The National Company Law Tribunal (NCLT) on Thursday reserved its order on crisis-hit airline Go First’s plea seeking voluntary insolvency resolution proceedings and interim moratorium on financial obligations while aircraft lessors vehemently opposed the petition.Amid the airline facing severe financial crunch and cancelling flights, a two-member NCLT bench comprising President Justice Ramalingam Sudhakar and Member L N Gupta heard the arguments for and against the petition for nearly four hours.As aircraft lessors opposed the plea, the counsels for Go First said the petition was not a malicious one to avoid payment of dues to its creditors but to save the company.
The counsels also requested the tribunal to grant an interim moratorium on an urgent basis to keep the carrier as a going concern and protect the fleet from being taken away by the lessors by enforcing their contractual rights.Senior advocates Neeraj Kishan Kaul and P Nagesh submitted that the airline’s several bank guarantees are being encashed and that the carrier has also received notices for termination of aircraft leases.The company has an “impeccable” financial record and before the pandemic, it was having around 8 per cent of the overall domestic aviation market. It is now facing problems because of the dispute with Pratt & Whitney over the supply of the engine, they said.The Wadia group-owned airline has liabilities worth Rs 11,463 crore and has cancelled all its flights till May 9 while sale of tickets has been suspended till May 15.When the NCLT bench asked how the interim moratorium would help Go First, Kaul said, “It will keep the airlines in a going concern”.
Under the insolvency resolution process, an Interim Resolution Professional (IRP) takes over the control of the company concerned and will discharge his or her duties with the guidance of the Committee of Creditors (CoC).Further, the bench wondered “how one IRP can run the company when so many professionals could not run it?”.In response, Kaul said the airline has proposed the name of Abhilash Lal from Alvarez & Marsal as an IRP.It is the same firm which was also roped in by Jet Airways, which had gone into insolvency proceedings in 2019.Citing the example of Jet Airways, they submitted that when Corporate Insolvency Resolution Process (CIRP) was initiated against that airline, it had over 100 aircraft but by the time a resolution was reached, only 11 were left.”IBC says that during CIRP the corporate debtor should be in a ‘going concern’ and not as a ‘grounded concern’,” Kaul said.In its petition filed through advocate Pranjal Kishore, Go First has sought various interim directions from NCLT including restraining lessors from taking back aircraft and regulator DGCA from taking any adverse action against the airline.
The counsels representing aircraft lessors such as SMBC Aviation Capital questioned why Go First was in a hurry for initiation of CIRP or interim protection. and also rejected the airline’s submission that lessors have no locus standi in the case. According to the lessors, they have the right to file a reply to Go First’s plea and said if a moratorium is granted, they cannot take their planes back.”They are asking for pre-admission of CIRP. There is no such concept under IBC (Insolvency and Bankruptcy Code),” Senior Advocate Arun Kathpalia, who appeared for the lessors, said.The lessors also submitted that the admission of the petition would have “harmful and serious consequences” as this is not the case for the “first-day first show relief to be granted”.Go First’s counsel Kaul said the NCLT can pass such an order of interim moratorium in “such special circumstances”.”This is not the first time that NCLT would pass such an order. The Chandigarh bench has passed such order,” he said, adding “what we will do if all our planes are grounded.” Currently, Go First has over 7,000 employees and 10,000 indirect employees, who will be impacted if the airline’s operations are grounded, he added.
In the petition before the NCLT, the airline has also said that aviation regulator DGCA, Airports Authority of India (AAI), and private airport operators should not cancel any departure and parking slots allotted to the company.The airline also wants fuel suppliers to continue supplying for aircraft operations and not terminate the present contractual arrangements.Go First, which started flying more than 17 years ago, has said the non-supply of engines by Pratt & Whitney resulting in the grounding of more than half of its fleet has led to the current situation.The carrier has total liabilities of Rs 11,463 crore to all creditors, including a default of Rs 3,856 crore towards operational creditors.
The dues towards aircraft lessors is Rs 2,600 crore, according to the plea filed before NCLT.As on April 30, the debt exposure towards financial creditors stood at Rs 6,521 crore.The airline’s net loss rose to Rs 3,600 crore last fiscal from Rs 1,807.8 crore in 2021-22. The net loss was at Rs 1,346.72 crore in 2020-21.