‘Go First trying to hold on to assets they don’t own’, aircraft lessors tell NCLAT

Banks are not looking at lending to the cash-strapped Go First before the completion of the resolution process of the airline, a senior executive of one of the lenders said on condition of anonymity on May 12.

Aircraft lessors to Go First, such as SMBC aviation capital, SFV aircraft holdings and GY Aviation Lease, on May 12 argued at the National Company Law Appellate Tribunal (NCLAT) that the cash-strapped airline is using the insolvency proceedings to hold on to aircraft that it does not own.

Aircraft lessor SMBC called into question the rationale behind the Go First filing for voluntary insolvency despite having 26 functional aircraft and taking bookings for future dates.

SMBC Aviation claimed that it has unpaid dues of Rs 700-800 crore from Go First. SMBC further argued that the National Company Law Tribunal (NCLT) did not provide them with an opportunity to present their side of the case and admitted Go First's plea for insolvency without ascertaining the entire situation.

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The aircraft lessor argued that they had already terminated the leases before the NCLT-ordered moratorium, however, they are not able to obtain possession of aircraft owing to the tribunal's order. Citing aviation rules, the leasing company argued that Go First cannot operate aircraft once the lease is terminated.

SMBC further argued that there will be no sanctity to commercial contracts if such an arrangement is permitted to continue. The leasing company further argued that Go First will incur a cost of $4.2 million a month to maintain and pay charges just for the aircraft that it had leased.

SFV Aircraft Holdings argued that the Director General of Civil Aviation (DGCA) has told the lessors that the aircraft cannot be deregistered owing to the moratorium.

GV Aviation argued that Go First is trying to create rights for itself in relation to the aircraft using the insolvency proceedings and diffuse rights of aircraft lessors.

Go First argued that it had initiated insolvency proceedings with bonafide intentions to protect the 7,000 employees in its rolls and ensure that the country's aviation sector enjoys healthy competition. The airline dismissed the claims made by lessors stating that it had malafide intentions.

Go First's Interim Resolution Professional (IRP), represented by his lawyer, argued that the airline owes over Rs 1,000 crore to its vendors and that the insolvency process will only help it repay its dues. He further argued that the lessors should challenge the insolvency order at NCLT by filing an application, as opposed to filing an appeal against it in NCLAT.

The IRP further stated that aircraft is the key to generating revenue and if they are repossessed and deregistered, the airline cannot resume its operations or generate revenue to repay its creditors.

Despite being urged by the lessors to order status quo on the aircraft, the tribunal did not pass any such orders and deferred the hearing of the case to May 15.

The tribunal had on May 11 deferred the hearing by a day due to paucity of time.

On May 10, the principal bench of NCLT at Delhi admitted Go First's voluntary plea to initiate an insolvency resolution process.

The tribunal appointed an IRP while suspending the board and putting a moratorium on the debt-ridden airline's financial obligations.

Founded by billionaire Nusli Wadia, Go First, earlier GoAir, filed for bankruptcy on May 2, blaming US engine maker Pratt & Whitney for the grounding of half of its fleet.

The ultra-low-cost airline has liabilities worth around Rs 11,000 crore.