New Delhi- The National Company Law Appellate Tribunal (NCLAT) on Monday upheld insolvency resolution proceedings against crisis-hit airline Go First, derailing aircraft lessors’ efforts to take back their planes from the struggling Wadia group firm.
A two-member NCLAT bench directed aircraft lessors and the Interim Resolution Professional (IRP) of the Wadia group firm to approach the National Company Law Tribunal (NCLT) regarding the claim of possession and other respective claims relating to the aircraft whose leases were terminated by the lessors after the company filed for insolvency process.
“The order dated May 10, 2023, admitting Section 10 Application is upheld,” said the NCLAT bench headed by Chairperson Justice Ashok Bhushan.
Earlier, NCLT on May 10, 2023, admitted the plea of Go First to initiate voluntary insolvency resolution 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) – owning around 22 aeroplanes.
Disposing of their pleas through a 40-page-long common order, the NCLAT said lessors are at “liberty to file” appropriate application before NCLT under Section 65 of the Insolvency & Bankruptcy Code (IBC) with “appropriate pleadings and material” regarding their claims.
However, it also added that NCLT while considering the said application “shall not be influenced by any observations made in this order”.
“The appellants, as well as IRP, are at liberty to make 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 Application, which Application needs to be considered and decided by the Adjudicating Authority in accordance with law,” it said.
NCLAT also held lessors and IRP are at liberty to make an appropriate application under Section 60, sub-section (5) with regard to claims of possession and other respective claims relating to the aircraft in question, which need to be decided by the NCLT in accordance with the law.
Section 10 of IBC allows a company to approach NCLT for initiation of insolvency after default.
While section 60 (5) grants NCLT power to entertain any claim made by or against the corporate debtor including claims by or against any of its subsidiaries. It also grants NCLT power to deal any question of priorities or any question of law or facts, arising out of CIRP.
Over aircraft lessors’ contention that leases with Go First were terminated prior to admission of Section 10 and moratorium as directed by NCLT order dated May 10, 2023, cannot be said to be applicable to these assets are free to claim possession, the appellate tribunal said: “the issues which are sought to be raised in this appeal have not yet been considered by the Adjudicating Authority”.
“When the NCLT has not adverted to the aforesaid issues, where the CIRP is pending, we are of the view that ends of justice will be served by granting liberty to the Appellant(s) or to the IRP to make appropriate Application before the Adjudicating Authority under Section 60, subsection (5) of the Code,” it said directing NCLT to take appropriate decision in accordance with law.
Aircraft lessors had also alleged that NCLT order admitting Go First insolvency plea was in “violation of principles of natural justice” as they were not served copy and sought time for filing opposition, which was not granted.
Rejecting it, NCLAT said the statutory scheme does not contain any obligation of issuing notice to the creditors by Go First, however, if any objector appears at the time of hearing has to be heard and the objection may be noted by NCLT and thereafter the appropriate decision can be taken.
“We, thus, conclude that the mere fact that no notice was issued to the creditors or any opportunity was given to the objectors before proceeding to hear, the Corporate Applicant, cannot be held to vitiate any procedure or violating the principles of natural justice, more so when objectors were heard by the Adjudicating Authority,” it said.
Over the lessors’ allegation that insolvency plea was filed by Go First “fraudulently with malicious intent” as there was no financial default, the appellate tribunal said on the strength of the oral objections which were raised before NCLT and also before NCLAT, it was of the view that”no conclusion can be derived at this stage that Application filed by the Corporate Applicant was fraudulent with malicious intent.
The suspended management of Go First was represented by Senior advocate Maninder Singh, P Nagesh and Pranjal Kishore before NCLAT, while IRP was represented by Ramji Srinivasan and Ritin Rai.
The crisis-hit carrier has more than 7,000 employees on its roll.
This was immediately challenged by SMBC Aviation Capital before NCLAT within hours of the NCLT order. Later, other lessors also moved NCLT and the appellate tribunal 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 planes.
Go First stopped flying on May 3