Go First's Interim Resolution Professional (IRP) Abilash Lal told the National Company Law Tribunal (NCLT) that the cash-strapped airline has accumulated disproportionate liabilities because of grounding of aircraft.
The IRP's affidavit at NCLT claimed that the company was not at a default with any financial creditors, as on the date of its filing. "Due to substantial grounding of its aircraft for a long time because of operational difficulties, the company has accumulated disproportionate liabilities, including those towards lessors of the aircraft," it argued.
Citing the operational accounts, the affidavit said there is a very high probability that due to the substantial overdues, lessors and other creditors who are guaranteed by the Standard Letter of Credit (SBLCs) and Bank Guarantees (BGs) issued to them by the company, would invoke these. "The company is anyway operating with reduced capacity and is not left with sufficient resources to pay its operating cost, overdue creditors and make good the potential devolvement of SBLCs and BGs. Hence, the company has decided to go for a resolution under Section 10 of the IBC," it said.
Despite the NCLT having admitted the plea for the airline's voluntary insolvency on May 10, aircraft lessors have appealed against it before the National Company Law Appellate Tribunal (NCLAT). The NCLAT is expected to pronounce its verdict on the lessors' plea on May 22.
On May 15, the debt-laden airline's resolution professional alleged that the lessors issued a letter of termination after Go First announced its plans to initiate insolvency. The letter was issued to defeat the purpose of IBC.
The IRP further argued that airline's fortunes will change if engine maker Pratt and Whitney supplies them 10 engines a month as mandated by Singapore arbitral tribunal. Questioning the intentions of the lessors for objecting to the company's plans for voluntary insolvency, the RP argued that the lessors had not terminated the leases when the dues to them increased, however they terminated the leases immediately after the airline announced plans for insolvency.
Responding to the allegations by the IRP, lessors argued that Go First created a sense of false urgency by suddenly halting its operations and approaching the NCLT for insolvency, even when the aircrafts were flying. Saying thus, the lessors questioned the rationale behind Go First's sudden plans to file a plea for voluntary insolvency.
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