The National Company Law Tribunal (NCLT) on Tuesday issued a notice to the suspended management of grounded budget carrier Go First, seeking its response to the Committee of Creditors’ (CoC) decision to liquidate the airline.
The counsel for the resolution professional (RP) informed the tribunal that the CoC had passed a resolution to liquidate Go First after finding that the resolution plans received under the insolvency resolution process were non-compliant with the law.
Further, the counsel said since the CoC has already infused more than ₹200 crore in the insolvency resolution process, and with no cash being generated by the airline, the CoC has approved a resolution allowing third-party funding of the arbitration proceedings that Go First has filed against US engine maker Pratt & Whitney (P&W) at the Singapore Court of Arbitration.
ET earlier reported about Go First appointing Burford Capital, a US-based litigation finance firm, to finance the arbitration case against P&W.
It is estimated that the US firm is likely to shell out around ₹180 crore as part of the first tranche to cover the litigation expenses.
However, a NCLT bench comprising Mahendra Khandelwal and Sanjeev Ranjan asked the counsel if third-party funding of litigation is allowed under Indian law, and whether third-party funding of litigation can be considered as liquidation cost under the Insolvency and Bankruptcy Code, 2016 (IBC).
“If the award goes in favour of Go First, does IBC allow some part of the money received under the award to be given to a third party for funding litigation?,” the tribunal asked the counsel.
Go First owed ₹6,521 crore to financial creditors when it filed for a voluntary corporate insolvency resolution process (CIRP) initiation.
The Wadia Group-owned airline blamed its financial distress on faulty engines supplied by P&W, which forced the grounding of 34% of its fleet in 2022.
Source: Economic Times