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NEW DELHI : The Madras High Court has directed no-frills carrier SpiceJet Limited to wind up its operations after the airline failed to make payment of over $24 million to a Swiss company SR Technics for maintenance, repair and overhauling of aircraft engines, modules, components, assemblies and parts.

A single-judge bench of Justice R Subramanian, who passed the order on Monday, directed the official liquidator to take over assets of the airline.

"I am therefore of the opinion that this Company Petition should be allowed and the respondent Company directed to be wound up," Justice Subramanian said in the order.

"The Official Liquidator is directed to take over the assets of the respondent Company," he added.

A copy of the court order has been reviewed by Mint.

However, the operation of the said order has been conditionally stayed for a period of three weeks, thereby allowing SpiceJet to lodge an appeal.

The order said that if SpiceJet fails to pay the debt demanded under said notice within the three weeks period, a company is deemed to be unable to pay its debts.

"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 added.

The petition was filed by Credit Suisse AG, which has been mandated to receive pending dues, on behalf of SR Technics.

According to the petitioner, SpiceJet had reached an agreement with SR Technics for MRO services for a period of 10 years in November 2011.

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 properly stamped in accordance with the requirements of the Indian Stamp Act, and therefore couldn't be relied upon to establish a debt in an Indian Court.

"....the 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 the amount equivalent to USD five million within a period of two weeks," SpiceJet said in a statement.

It is imperative to note that in the instant case, the petition for winding up was filed prior to the enactment of the Insolvency and Bankruptcy Code, 2016 (IBC), said Shivek Sharma, 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 added.

SpiceJet reported its seventh consecutive consolidated quarterly loss of about 571 crore during the three-month period that ended on 30 September.

Mounting losses have resulted in complete 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, Walker Chandiok &.Co LLP said in the result statement.

Meanwhile, SpiceJet is also facing a lawsuit by aircraft lessor Goshawk and its trustee Wilmington Trust SP Services Dublin Ltd regarding unpaid dues at the Delhi High Court which is set to hear the case next on 14 December.

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