Go First case: Six months on, where does the litigation stand?

Go First Insolvency, six months on what is the status now?

Come November, it will be six months since Go First filed for voluntary insolvency, blaming American engine maker Pratt and Whitney for its troubles. The National Company Law Tribunal (NCLT) admitted the company to the insolvency resolution process on May 10, accepting its arguments after just one hearing. In doing so, it activated the moratorium on recovery of assets by the airline’s creditors, set under the Insolvency and Bankruptcy Code, 2016.

However, the airline’s plans to revive the business hit a roadblock almost immediately after aircraft and engine lessors started approaching the insolvency tribunal to take back their assets. The airline has resisted those assets so far. However, a notification from the Ministry of Corporate Affairs (MCA) earlier this month exempted aviation leases from the moratorium.

Currently, the grounded airline is fighting litigation on two fronts, at the NCLT and the Delhi High Court. While these judicial forums have passed contradictory orders on applications by lessors, they are both yet to commence final hearing of these pleas. At the NCLT, Go First’s case has been transferred to three different benches, the last time a new bench took up the case was earlier this month.

Moneycontrol explains how these cases have played out over the last six months, what their status is now, and when they are likely to be taken up.

NCLT litigation

On May 2, 2023, Go First filed a plea in the NCLT under Section 10, asking to be admitted to the Corporate Insolvency Resolution Process (CIRP) voluntarily. On May 10, the NCLT admitted Go First’s insolvency plea, and appointed a Resolution Professional (RP) to run the affairs of the company.

However, Go First’s aircraft lessors filed an appeal against the NCLT order in the National Company Law Appellate Tribunal (NCLAT) stating that their assets had unfairly been taken from them as they had terminated the leases before moratorium. On May 22, the NCLAT upheld the NCLT order and asked the lessors to file an appropriate application at the NCLT for clarification on the applicability of the moratorium on the aircraft.

The lessors accordingly moved the NCLT asking to be exempted from the moratorium, and in the meanwhile asked the tribunal to injunct the airline from using them. However, the NCLT refused to pass such an order and furthermore refused to permit them to inspect or maintain their assets. The lessors approached the NCLAT against this order, but the appellate tribunal modified the order only to the extent of permitting the lessors to inspect their assets.

Meanwhile, the MCA issued a notification exempting aviation leases from the moratorium. This, coupled with a change in the bench, led to the case being deferred. The case is now expected to come up for hearing in November.

Delhi High Court litigation

The lessors moved a plea in the Delhi HC against the DGCA requesting the court to direct the authority to deregister their aircraft. They argued that the authority should deregister aircraft if demanded by lessors.

On July 5, the High Court, in an interim order, permitted the lessors to inspect and perform maintenance work. However, a division bench of the Delhi High Court on July 12 modified the order to the extent that the lessors could only inspect the aircraft while the insolvency Resolution Professional (RP) appointed under the IBC could carry out maintenance. The Supreme Court upheld the order of the Delhi High Court.

As the case progressed, the lessors accused the RP of not maintaining the aircraft and told the court that their assets were at the risk of being rendered useless. DAE (SY 22) 13 Ireland alleged that the condition of the aircraft was deteriorating every time it inspected the planes.

DAE, which has leased two aircraft, alleged in its plea that the RP was not giving it access to documents such as maintenance records, which were essential to determine if the planes were being maintained in an airworthy condition.

On October 12, the Delhi High Court permitted the lessors of the grounded airline to engage security personnel to monitor their aircraft engine and other parts. The High Court order said, “A review of the documents and photographs filed by the Petitioners/Lessors show the evident cannibalisation of the Aircraft.”

Meanwhile, the MCA’s notification also raised questions about the status of the leased aircraft. The High Court has now asked the DGCA to take a stand on the notification. The case will now be taken up for final hearing on November 3.

MCA notification

The MCA issued a notification on October 4 stating that the provisions of sub-section (1) of section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC), would not be applicable to transactions, arrangements or agreements under the Convention and the Protocol relating to aircraft, aircraft engines, airframes and helicopters.

Section 14 of the IBC deals with the power of the adjudicating authority (NCLT) to issue a moratorium when admitting a company to the insolvency resolution process. Once a moratorium is imposed, activities such as institution of suits, continuation of pending suits, execution of judgments, transferring/disposing off assets, and recovery or enforcement of security interest are prohibited.

As a result of this notification, a moratorium will not include agreements relating to aircraft, aircraft engines, airframes and helicopters.

Attempts at revival

The company’s Resolution Professional has made attempts to hand over the control of the airline to a suitable bidder so that it can be revived. The RP issued advertisements seeking expressions of interest (EOI) for the airline. In October, it was reported that Jindal Power had expressed interest in buying the airline.

Another company, Jettwings Airways, which touts itself the first airline to be based in Assam, on October 12 said that it had submitted an EoI for GoFirst. There has, however, been no official statement from the RP on this front.