A Delhi bankruptcy court admitted Go First’s request for insolvency, marking the beginning of a search for a buyer for the budget airline.
The National Company Law Tribunal’s (NCLT’s) acceptance of Go First’s insolvency plea triggers a moratorium on the airline’s assets and liabilities. It bars any legal proceedings related to asset recovery, sale, or transfer of assets, as well as the termination of crucial contracts by vendors.
“Keeping in mind the urgency of the case, to protect and maximize the value of the assets in line with the objectives of IBC (Insolvency and Bankruptcy Code), employment and the larger public interest involved, the petition has been admitted,” a bench led by Justices Ramalingam Sudhakar and L.N. Gupta said.
Go First may resume some flights from 24 May as the airline plans to keep its air operator certificate active, two people aware of the development said. The airline is yet to submit a detailed plan of its flight operations to the civil aviation regulator Directorate General of Civil Aviation (DGCA).
Notably, the court’s order also precludes lessors from reclaiming aircraft during the moratorium period. Aircraft lessors approached the DGCA, to deregister over 40 aircraft of Go First on 4 May onwards, after the airline filed the bankruptcy petition.
Under Irrevocable De-registration and Export Request Authorisations (IDERA), the civil aviation regulator is required to deregister aircraft within five days in case of default of lease rentals.
“Some lessors are irked as their aircraft are now stuck until the Go First insolvency proceedings come to a close. If the airline is not able to activate these aeroplanes within a few weeks, this will only lead to the deterioration of their assets. They have been in talks with IndiGo and Air India to transfer leases on some of these planes, but the NCLT order halts those plans too. They may challenge the order in NCLAT,” an airline executive said.
NCLT has named Abhilash Lal as the interim resolution professional and directed him to take charge of the corporate insolvency resolution process of Go First with immediate effect. Lal has been asked to take all steps to keep the airline as a “going concern” and run its services smoothly. The NCLT has also directed Lal to ensure that the company does not resort to laying off its employees in due course and that any such decision or event be brought to the attention of the bench immediately.
“No new proceedings can be filed against Go First in any civil court or arbitration,” Smiti Tewari, a partner at Khaitan Legal Associates, said, adding that the Singapore arbitration with engine maker Pratt & Whitney can continue parallelly.
The Wadia Group-owned airline had filed for insolvency on 2 May, citing ₹10,800 crore in lost revenues and additional expenses due to faulty engines supplied by Pratt & Whitney. The airline has sought compensation of approximately ₹8,000 crore in the Singapore arbitration court.
Pratt & Whitney denied responsibility for Go First’s financial condition. “Go First’s allegations that Pratt & Whitney is responsible for its financial condition are without merit. Pratt & Whitney will vigorously defend itself against Go’s claims, and is pursuing its own legal recourse,” a Pratt & Whitney spokesperson said.
Go Airlines (India) Ltd, which runs the airline, was established in 2005. The airline rebranded itself as Go First in May 2021 as it prepared for a potential initial public offering.
Under the insolvency process, Lal will now call for claims, and once the claims are collated, the financial creditors will be invited to form the committee of creditors (CoC), Tewari said.
“For any unpaid dues, the aircraft lessors will be required to file claims as operational creditors. So far as the asset is concerned, they will likely not be able to retrieve it now as the recovery of lease-held assets is prohibited by the statutory moratorium under IBC,” Tewari said.
The board and management of the airline have been suspended, and they have been directed to “extend all necessary support and cooperation” to the resolution professional and his team to run the airline.
Lawyers said that provisions allow a company to withdraw the NCLT application before the CoC is formed. Once the CoC is formed, the withdrawal would require approval from 90% of creditors.
The industry is hopeful that the resolution in the case of Go First will come much faster and may not be as delayed as Jet Airways, which ceased operations in April 2019 and is still struggling to restart operations.
“We are positive that the airline may witness a quicker resolution since the case of Go First appears to be better than Jet Airways as the airline’s operations are not halted, assets are there with the company and, as the account is not a non-performing asset yet, so the promoters can also submit their own resolution plan,” said Ashish Pyasi, a partner at law firm Dhir & Dhir Associates.
The airline borrowed more than ₹6,500 crore from banks including Central Bank of India, Bank of Baroda and IDBI Bank among others.
