Madras HC orders Spicejet to wind up ops over unpaid dues

THE AIRLINE SAID THE COURT HAS STAYED THE ORDER FOR THREE WEEKS. IT WILL HAVE TO PAY $5MN WITHIN TWO WEEKS

NEW DELHI: Madras High Court has directed Spicejet to wind up its operations after the no-frills airline failed to pay over $24 million to Swiss company SR Technics for maintenance, repair and overhauling (MRO) of aircraft engines, modules, components, assemblies and parts, and asked the official liquidator to take over the assets of the carrier.

Spicejet had reached an agreement with SR Technics for MRO services for 10 years on November 2011, according to the petitioner Credit Suisse AG, which has been mandated to receive pending dues on behalf of SR Technics. “I am, therefore, of the opinion that this company petition should be allowed and the respondent company directed to be wound up,” a single judge bench of Justice R. Subramanian, said in the order passed on Monday. “The official liquidator is directed to take over assets of respondent company,” Justice Subramanian said. A copy of the court order has been reviewed by Mint.

However, the operation of the order has been conditionally stayed for three weeks, allowing the carrier to appeal.

“In view of the presumption of inability to pay created under Section 434 of the Companies Act, an order for winding up should automatically follow, unless the debtor company is able to show that the debt itself is unenforceable or that there is a bona fide dispute,” it said.

Spicejet had argued that the documents that were relied upon by the petitioner, particularly the assignment deeds, the bills of exchange, and the acknowledgements/certificates of acceptance were not stamped in accordance with the requirements of the Indian Stamp Act and, therefore, could not be relied upon to establish a debt in an Indian court.

“Madras High Court vide its order of December 6, 2021, was pleased to stay the operation of the order for a period of three weeks, subject to the condition that the company deposits an amount equivalent to $5 million within two weeks,” Spicejet said. The petition for winding up was filed prior to the enactment of the Insolvency and Bankruptcy Code, 2016 (IBC), said Shivek Sharma, an associate at Pioneer Legal who specialises in IBC. “At present, the winding up of a company on the grounds of inability to pay debt is no longer covered under the Companies Act and the same is dealt in accordance with the liquidation provisions set out under the IBC,” Sharma said.

Spicejet reported its seventh consecutive consolidated quarterly loss of about ₹571 crore during the three-month period that ended on September 30. Mounting losses have resulted in an erosion of the airline’s net worth, with its liabilities exceeding its assets by ₹6,123.73 crore at the end of 30 September, the auditors of the airline said in result statement.