NCLT reserves order on Go First’s plea seeking interim moratorium

Go First aircraft

The National Company Law Tribunal (NCLT) on May 4 reserved the order on cash-strapped budget airline Go First's plea seeking interim moratorium under the Insolvency and Bankruptcy Code (IBC).

Throughout the four-and-a-half-hour-long hearing, 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.

Go First argued that the company had come to 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 Go First 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. The airline had not defaulted to its financial creditors till April 30, though from then to now, there is a default of Rs 11 crore, Kaul stated.

Arguing that the aircraft is the airline's only asset, Kaul told the tribunal that if the aircraft are seized the company will have no future. Stating that a consortium of banks had frozen its bank account, the airline urged the tribunal to unfreeze it so that costs can be met.

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.

Kathpalia urged the court to permit the lessors to file a statement of objections to Go First's plea in the interest of natural justice. He further argued that the moratorium will only increase the cost for the airline as they will have to pay charges for aircraft without utilising it. "How will an insolvency resolution professional (IRP) chase Pratt & Whitney if the Wadia group can't do it?" he asked.

In a rejoinder, Kaul took the court through various judgments and provisions of law to argue that the tribunal has the power to impose an interim moratorium. It is not necessary to keep the aircraft idle during the moratorium period as they could be used to generate revenue, he noted.

Go Airlines had pled that an IRP should be appointed for the turnaround of the airline.

Earlier today, Go First argued that it sees a big scope for revival and that a moratorium was needed as its only assets were the aircraft.

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 Go First 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.

Meanwhile, the Directorate General of Civil Aviation (DGCA) has examined the response of Go First and has issued an order to the carrier to process refunds to passengers.

In a statement, DGCA said Go First has intimated that it has suspended the sale of its flights till May 15, 2023, and is working to refund or reschedule for future dates the passengers already booked to fly with it.