The National Company Law Tribunal (NCLT) on Thursday reserved its order on Go First’s plea for voluntary insolvency resolution proceedings even as the airline and its lessors bickered over whether the Insolvency and Bankruptcy Code (IBC) allowed for an interim moratorium as sought by the crisis-hit airline.
Senior advocate Neeraj Kishan Kaul, who appeared for the airline, said: The petition has shown all requirements for an interim moratorium, which are essential at this stage, and any malicious intent can be objected at later stages.”
The IBC Code provides for an interim moratorium under section 96 when a debtor makes a voluntary application for insolvency resolution but the grant of such relief is subject to certain conditions.
Kaul argued that the GoFirst petition meets all the procedural and other requirements under IBC 2016.
Go First, which has proposed an interim resolution professional (IRP) from Alvarez & Marsal in the voluntary insolvency proceedings, had sought an interim moratorium to prevent lessors from taking possession of its aircraft. The lessors have argued against this plea saying it will prevent them from enforcing their contractual rights.
The two sides argued over whether the airline could seek protection under Section 96 of IBC when voluntarily filing for insolvency resolution. However, Section 94 or Section 95 allows for an interim moratorium in relation to all the debts.
Go First has filed the application under Section 10 of the IBC that allows a debtor to voluntarily seek insolvency before the NCLT. Blaming engine maker Pratt & Whitney’s failure to supply spare engines, Go First said if P&W complied with an order of a Singapore artbitrator, it can return to full operations by August-September 2023.
In its petition filed before the NCLT, the carrier had sought directions to restrain aircraft lessors from taking any recovery action as well as restrain the DGCA and suppliers of essential goods and services from initiating adverse actions.
During the more than four-hour-long hearing at the tribunal, Kaul said that while 28 of its 54 aircraft have been grounded because of Pratt & Whitney, if the aircraft are seized by the lessors it would have an adverse impact on the company. Kaul added that the objective of the IBC is to ensure that a company is a going concern and not stop its operations.
Senior advocate Arun Kathpalia who appeared for the airline’s lessors maintained that the interim moratorium as sought by Go First is not available under the insolvency law.
A two-member bench headed by President Justice Ramalingam Sudhakar concluded the day-long hearing during which the Wadia group-controlled airline sought initiation of insolvency resolution proceedings and an interim moratorium on its financial obligations.
Kaul and P Nagesh who argued for Go First submitted that the airline’s several bank guarantees are being encashed and that the carrier has also received notices for termination of aircraft leases.
However, aircraft lessors opposed the airline’s request saying that insolvency proceedings cannot be initiated without hearing them.
Flights off
Go First has suspended the sale of tickets till May 15 and is working to refund or reschedule existing bookings for future dates, aviation regulator DGCA said on Thursday.
The DGCA has asked the carrier to start refunds according to timelines specified in the rules.
