Madras High Court upholds single judge order against SpiceJet

A division chamber of the Madras High Court on Tuesday upheld a recent verdict of a single judge ordering the liquidation of the private jetliner SpiceJet Limited and ordering the official liquidator attached to the High Court to take over the company’s assets .

Considering that the appellant company had not established any grounds for allowing the appeal, the bench of Justices Paresh Upadhyay and Sathi Kumar Sukumara Kurup today dismissed the appeal preferred by the private carrier.

The appeal challenged the December 6 order of Justice R Subramaniam on various grounds.

The magistracy, however, extended the operation of the suspension granted by the single judge, until January 28 to allow the plane to appeal to the Supreme Court. The single judge had suspended the execution of his order for a limited period with the order to the company to return 5 million US dollars, as a condition precedent to take advantage of the interim measure.

Meanwhile, a spokesperson for SpiceJet said that “the company is reviewing the order and will take appropriate corrective action in accordance with legal advice received.”

The charge against SpiceJet was that it had failed to honor its commitment to pay the invoices of over US $ 24 million raised by a Swiss company for the maintenance, repair and overhaul of engines and engine components. the plane.

Originally, while allowing the request of Credit Suisse AG, the joint stock company registered under the laws of Switzerland, the single judge found that the airliner had failed miserably to pass the test at three prongs suggested by the Supreme Court in a similar case and had therefore made itself liable to liquidation for its inability to pay its debts under section 433 (e) of the Companies Act of 1956.

The company’s petition had requested the liquidation of SpiceJet under the provisions of the Companies Act 1956 and the appointment of the official liquidator of the High Court as liquidator of SpiceJet with full powers under section 448 of the Companies Act to take charge of its assets, property, business and books of account.

According to the petitioner, SpiceJet had used the services of SR Technics, Switzerland, for the maintenance, repair and overhaul of aircraft engines, modules, components, assemblies and parts, which were mandatory for its operations. . A 10-year agreement for such services was concluded between SpiceJet and SR Technics on November 24, 2011. Payment terms have also been agreed.

On August 24, 2012, a supplemental agreement was also entered into to modify certain terms of the agreement.

The changes included an extension of the deadline for payment of sums due under various invoices issued by SR Technics as well as a deferred payment program. As there had been a general increase in costs, the 2012 Supplementary Agreement provided for an adjustment in flight hour rates and arrangements for escalation were also made. The petitioner had repeatedly asked SpiceJet to make payments for the various invoices.

Not having honored his commitment under the agreements with SR Technics and not being able to meet his financial obligations, the petitioner issued a formal notice. In the absence of a response, he preferred the company’s petition to the High Court to wind up SpiceJet and obtained a favorable order.

Badly, SpiceJet preferred the call.

SpiceJet claimed to have reached an agreement with the Swiss company for a period of 10 years in 2011.

However, halfway through, he found out that the aircraft maintenance company did not have a valid authorization from the Director General of Civil Aviation between January 1, 2009 and May 18, 2015. The Single Judge had assumed wrongly that SpiceJet had entered into the agreement despite the knowledge of the lack of approval of the DGCA and considered that it could have terminated the contract halfway as soon as it had knowledge of the lack of official approval.

Termination was not a mandatory requirement. Once he (SpiceJet) learned of the fact, he stopped the payments. There was no finding in the arbitration award that the air carrier was aware of the non-approval even before entering into the deal, the appeal said, adding that an “illegal claim” for dues would fall. not from the definition of “debts” as stated. in the Companies Act.

(Only the title and image of this report may have been reworked by Business Standard staff; the rest of the content is automatically generated from a syndicated feed.)

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