Go First lessors initiated parallel proceedings despite NCLAT directive to NCLT: IRP in Delhi HC

The Interim Resolution Professional (IRP) for Go First argued on 30 May 2023 that the airline’s cash-strapped situation led its lessors to approach the Delhi High Court instead of appealing the National Company Law Appellate Tribunal’s (NCLAT) order to the Supreme Court.

Harish Salve, representing the IRP, contended that the aircraft lessors initiated “parallel proceedings” despite a clear directive from the NCLAT to approach the National Company Law Tribunal (NCLT) regarding the status of aircraft leases terminated before the moratorium.

Salve raised concerns about the potential consequences of the Delhi High Court’s order, which directed the Director General of Civil Aviation (DGCA) to release the aircraft to the lessors. He argued that such an order would undermine the insolvency process and result in a permanent halt to the company’s operations, leading to significant job losses.

Salve emphasized the interconnectedness of the insolvency proceedings and the proceedings before the Delhi High Court, asserting that any order issued by the High Court would directly impact the ongoing insolvency process.

He further stated that the IRP, acting as a replacement for the company’s management, has the right and responsibility to continue running the airline as a going concern, which necessitates the availability of aircraft.

Sandeep Sethi, a Senior Advocate also representing the IRP, echoed Salve’s arguments, highlighting that the Supreme Court has consistently advocated for minimal interference in insolvency proceedings.

The case has been adjourned until May 31st, during which the DGCA is expected to present its side of the case to the court.

Meanwhile, the Directorate General of Civil Aviation (DGCA) has said that it has only put on hold a request by Go First lessors to deregister their aircraft and not rejected it. The DGCA said in a court filing that the bankruptcy process of the cash-strapped carrier imposes a freeze on assets that supersedes such requests.

Background

• On May 26th, the aircraft lessors contended that the denial of deregistration by the Directorate General of Civil Aviation (DGCA) was “illegitimate.” Their lawyers stated that they had approached the civil aviation regulator to request deregistration of their aircraft, but their pleas were rejected.
• The lessors argued that, according to the Irrevocable De-registration and Export Request Authorisations (IDERA), it was mandatory for the DGCA to deregister the aircraft upon their request.
• On May 24th, the DGCA informed the court that the application by the aircraft lessors to repossess their aircraft had not been officially rejected. Instead, it was put on hold due to the ongoing moratorium.
• Aircraft lessors, including Pembroke Aviation, Accipiter Investments Aircraft 2 Ltd, EOS Aviation, and SMBC Aviation, filed a writ with the Delhi High Court, seeking directions to release the planes leased to the financially distressed airline. The writ requested the court to instruct the DGCA to deregister the aircraft currently leased to Go First.
• On May 22nd, the National Company Law Appellate Tribunal (NCLAT) upheld the NCLT’s order admitting Go First’s plea for insolvency. The appellate tribunal directed the aircraft lessors to approach the NCLT with relevant applications to determine the possession of the aircraft.
• The lessors had challenged the NCLT’s order, alleging that Go First was attempting to utilize the insolvency process to retain assets it did not own.
• On May 10th, the principal bench of the NCLT in Delhi accepted Go First’s voluntary plea to initiate an insolvency resolution process. The tribunal appointed an IRP, suspended the board, and imposed a moratorium on the airline’s financial obligations.

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