Plane Lessor SMBC Challenges NCLT Move to Admit Go First for Insolvency

Aircraft lessor SMBC Aviation Capital has gone to the National Company Law Appellate Tribunal (NCLAT) challenging the decision by India’s bankruptcy court to admit Go Airlines’ insolvency plea.

The National Company Law Tribunal (NCLT) admitted Go First’s voluntary plea on Wednesday.

Meanwhile, the court-appointed insolvency resolution professional (IRP) Abhilash Lal told the airline’s employees that all efforts will be made to revive it in six months.

SMBC, One of the World’s Largest Plane Lessors, is Owned by a Consortium of Japanese Financial Institutions including Sumitomo Mitsui Banking Corp.

In its plea to the NCLAT, SMBC said the NCLT initiated corporate insolvency resolution process against the airline without giving the lessor an opportunity to present its case and “without taking into consideration that the petition has been filed by the corporate applicant with the sole intent to defraud its creditors including the Appelant and other aircraft lessors and is thus in the teeth of Section 65 of IBC,” the Insolvency and Bankruptcy Code.

ET has seen a copy of SMBC’s application.

Section 65(2) says that if “any person initiates voluntary liquidation proceedings with the intent to defraud any person, the Adjudicating Authority may impose upon such person a penalty which shall not be less than one lakh rupees but may extend to one crore rupees,”

The CIRP against Go Airlines has put its aircraft lessors in a bind. The admittance of the insolvency plea triggers a six month moratorium on all payments by the applicant (Go) and protects its assets against any coercive action by creditors.

The Wadia Group-owned airline has defaulted on Rs 3,802 crore to its aircraft lessors and other vendors, according to the insolvency petition. ET has seen a copy of the petition.

SMBC and its affiliates leased 9 Airbus planes to Go. It has terminated the leasing contracts on all the planes, filed appeals to deregister the aircraft with the country’s aviation regulator and “resumed possession of the aircraft as on May 2, i.e., prior to the admission of the petition,” the aircraft financier said in its appeal to the NCLAT. The Directorate General of Civil Aviation has received deregistration notices for most of Go First’s 55 planes, more than half of which are grounded for want of engines from maker Pratt & Whitney. The airline has blamed PW and its engine supply delays for its financial problems.

People close to the development said that SMBC hasn’t been allowed to access its aircraft. There has been no communication from Go management either, they said.

NCLAT’s next hearing on the matter is Friday.

Meanwhile, in a town hall meeting at Go Airlines’ office resolution professional Lal told employees that everyone’s roles and responsibilities will remain the same and that the staff will be kept apprised of all developments to do with the airline.

“He asked the employees to have faith in the legal processes,” said a person close to the development.

Lal however didn’t talk about when operations would be resumed. Go First’s CEO Kaushik Khona had recently, before ling the insolvency plea, told employees that the airline aims to keep flying with about 20 planes.