Go Airlines | NCLT Directs RP To Protect Assets Under Control Of Corporate Debtor

The National Company Law Tribunal (“NCLT”), Special Bench, comprising of Shri Mahendra Khandelwal (President) and Shri Rahul Bhatnagar (Technical Member), while adjudicating a petition filed by Go Airlines (India) Limited, has directed the Resolution Professional to protect the assets in possession and control of Go Airlines (India) Ltd. in terms of Section 25(1) of IBC. The direction has been given in view of an application filed by the Lessors of the Aircraft engines, who have raised concerns regarding the need to timely service and maintain the engines. Further the Interim Resolution Professional has been replaced by Mr. Shailendra Ajmera as the Resolution Professional of Go Airlines (India) Ltd.BACKGROUND FACTS M/s Go Airlines (India) Limited (“Corporate Debtor”) is engaged in the business of Airlines and is the third largest airline operator in India. It has been running a low-cost Airline service under the brand name ‘Go Air’ for the past 17 years and holds license issued by the Directorate General of Civil Aviation (DGCA) for carrying out commercial air operations in India. In May 2021, GoAir was renamed as ‘GoFirst’. Pratt & Whitney (“P&W”) had supplied defective engines to the Corporate Debtor due to which the latter’s several aircrafts were grounded and could not take off. P&W declined to provide any repair or replacement to the Corporate Debtor. The matter was referred to an emergency arbitration before the Singapore International Arbitration Centre (SIAC), wherein the Emergency Arbitrator passed Awards dated 03.02.2023 and 15.04.2023, directing P&W to supply 10 serviceable engines by 27.04.2023 and 10 serviceable engines each month till December 2023. However, the Awards were not complied with by P&W and enforcement proceedings are pending adjudication. For this reason, the Corporate Debtor was constrained to cancel 4,118 flights with 77,500 passengers in the last thirty days. The Corporate Debtor filed a petition under Section 10 of the Insolvency and Bankruptcy Code, 2016 (“IBC”), voluntarily seeking initiation of the Corporate Insolvency Resolution Process (“CIRP”) against itself. On 10.05.2023, the NCLT admitted the petition under Section 10 of IBC and initiated CIRP against the Corporate Debtor. Mr. Abhilash Lal was appointed as the Interim Resolution Professional (“IRP”). While imposing Moratorium under Section 14 of IBC, the NCLT had specifically stayed the recovery of any property by an owner or lessor, where such property is occupied by or in the possession of the Corporate Debtor.SMBC Aviation Capital Ltd, GY Aviation and SFV Aircraft Holdings (“Lessors”) had leased out aircrafts to the Corporate Debtor. The Lessors filed an appeal before the NCLAT challenging the NCLT order dated 10.05.2023, since the Order restricted the Lessors from recovering their assets (aircrafts) which are in possession of the Corporate Debtor. The Lessors submitted that they had terminated the Lease Agreement of aircrafts prior to initiation of CIRP and imposition of moratorium. The assets belonging to third parties could not be covered under moratorium and must be reverted to the Lessors. The NCLAT upheld the NCLT order initiating CIRP against the Corporate Debtor. However, liberty was granted to the IRP and the Lessors to file application(s) before the NCLT with respect to their claims relating to the leased aircrafts.PROCEEDINGS BEFORE NCLT Interim Resolution Professional replaced by Resolution ProfessionalThe Committee of Creditors (“CoC”) had filed an application before the NCLT under Section 22(3)(b) of IBC, seeking approval for replacement of the IRP (Mr. Abhilash Lal) and appointment of Mr. Shailendra Ajmera as the Resolution Professional of the Corporate Debtor. The NCLT has approved the appointment of Mr. Shailendra Ajmera as the Resolution Professional. Application filed by Lessors The Lessors filed an application under Section 60(5) of IBC before the NCLT as per the liberty granted by NCLAT. The Lessors submitted that the aircraft engines are highly delicate and complex machines, therefore, require timely servicing and maintenance. Further, the Lease Agreement of aircrafts were terminated by the Lessor prior to initiation of CIRP, hence, the engines are liable to be returned to the Lessor and cannot be kept in control of Go Airlines. The Resolution Professional submitted that he would carry out duties as mandated under law.The NCLT has granted time to the newly appointed Resolution Professional to a file reply to the Lessor’s application. Further, the Resolution Professional has been directed to protect the assets ‘with respect to which he has the responsibility assigned to him in the current proceedings’, in terms of Section 25(1) of IBC. “The RP should comply with the relevant provisions of the IBC and perform the duties assigned to him under the Code, in particular those related to Section 25(1) of the Code regarding protection of the assets with respect to which he has the responsibility...

Go Airlines | NCLT Directs RP To Protect Assets Under Control Of Corporate Debtor

Pallavi Mishra

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