Go First: HC asks DGCA to clarify stand on notification exempting aviation leases from moratorium

A Go First aircraft.

The Delhi High Court on October 19 asked the Director General of Civil Aviation (DGCA) to file a response on whether or not the Ministry of Corporate Affairs' notification exempting aviation leases from moratorium under the Insolvency and Bankruptcy Code, 2016, applies to Go First case.

The HC was hearing a case by aircraft and engine lessors of grounded airline Go First against DGCA for de-registration of their aircraft.

The HC has nevertheless decided to continue hearing the case and adjourned it to November 3, when the Resolution Professional (RP) of Go First is expected to commence his arguments.

When the case was called out, Additional Solicitor General (ASG) Chetan Sharma sought some more time to get clarity from the government on the applicability of the notification in Go First's case. Senior advocates Amit Sibal and Dayan Krishnan, who appeared for the lessors however objected to this and contended that the government has made its stand clear since aviation leases are exempted from moratorium.

Senior advocates Neeraj Kishan Kaul and Ramji Srinivasan however told the court that they wish to address the court on the merits of the matter since they have many other issues to address in the case. They urged the court to hear them since the lessors have already been heard on the merits of the case for over a month.

The court thus decided to go on with the hearing of the case, irrespective of DGCA's stand on the notification.

MCA's notification

The Ministry of Corporate Affairs 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 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. This would mean that aircraft, engine and helicopter leased and other agreements will not be bound by a moratorium.

Lessors' plea

Go First's lessors have moved both the National Company Law Tribunal (NCLT) and the Delhi High Court. At the NCLT, they have filed a batch of petitions to be exempted from the moratorium as they terminated their leases before the airline was admitted to insolvency.

The lessors have moved a plea in Delhi HC against DGCA requesting the court to direct the authority to deregister their aircraft.

While the NCLT refused to restrain Go First from using the aircraft, the Delhi High Court passed a contrary order.

On October 12, Delhi HC permitted the lessors of the grounded airline Go First to engage security personnel to monitor their aircraft engine and other parts. The court also directed the airline's resolution professional (RP) to grant access to all the documents pertaining to the maintenance of aircraft, engines and airframes to the lessors in two weeks.

On July 5, the HC permitted the lessors to inspect and perform maintenance work. However, a division bench of the Delhi HC on July 12 modified the order to the extent that the lessors could only inspect the aircraft while the RP could carry out maintenance.