NCLT Delhi admits Go First Airlines insolvency plea

The Chief Bench of the National Company Law Tribunal (NCLT) in Delhi on Wednesday allowed the application filed by Go First Airlines for initiation of voluntary insolvency proceedings. A Coram of President Justice Ramalingam Sudhakar and Technical Member LN Gupta today pronounced the verdict and declared a complete moratorium on the company.

The tribunal appointed Abhishek Lal, supported by Alvarez and Marcelo, as the Interim Resolution Professional (IRP) until the Committee of Creditors (CoC) appoints a resolution professional. He also directed the suspended board of the company to cooperate with the IRP and ensure that there are no layoffs. The management was also asked to put in Rs 5 crore for immediate expenses.

Go Airlines moved the NCLT earlier this month to initiate the process of resolving the company's insolvency under the Insolvency and Bankruptcy Code (IBC). It reasoned that the grounding of its planes rose from 31% in 2020 to more than 50% in April 2023 due to faulty engines supplied by US company Pratt & Whitney (P&W). They claimed that it cost the company a loss of over Rs 10,800 crore.

In its petition filed through advocate Pranjal Kishore, the airline said it has paid Rs 19,980 crore to its creditors till date. He added that he owes an amount of Rs 11,463 crore to his creditors, which include banks, financial institutions, aircraft dealers and lessors.

It was pointed out that as of 28 April 2023, the company was in arrears in payment of Rs 1,202 crore to its creditors and Rs 2,660 crore to the lessors of the airport. As an urgent relief, senior advocate Neeraj Kishan Kaul, appearing for Go Airlines, sought an interim moratorium to prevent the lessors from seizing its 26 aircraft.

He reasoned that if the company loses ownership of the planes and the legal right to operate them, the continuation of its business will be at stake. This would impact the employment of 7,000 direct and 10,000 indirect employees as well as repayment of debts to creditors, the company claimed. Coram reserved the lawsuit after an extensive hearing on May 4.

On May 7, the airline approached the NCLT seeking an urgent decision on its application for an interim moratorium. Senior advocate P Nagesh informed the tribunal that the aircraft lessors have initiated steps with the Directorate General of Civil Aviation (DGCA) to take possession of their planes. The tribunal assured counsel it would consider the request and issued a request for comment today.