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NCLAT Upholds Go First's Voluntary Insolvency Proceedings, Aircraft Lessors Face Setback [Read Judgment]

By LAWSTREET NEWS NETWORK      May 23, 2023      0 Comments      1,242 Views
NCLAT Upholds Go First's Voluntary Insolvency Proceedings, Aircraft Lessors Face Setback

NEW DELHI: The National Company Law Appellate Tribunal (NCLAT) has on May 22 upheld insolvency resolution proceedings against crisis-hit airline Go First, affecting aircraft lessors’ efforts to take back their planes from the struggling Wadia group firm.

A two-member NCLAT bench headed by chairperson Justice Ashok Bhushan and also comprising member (technical) Barun Mitra 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 admitting Section 10 application under the Insolvency and Bankruptcy Code, 2016 is upheld," the NCLAT said.

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 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 planes.

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 IBC with “appropriate pleadings and material” regarding their claims.

However, it also said 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 needs to be decided by the NCLT in accordance with the law.

Arun Kathpalia, Krishnendu Datta, Abhijeet Sinha and Rajshekhar Rao, senior counsel appeared for for the Appellants. Ramji Srinivasan and Ritin Rai, senior counsel appeared for the IRP and Maninder Singh and P Nagesh, counsel for suspended Management of the Corporate Applicant.

The appellant contended that the order by the NCLT has been passed in violation of principles of natural justice, since although they had appeared and sought for time for filing application under Section 65 of the Code, which was not granted by the Adjudicating Authority.

They also claimed the company petition was filed not for the purposes of resolution of insolvency, rather it was filed with fraudulent and malicious intent.

The opposite side, on the contrary, contended the order does not amount to violation of principles of natural justice inasmuch as the application under Section 10 of the Code does not require creditors to be heard before admission of the application. There is no mandatory requirement in Section 10 to issue notice to the creditors at the pre-admission stage, rather, giving notice to the creditors is a matter of discretion to be exercised on a case-to-case basis on valid grounds. In the present case, the adjudicating authority in the larger interest, after hearing the appellant and objectors has admitted the Section 10 application.

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