'Claim Not Legally Enforceable, Admission Of Winding Up Laden With Procedural Infirmities': SpiceJet Files Appeal Before Madras High Court

Madras High Court has deferred the hearing of an appeal against the admission of SpiceJet's winding up for tomorrow. The order was passed today after hearing the arguments of SpiceJet at length.The appeal came up for admission before a Division Bench of Justice Paresh Upadhyay and Sathi Kumar Sukumara Kurup today. The counsel appearing for the appellant, Senior Advocate Ramakrishnan Viraraghavan, primarily contended that a party who has violated a public safety statute cannot demand enforcement of a claim rendered illegal.The court observed in the order that SpiceJet Limited has complied with the previous order of Justice R. Subramanian to deposit an amount equivalent to five million US Dollars with the Court Registry. Since the amount was deposited prior to the specified last date of 3rd January, the court also observed that the stay on the operation of winding up will continue for the time being. The court deferred the hearing since the counsel for the caveator, Credit Suisse AG, is yet to receive some relevant parts of the paper book from the appellant. On 6th December, Madras High Court had ordered the admission of winding up SpiceJet Ltd. while adjudicating a company petition filed by Credit Suisse AG, a Switzerland based Stock Corporation and a creditor, who alleged inability on the part of respondent Airlines to pay the debts owed to the former. The company petition was filed by the Swiss Corporation under Sections 433(e) and (f) r/w Sections 434 and 439 of the Companies Act, 1956, before the single judge bench.BackgroundSpiceJet Limited (First Party) had availed the services of SR Technics (Second Party) in Switzerland for Air Craft maintenance and repair, among other related services, via an agreement that has a lifetime of 10 years, back in 2011. In 2021, a supplemental agreement was signed between the two parties that enabled the airlines to pay back the monies raised by SR Technics at various occasions through a deferred payment scheme.Before the High Court, the contentious matter was the seven invoices raised by SR Technics, the seven corresponding Bills of Exchange for the amount due under invoices, and the acknowledgement of debts through the issuance of certificates of acceptance by the Airlines. In 2012, the stock corporation Credit Suisse AG (Third Party) was assigned all the rights to receive payments due to SR Technics through a financial agreement. The assignment also entitled the third party to receive payments from SpiceJet under the seven invoices issued by SR Technics.Even after repeated requests, SpiceJet allegedly shrugged off its responsibility to pay the monies due under the invoices, that too after a statutory notice under Sections 433 and 434 of the Companies Act, 1956. Therefore, the third party preferred a company petition for winding up under Section 433 (e), citing the inability on the part of the first party airlines to repay the debts.Court Room ExchangeFor SpiceJetThe appellant counsel, at the outset, submitted that the primary contract was between SR Technics and SpiceJet Limited for aircraft maintenance services. The other agreement between SR Technics and Credit Suisse AG, i.e, the banker, was entirely a financing agreement to which the appellant passenger carrier was not a party."In all other branches of law, an order of admission is inconsequential, no one can even appeal against admission. In Corporate matters, however, admission including admission of winding up is a step into the 'gallows'," the senior advocate for SpiceJet remarked at the outset.He also added that the Supreme Court has set out the standards for admission via three requirements. These three requirements are i) The existence of a bona fide dispute, ii) Debt payable should be bona fide, and iii) If the company produces prima facie evidence of such bona fide debt. He added that a company court does not give a finding as to whether a debt is due or not; the only question would be if it's bona fide or not.On the general question of the reason behind SpiceJet's refusal to pay 24 Million US Dollars to Credit Suisse, the counsel argued that the third-largest passenger carrier became aware of the lack of license for SR Technics to carry out aircraft maintenance only halfway. Since SR Technics did not have a valid license from Directorate General of Civil Aviation (DGCA) between the period of 2009-2015 during the period of issued invoices, there was no requirement to pay the amount claimed towards such maintenance.SpiceJet contended that the single judge bench erred in ordering the admission of winding up. The single judge had taken a stand that if there is a breach of contract had taken place, then the appellant should have terminated the contract. Secondly, the single judge bench remarked that there was a finding in the Arbitration proceedings that took place in United Kingdom to the detriment of SpiceJet. The finding, according to Justice R. Subramanian, was that the appellant was aware of the ...

'Claim Not Legally Enforceable, Admission Of Winding Up Laden With Procedural Infirmities': SpiceJet Files Appeal Before Madras High Court

Sebin James

Madras High Court has deferred the matter to hear the caveator, Credit Suisse AG, at length tomorrow.

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