The National Company Law Tribunal (NCLT) on May 10 admitted Go First's insolvency plea. In a relief to Wadias, the moratorium will kick in. Abhilash Lal has been appointed as Insolvency professional.
The NCLT order said that the former management will have to deposit Rs 5 crore towards expenses of IRP. IRP will have to keep the company running as a going concern. The suspended management has been asked to extend all the assistance needed by the IRP in keeping the airline as a going concern.
"The IRP has been directed to take all necessary steps including the execution of the Arbitral Award to keep the Go Airlines as 'a going concern' and run its services smoothly. Further, the NCLT has directed the IRP to ensure that retrenchment of Employees is not resorted to as a matter of course, and in any event, any such decision/event would be brought to its attention immediately," the order read.
Reacting to the order, a DGCA official said that none of the requests to deregister and export GoFirst's aircraft will be granted as NCLT has now admitted airline's insolvency application. Lessors re-registration request will be addressed after the insolvency case.
"This is the best thing that could happen for the airline. The plan of action will now include IRP to discuss on refunds and resumption of flights. Our job was to see that airline does not go down and does not lose its aircraft, now everything is in IRP's hands," Kaushik Khona, GoFirst CEO, said.
On May 8, the airline urged the tribunal to pass orders in its insolvency saying lessors are taking possession of the aircraft even when NCLT is seized of the case. "We are not being allowed access for maintenance work," the airline said.
The tribunal reserved the case for judgment on May 4 after hearing the arguments from GoFirst and aircraft lessors.
Speaking about the order, Ajay Shaw, Partner, DSK Legal, said, "This is a move done with an intent to protect the airline from losing the substratum in this case namely the aircrafts, as without the aircrafts business would be grounded and resolution as a going concern would be problematic. However, this will be a big concern for lessors in this space as their rights to repossess gets limited on account fo the moratorium that kicks in."
Throughout the four-and-a-half-hour hearing on May 4, senior advocate Neeraj Kishan Kaul, who appeared for the airline, maintained that the airline is seeking an interim moratorium only if the tribunal is not inclined to immediately admit the plea for insolvency.
GoFirst argued that it had moved the NCLT not because of bad corporate governance but due to engine maker Pratt & Whitney's unserviceable engines that led to the grounding of 28 of its 54 aircraft. Kaul argued that if the budget airline stops functioning, it will lead to a monopolistic situation in the market.
The airline contended that the news of its application for voluntary insolvency resolution proceedings is creating a cascading effect where planes are being seized, leases are being terminated and bank guarantees are being revoked.
Appearing for a group of aircraft lessors, senior advocate Arun Kathpalia argued that the interim moratorium is not an option under insolvency law. He submitted that the airline is asking the tribunal to pass orders that will affect entities whose side of the case has not been heard as yet.
Go Airlines, founded by billionaire Nusli Wadia, filed for bankruptcy on May 2 with the low-cost carrier blaming US engine maker Pratt & Whitney for grounding half of its fleet.
Rechristened GoFirst last May, the airline that started flying in 2005 becomes the first Wadia Group entity to declare bankruptcy in its 287-year history and the third major airline to collapse since 2012 after Kingfisher Airlines and Jet Airways.
The Directorate General of Civil Aviation (DGCA) has examined the response of GoFirst and has issued an order to the carrier to process refunds to passengers.
In a statement, DGCA said GoFirst has intimated that it has suspended the sale of its flights till May 15, and is working to refund or reschedule for future dates the passengers already booked to fly with it.
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