Madras High Court Orders Winding Up Of SpiceJet Ltd, Official Liquidator To Take Over The Company Assets

The Madras High Court has ordered that SpiceJet Limited must be wound up and the assets must be taken over by the official liquidator on the grounds of proved inability of the Airlines to repay its debts. Justice R. Subramanian was 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. In the petition filed under Sections 433(e) and (f) r/w Sections 434 and 439 of the Companies Act, 1956, the single judge bench evoked the three-pronged test framed by the apex court in Mathusudan Gordhandas & Co. v. Madhu Woollen Industries (P) Ltd., (1971) 3 SCC 632 to determine the admission of winding up when the existence of debt is proved against SpiceJet Limited. The court iterated that the three-pronged test enunciated by the apex court involves, Ascertaining if the defence of company is bonafide and is of substance, If such defence is likely to succeed on point of law, andIf the company produces prima facie proof of the facts on which the defence rests. While agreeing with the submissions made by Advocate Rahul Balaji appearing for the stock corporation, Justice R Subramanian recorded on the question of enforceability of debts after referring to Mathusudan and Madras HC judgment in Michael Hart v. M/s. Ninestars Information Technologies Ltd. (2013): "The three pronged test suggested by the Hon'ble Supreme Court which I have already extracted would show that the Company Court need not render a conclusive finding on the enforceability of the debt, while examining the issuance of notice of winding up or while examining the admission of a winding up petition. The question whether the documents require stamping or the question whether the bills of exchange are payable on demand or otherwise than on demand or questions which, as rightly pointed out by Mr. Rahul Balaji, learned counsel appearing for the petitioner, will have to be examined at the time when the actual enforcement or examination of the claim of the petitioner by the Official Liquidator takes place." Background SpiceJet 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 the 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 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 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. Arguments Raised The petitioner counsel, Advocate Rahul Balaji, argued before the court that a debt exists and a notice was issued under the Companies Act to the Airlines. Once a notice has been issued under Section 434(1) (a) of the Act and the failure of the company which in receipt of the said notice to repay the amount within three weeks or to secure the debt or to compound for it becomes evident, the winding-up procedure inevitably follows. To dispute the admission of winding up, the respondent company should prove a bona fide dispute or unenforceability of debt under Indian law, contended Mr. Balaji. The counsel argued that the Airlines has not disputed the utilisation of services by SR Technics. This, along with the fact that the invoices were accepted, Bills of Exchange and Certificates of Acceptance were issued by the first party airlines negates their argument that the debt is non-enforceable. The counsel also added that the dissection of debt enforceability is not warranted at the stage of admission of winding up; it is the duty of official liquidator to examiner the same and not the court's responsibility. The dispute on the adequacy of stamping the instruments need not be looked into at this stage, concluded the counsel. About the lack of a valid license for aircraft maintenance, the counsel would submit that the Debtor Company was aware of the...

Madras High Court Orders Winding Up Of SpiceJet Ltd, Official Liquidator To Take Over The Company Assets

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Madras High Court Orders Winding Up Of SpiceJet Ltd, Official Liquidator To Take Over The Company Assets

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