Delhi HC demands personal guarantees from SpiceJet directors over unpaid engine dues

The Delhi high court on Thursday rebuked budget carrier SpiceJet once again for failing to pay rental dues to its French engine lessors, Team France 01 SAS and Sunbird France 02 SAS, for three leased engines. The court has now demanded personal guarantees from the airline's directors if SpiceJet cannot meet its financial obligations.

“You’ve been repeatedly giving undertakings to the court. If you’re not in a position to pay, then you should ground these engines. Why are you using them if the company is unable to pay?" remarked justice Manmeet Pritam Singh Arora. "If the company alone is liable and it has no money, then perhaps your directors should provide personal guarantees. Otherwise, it seems the directors themselves have no faith in the money coming in.”

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The court has given SpiceJet until Monday to confirm whether the directors are willing to assume personal liability for the dues and to provide asset declarations. The case will be heard again on Monday.

In response, SpiceJet’s senior counsel, Sandeep Sethi, argued that grounding the aircraft would severely impact the company’s revenue and operations. 

Sethi said that SpiceJet plans to raise ₹3,000 crore through a qualified institutional placement by 30 September to address its financial stress. He assured the court that ₹4.9 crore would be paid in a lump sum from the equity proceeds by the end of September to cover the outstanding dues.

Despite this, the lessors have expressed their unwillingness to continue settlement talks and wish to reclaim their valuable assets. 

“We have given them a long rope. Your Lordships have been more than kind since December. It is time to consider grounding the aircraft. One engine flies 12 hours a day and the other 10 hours a day. These are among the most efficient engines in the market, and they are being used without payment," said Rajahekhar Rao, senior lawyer for the lessors.

Team France 01 SAS and Sunbird France 02 SAS had filed the case against SpiceJet in December, claiming total outstanding unpaid dues of more than $20 million for over two years related to three engines, as per court filings.

SpiceJet has been embroiled in multiple legal battles over unpaid dues in forums such as the Delhi high court and the National Company Law Tribunal (NCLT), facing contempt charges and regular rebukes by courts for failing to pay its creditors and comply with court orders. 

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On 9 June, the Delhi high court ordered the registration of a contempt case against SpiceJet's directors for non-compliance with its order to return two airframes and three engines to lessor TWC Aviation Capital Ltd.

These cases underscore the ongoing financial challenges for SpiceJet as the airline strives to remain operational. SpiceJet has also been under fire recently for delays in salary payments for June and a default on provident fund contributions.

SpiceJet, India's sixth-largest airline with a market share of 4%, employs over 8,000 people.