The National Company Law Tribunal (NCLT) on Wednesday admitted Go First’s voluntary plea under the Insolvency and Bankruptcy Code (IBC) and awarded the airline bankruptcy protection.
The airline had last week filed for insolvency resolution proceedings in the NCLT while also announcing the suspension of the sale of tickets till May 15.
With liabilities of ₹11,463 crore and a financial crunch, the Wadia group-owned airline had sought voluntary insolvency resolution proceedings, as well as ,an interim moratorium on financial obligations.
Granting the cash-strapped airline a full moratorium, a bench comprising president justice Ramalingam Sudhakar and technical member LN Gupta also appointed Abhilash Lal as the interim resolution professional (IRP), who will act as an intermediary between the airline and the lenders in accordance with the provisions of the IBC.
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The tribunal said that the suspended board of directors should extend support to the IRP and ensure that no layoffs take place and further directed the management to deposit Rs.5 crore for immediate expenses. The tribunal added that the IRP should work towards keeping Go First as a “going concern” and running the corporation smoothly.
“Moratorium under section 14(1) has been declared. Mr Abinash Lal is appointed as IRP. He is directed to take steps as mandated under IBC and take charge of the corporate debtor…”, the nech said while pronouncing its judgment.
On Thursday, the NCLT had reserved its order on Go First’s plea for initiation of insolvency proceedings to prevent the seizure of its 26 aircraft.
In its application before the NCLT, Go First while seeking a declaration of bankruptcy under the IBC also requested that till the time the tribunal is deciding its application (IPR) under section 10 of the IBC, as an interim measure, the court can allow a moratorium to save the business.
This was, however, opposed by the lessors representing 26 aircraft who challenged these proceedings contending that this would jeopardise their contractual rights, adding that they want their aircraft back.
Senior advocates Neeraj Kishen Kaul and P Nagesh for Go First argued that if they lose the aircraft, their business would also stop completely. Senior counsel Kaul said that the company has started facing substantial losses due to the increased grounding of aircraft on account of faulty engines being supplied from the United States.
Senior counsel Kaul said that the purpose of filing for ‘voluntary insolvency’ is to revive the airline. “It is seeking a comprehensive debt restructuring and that it is not a malicious petition to avoid payments of dues”, he added.
Nagesh argued that this would affect around 7,000 employees of the company, adding that another 10,000 indirect employees will also be affected. He further contended that the company was seeking the imposition of an interim moratorium to prevent lessors from taking possession of its 26 aircraft.
“If the company losses possession of the aircraft and the legal right to operate them, then the continuance of its business as a going concern will be at stake, which will directly impact the employability of 7,000 direct and 10,000 indirect employees,” read the petition.
Go First told the tribunal that its bank accounts with the consortium have already been frozen as of last night. It added that it has also received more notices for the termination of aircraft leases.
The aircraft lessors told the court that there is no concept of interim moratorium under the IBC and that the Parliament does not have many such provisions.
“Such an order placing conditions on third parties not before NCLT would be impermissible in law,” the counsel for the plaintiff said.
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In its petition filed through Pranjal Kishore, the airline said that it has initiated emergency arbitration proceedings against US-based aircraft engine maker Pratt & Whitney (P&W) which is pending, adding that the airline has paid Rs.19,980 crore to its creditors, out of which Rs.5,400 crore was paid to the lessors in the last two years. It has now exhausted all financial resources (including full utilization), Go First said.
It was pointed out that as on April 28, 2023, the airline had defaulted on payment of ₹1,202 crore to its creditors and ₹2,660 crore to the airport lessors.
“Currently, the assets of the company are not sufficient to meet its liabilities. Due to such financial stress, the essential goods and service providers (including fuel suppliers) are not ready and willing to offer their services and it is becoming increasingly difficult to run the business of the company as a going concern,” the plea said.
It further said that the airline has already cancelled 4,118 flights in the last 30 days and will be constrained to cancel further flights.
“Inevitably, the company will be forced to continue with the cancellation of more flights if urgent actions are not taken for its survival and resolution,” added the petition.
