The National Company Law Tribunal (NCLT) on Tuesday said bankrupt Go First’s current resolution professional Shailendra Ajmera cannot be appointed as its liquidator.
The NCLT bench, consisting of judicial member Mahendra Khandelwal and technical member Sanjeev Ranjan, while hearing Go First plea, clarified that Ajmera could not continue as the liquidator. “The RP can be involved in the liquidation process in some other capacity, but not as a liquidator,” the tribunal said.
The NCLT is yet to pass a final order on the matter.
The bench cited a July 2023 circular from the Insolvency and Bankruptcy Board of India (IBBI), which recommended appointing a different individual as the liquidator, not the RP. The tribunal suggested Ajmera could still participate in the liquidation process in another capacity but not as the liquidator.
It instructed Go First to choose a new liquidator while emphasizing that Ajmera could not continue in his current role.
However, the tribunal did not pass a final order on the issue and asked Go First’s senior counsel to seek instructions, with the case scheduled for further hearing on November 8th.
The airline filed for liquidation in September, citing the absence of viable assets or a revival plan, and in the liquidation petition, it called for Ajmera to be appointed as the liquidator.
Third-party foreign funding
During the hearing, the NCLT also expressed dissatisfaction with the RP’s request to approve third-party funding from a U.S.-based entity for Go First’s arbitration case against Pratt & Whitney at the Singapore International Arbitration Centre (SIAC).
The airline is seeking $1 billion in claims against the engine maker Pratt and Whitney over faulty engines that led to the grounding of its fleet and its voluntary insolvency in May 2023.
The tribunal in response indicated that the government has not approved the third party foreign funding to support litigations for the insolvency companies under IBC
“Before I came to this office, we had already seen this issue in the government. We are aware that it has arisen at multiple points in time within the government sector. However, no affirmative decision has been taken on it. We don’t want to send the wrong signal by saying ‘no’ at this moment. I cannot provide further details, but we are aware of the issue,” said judicial member Mahendra Khandelwal.
The RP’s counsel informed the NCLT that creditors had already spent around ₹160 crore on litigation since the insolvency filing and were unwilling to provide more funds for the Singapore arbitration. The RP argued that the third-party funding would be treated as a loan, repayable from the liquidation proceeds. However, the NCLT stressed that under the Insolvency and Bankruptcy Code (IBC), liquidation proceeds must first go to operational creditors, not foreign third-party funders.
The tribunal warned that allowing such funding could set a precedent, potentially leading to more similar requests from corporate debtors. The RP pointed out that the arbitration claim was the last significant asset Go First had, as all 54 of its leased aircraft had been deregistered and reclaimed by lessors following a Delhi High Court order in April 2024.
Arbitration as the last hope for creditors
Go First has engaged US-based litigation finance firm Burford Capital, which is prepared to provide $20 million in the first tranche to finance the arbitration. While litigation finance is a well-established practice in countries like Australia, the UK, and the US, it is still relatively new to India, with few cases reported. In those jurisdictions, litigation financiers cover legal costs in exchange for a portion of any successful settlement or award.
Go First’s lenders are relying on this arbitration as their final opportunity to recover dues. They are also separately pursuing recovery through land collateral pledged to them, along with some remaining assets such as aircraft parts and machinery, which could provide additional avenues for recovery.
Financial liabilities and grounding
Go First owes its creditors approximately ₹6,200 crore, with major claims from the Central Bank of India ( ₹1,934 crore), Bank of Baroda ( ₹1,744 crore), and IDBI Bank ( ₹75 crore).
The airline has been grounded since 3 May, 2023, after its former promoter, the Wadia Group, filed for voluntary bankruptcy, citing prolonged delays in securing aircraft engines from Pratt & Whitney.
Source: Mint