SpiceJet Faces New Bankruptcy Code Rider In Case Vs Aircraft Lessors

The National Company Law Tribunal (NCLT) on Tuesday told low-cost airline SpiceJet and its aircraft lessors, Aircastle and Wilmington, to study the impact of the government's notification, issued last week, removing aviation lease agreements from the moratorium under the Insolvency and Bankruptcy Code (IBC).

The next hearing in the cases is expected to come up on November 7.

Aircastle and Wilmington have filed insolvency pleas against SpiceJet over unpaid dues. However, the airline has also challenged the maintainability of these petitions on certain technical grounds.

The Centre had issued a notification on October 3 providing that the moratorium under the Insolvency and Bankruptcy Code, 2016 will not apply to aircraft, aircraft engines, airframes and helicopters governed by the Cape Town Convention.

A moratorium gives bankrupt companies some immunity in legal cases and makes it difficult for lessors and creditors to recover their assets. However, with the lifting of this moratorium this protection has been reduced.

While the lessors have filed cases against Spicejet for the settlement of their dues, SpiceJet has also filed a plea questioning the maintainability of Aircastle's petition. SpiceJet has challenged the validity of Aircastle's power of attorney, which grants authority to its representative, and also asserted that Aircastle had not filed a proper affidavit in support of its insolvency petition.

The next hearing is expected to provide more clarity on various issues taking into account the impact of the government's notification. The government's notification to exempt transactions involving aircraft, aircraft engines, and helicopters from the IBC was issued in consonance with India's international treaty obligations as the country was a signatory to the Cape Town Convention and its Aircraft Protocol (CTC).

Aviation Working Group, a global watchdog representing aircraft manufacturers and leasing firms, had put India on a watchlist with a negative outlook in May and has now given the country a positive rating after the notification was issued