Go First ceased flying on May 3. (File)
New Delhi:
The National Company Law Appellate Tribunal (NCLAT) on Monday upheld insolvency proceedings against crisis-hit airline Go First, derailing attempts by aircraft lessors to repossess their planes from the struggling Wadia group company.
A two-member NCLAT bench directed aircraft lessors and the Wadia group firm’s Interim Resolution Professional (IRP) to approach the National Company Law Tribunal (NCLT) regarding the claim of possession and other respective claims related to the aircraft of which the leases had been terminated by the lessors after the company filed for bankruptcy.
“The May 10, 2023 order authorizing Section 10 is upheld,” said the NCLAT bench headed by Chairman Judge Ashok Bhushan.
Previously, on May 10, 2023, NCLT conceded Go First’s plea to begin voluntary insolvency proceedings and appointed an interim resolution professional (IRP) to suspend the company’s board.
The said NCLT order was challenged by Go First’s four aircraft lessors – SMBC Aviation Capital Ltd, GY Aviation, SFV Aircraft Holdings and Engine Leasing Finance BV (ELFC) – who owned approximately 22 aircraft.
The NCLAT quashed their pleas through a 40-page joint order, saying landlords are “free to” make the appropriate application to NCLT under Section 65 of the Insolvency & Bankruptcy Code (IBC) with “appropriate pleas and material” regarding their claims.
However, it also added that NCLT “will not be affected by comments in this order” when considering the said filing.
“Both claimants and IRP are free to make an appropriate request to the Adjudicating Authority (NCLT) for explanation as to the applicability of the moratorium on the aircraft with respect to which leases are in favor of the business applicant (Go First) were terminated prior to the admission of Section 10 application, which application must be considered and decided by the procuring authority in accordance with the law,” it said.
NCLAT also holds lessors and IRP free to make an appropriate application under section 60 subsection (5) in respect of claims of possession and other respective claims related to the aircraft in question, which must be determined by the NCLT. decided in accordance with the law.
Section 10 of IBC allows a company to approach NCLT for initiating insolvency upon default.
Although Section 60(5) grants NCLT the authority to accept claims from or against the corporate debtor, including claims from or against any of its subsidiaries. It also empowers NCLT to deal with any matter of priorities or any matter of law or fact arising out of CIRP.
Aircraft lessors’ claim that leases with Go First were terminated prior to the entry of Section 10 and moratorium as mandated by May 10, 2023 NCLT order cannot be said to apply to these assets that are free to take possession of. claim, the appeals court said. : “the issues raised in this appeal have not yet been dealt with by the contracting authority”.
“Where the NCLT has failed to address the above issues, where the CIRP is pending, we believe that justice will be served by allowing the applicant(s) or the IRP discretion to make an appropriate request before the adjudicating Authority under Section 60(5) of the Code,” it said instructing the NCLT to make the appropriate decision in accordance with the law.
Aircraft lessors had also alleged that the NCLT order conceding the Go First insolvency plea “contradicted principles of natural justice” as they were not given a copy and sought time to file an opposition, which was not granted .
NCLAT rejected it, saying the statutory scheme does not contain any obligation for creditors to be notified by Go First, but if an objector appears at the time of the hearing, it must be heard and the objection can be noted by NCLT and thereafter the right decision can be made.
“Thus, we conclude that the mere failure to notify creditors or give opportunity to objectors before hearing the Corporate Applicant cannot be considered a breach of procedure or a breach of principles of natural justice. even more so when objectors were heard by the contracting authority,” it said.
On the landlords’ claim that the insolvency petition was filed by Go First “fraudulently with malicious intent” as there was no financial default, the appeals court said based on the oral objections filed before NCLT and also for NCLAT. the opinion that “no conclusion can be drawn at this stage that the application submitted by the business applicant was fraudulent with malicious intent.
Go First’s suspended management was represented by Senior Advocate Maninder Singh, P Nagesh and Pranjal Kishore for NCLAT, while IRP was represented by Ramji Srinivasan and Ritin Rai.
The airline hit by the crisis has more than 7,000 employees.
This was immediately challenged by SMBC Aviation Capital for NCLAT within hours of the NCLT order. Later, other landlords moved NCLT as well, and the appeals court on May 15 reserved its order.
So far this month, several lessors have approached aviation regulator DGCA for deregistration and repossession of Go First’s 45 aircraft.
Go First ceased flying on May 3.
(Except for the headline, this story has not been edited by DailyExpertNews staff and is being published from a syndicated feed.)
