creditors," said Dhiraj Mhetre, dispute resolution and insolvency, Khaitan Legal Associates.

Mhetre said promoters who have triggered insolvency on their own have no special rights in this process.

The jury is still out on whether the Wadia Group can be allowed to bid for Go Airlines.

“There is a provision for promoters to bid for a company once it is admitted in insolvency. But that is broadly applicable for micro, small, and medium enterprises where there often are no buyers or resolution applicants who are interested and is not applicable to a big corporate like Go Air as this sets a dangerous precedence," a lawyer associated with an insolvency case said.

Established in 2005, the Mumbai-based airline filed for insolvency at the Principal Bench of New Delhi as the company’s registered office is based in the national capital and hence the jurisdiction for insolvency proceedings falls in Delhi.

The company has blamed faulty engines by US-based Pratt & Whitney for 30-50% inactive fleet since 2020 resulting in loss of revenues and additional expenses.

“The bench has stated that interim moratorium was not possible for the company as that is possible only in the case of individual debtor. It was a good move to file voluntarily for insolvency to get all lenders on one table for an expeditious and easier debt-restructuring process but they should have sought for immediate admission of plea rather than seeking interim moratorium," another lawyer said.