Lithuania nails SpiceJet after inspection, fresh insolvency cases in English courts

SpiceJet.

Two aircraft-leasing companies have obtained summary judgment totalling over $15 million against SpiceJet in the high court in London in May 2023. Moneycontrol can also confirm that there are, at least, three more cases lodged in the commercial courts of London against SpiceJet which are currently in different stages. This also includes a claim filed by a Turkish company.

The development comes in the wake of Wilmington Trust SP Services (Dublin) filing insolvency plea in the National Company Law Tribunal (NCLT) against SpiceJet. Wilmington Trust, just like the two companies, GASL Ireland Leasing A-1 Limited and VS MSN 36118 CAV Designated Company, had also got a summary judgment in the high court in London in July 2021.

It is likely that these two companies — who had filed separate cases — could also approach NCLT seeking SpiceJet’s insolvency. In fact, the proceedings in the commercial court in London reveal that VS MSN could have got default judgment but instead sought a summary judgment to facilitate taking legal steps in India against the airline. A default judgment is given when a defendant fails to perform certain required tasks or fulfil mandatory conditions, whereas, a summary judgment can be obtained on the merit of the case, but without a full trial. The former is comparatively easier to obtain and set aside, but the latter can only be set aside on appeal.

MoneyControl has exclusive details of how SpiceJet initially refused to acknowledge service, had to face the ignominy of its legal team coming off record due to non-payment of fees, sought adjournments on the basis of having no legal representation, and made deliberate attempts to delay court’s timetable. All this and much more could not grant them any reprieve from the high court in London.

GASL Ireland Leasing A-1 Limited v SpiceJet

This case pertains to the lease of a Boeing 737-800 aircraft by SpiceJet in May 2017. In February 2022, GASL obtained summary judgment for outstanding rent in the sum of $5,334,121.25 (which remains unpaid), but continued to pursue SpiceJet claiming non-compliance with aircraft Redelivery Conditions.

After non-payment of rent by SpiceJet, GASL requested that the aircraft be redelivered in the Republic of Ireland. Instead, SpiceJet made it available to GASL at Bengaluru from where it was flown by GASL to Lithuania for maintenance and inspections. Since there was a dispute between both the sides on whether the aircraft met the Redelivery Conditions they sent their experts to prepare a report.

In Lithuania, the aircraft was inspected for GASL by Peter Bull, an experienced aircraft maintenance engineer and by a representative of SpiceJet. Bull took over 1,800 pictures and produced a voluminous report on the condition of the aircraft, which was produced in court. The condition of the cabin and flight deck was described by Bull as “one of the worst I have seen in relation to an ‘in service’ aircraft which had been presented for redelivery.” Bull also gave evidence that the aircraft was not repainted as required by the Redelivery Condition.

SpiceJet, on the other hand, did not submit any report from its expert who inspected the aircraft at Lithuania. This was pointed out by GASL’s barrister Philip Shepherd, KC, who argued that the reason SpiceJet did not submit their expert’s report was because it would not have supported the airline’s case that the aircraft met Redelivery Conditions. The court accepted Bull’s evidence in full and entered judgment against SpiceJet in the amount of $8,490,312.39.

As the case progressed, the law firm representing SpiceJet came off record for non-payment of fees. At one stage, this was advanced by the airline to seek adjournment on the grounds that they did not have legal representation. “SpiceJet sought to adjourn this trial on the basis that it needs time to find and brief new solicitors. However, there was no evidence from SpiceJet as to what steps (if any) had been taken to find legal representatives…” noted Justice Foxton in his judgment dated 10 May 2023. “It has been a hallmark of the case to date that SpiceJet has sought to delay the timetable whenever possible.”

Not surprisingly in the last stages of this case they remained unrepresented, but that did not stop the court from giving out its judgment.

VS MSN vs SpiceJet

In April 2018, SpiceJet entered into an agreement with VS MSN to lease a Boeing 737-700 for 96 months. In the backdrop of Covid-19, there were payment defaults and in November 2020, the parties entered into a rent deferral agreement. A total of $1,657,376 was waived under the agreement and further arrangements were agreed which laid down payments in monthly instalments during 2021.

But continued non-payment by SpiceJet left over $4 million outstanding by September 2022. Accordingly, VSN approached the high court in London seeking payment of the outstanding dues. At the beginning, SpiceJet failed to even acknowledge service.

“The defendant buried their head in the sand, ignored our notices and claims which we made in September 2022,” said Cleon Catsambis, representing VS MSN during a hearing on May 5, 2023. There were some extended arguments on how to work out the accrued rentals, interest payments and other technical details. Thomas Munby, KC, representing SpiceJet characterised VS MSN’s application for a summary judgment as “having their cake and eating it too”. “The claimant can’t get summary judgment just by pleading,” Munby told the court.

The main contention between both the parties was the one related to future rentals. VS MSN claimed that in the event of a default, they are automatically entitled to payment of all sums “up to the date of redelivery under the Lease, May 3, 2026.” This meant that once the aircraft is redelivered and there are no dues outstanding, the airline would be repaid any money paid in excess.

SpiceJet disputed that VS MSN had any such entitlement pertaining to future rentals. The airline challenged the construction of the clause put forward by the claimant, and argued that the wording made it uncertain. Deputy Judge Charles Hollander accepted that the wording of the future rental clause was unsatisfactory, but concluded: “The fact that it is a draconian provision is hardly unusual in a list of remedies in an aircraft lease drafted for the protection of the lessor. Where there has been an Event of Default it is not particularly unlikely that the lessor would wish to secure future payments by advance payment, the monies being repayable after redelivery and full payment.”

Accordingly, VS MSN was awarded a summary judgment to the tune of $5,890,000.