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SC agrees to hear SpiceJet plea against Madras HC’s winding up order

The airline company is challenging the Madras High Court division bench ruling that had on December 7 upheld its single judge’s decision to wind up the company.

The Division Bench had ruled in favour of Credit Suisse AG, a Zurich-based company, which was assigned the right to receive the payments due to SR Technics.
The Division Bench had ruled in favour of Credit Suisse AG, a Zurich-based company, which was assigned the right to receive the payments due to SR Technics.

The Supreme Court on Tuesday agreed to hear on Friday the Ajay Singh-owned SpiceJet’s appeal against a Madras High Court order to wind up the company for non-payment of unpaid dues to the tune of $24.01 million to Swiss stock corporation Credit Suisse AG.

A bench headed by Chief Justice N V Ramana said it will hear the case on Friday after senior counsel Mukul Rohatgi, appearing for SpiceJet, sought an urgent hearing because any further delay will lead to the carrier’s shutting down. “The protection is till Friday, please list on Friday or Monday,” Rohatgi said.

The airline company is challenging the Madras High Court division bench (DB) ruling that had on December 7 upheld its single judge’s decision to wind up the company. However, the DB had extended the interim stay till Friday as the carrier had already deposited $5 million in the court. The single judge had ordered the winding up of SpiceJet and asked the official liquidator to take over the airline’s assets.

The Division Bench had ruled in favour of Credit Suisse AG, a Zurich-based company, which was assigned the right to receive the payments due to SR Technics. Credit Suisse had moved the winding-up petition pursuant to failure on part of SpiceJet to honour some invoices the former had raised in 2013. The HC had rejected the airline’s stand that SR Technics did not have a valid licence to carry out aircraft maintenance services from the Director-General of Civil Aviation as required under the Aircraft Act and, therefore, the enforcement of the claim would be against public policy.

SpiceJet in its appeal said that the DB erred in holding that a purported debt arising out of services rendered in violation of the Aircraft Act can be a basis for admission of a winding-up order of a company. It said that the alleged debts are not legally enforceable under Section 433 of the Companies Act and there cannot be a winding-up order as the Credit Suisse is not a creditor of the carrier and that the enforcement of such claims is contrary to public policy and amounts to putting a premium on illegality. Besides, the agreements between SpiceJet and SR Technics do not authorise assignments to Credit Suisse.

Despite having noted the undisputed finding that SRT was an unapproved maintenance organization not entitled to maintain aircraft engines under the Aircraft Act and was acting in breach of the Engine Maintenance Agreement, the DB ought to have set aside the winding-up order by holding that SRT or the Respondent as its assignee is not entitled to demand payment from the petitioner, it said.

The airline had in November 2011 entered a 10-year contract for servicing of aircraft with another Swiss engine maintenance services firm SRT Technics, which, in turn, sold its right to receive payments based on the contract to Credit Suisse in September 2012.

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