Credit Suisse dispute: How SpiceJet came close to getting wound up

SpiceJet has reached an out of court settlement with Swiss bank Credit Suisse over payment of dues

Ajay Singh-promoted SpiceJet and Swiss bank Credit Suisse informed the Supreme Court on August 18 that the two had settled a long winding dispute through an out of court settlement. This led to the withdrawal of an appeal by SpiceJet against a Madras High Court order that would have potentially led to the winding up of the low-cost airline. The dispute originated at a time when Kalanithi Maran was the owner of the airline.

 

The dispute

 

The bone of contention was non-payment of money by SpiceJet to SR Technics, a Swiss firm engaged in repair, maintenance and overhaul of aircraft and engines. The deal for maintenance of planes was signed between the two in 2011. In September 2012, SR Technics transferred all the rights to receive payments to Credit Suisse. The Swiss bank contended in court that despite repeated requests, all attempts to recover money from the airline had failed. In 2012, further provisions were made in the agreement to account for increase in costs and future escalation in the money to be paid for the maintenance services being rendered by SR Technics.

 

The seven invoices

 

SR Technics had raised seven invoices totaling $25 million between July and December 2013. SpiceJet had issued bills of exchange in Zurich that were payable between January and May 2014. The money was to be paid from SpiceJet’s account at YES Bank’s Chanakyapuri branch in New Delhi. However, according to submissions made in court, only $1 million of this outstanding amount was paid by SpiceJet in 2014 and the rest remained unpaid. This is when Credit Suisse approached the Madras High Court to recover the dues, since the airline’s registered office was located at the time at Murasoli Maran Towers in Chennai.

 

The winding up petition

 

Credit Suisse argued in court that since SpiceJet’s position was financially unviable and it was not in a position to repay the money owed to it, the airline should be wound up to recover its dues. In addition, SR Technics had launched arbitration proceedings in the UK and had secured an award in its favour. In December 2021, the Madras HC ruled in Credit Suisse’s favour and allowed a petition to be moved for winding up the airline. The airline immediately moved the Supreme Court after its appeal against the order was rejected by the Madras HC. Senior advocates Harish Salve and Mukul Rohatgi appeared for SpiceJet and managed to get a reprieve with the country’s highest court staying the winding up order till February 2022.

 

SpiceJet’s contention

 

The airline pointed to technical errors in its agreements while defending itself in court. It stated that the contracts were not stamped in accordance to Indian laws and, therefore, could not be enforced. One of its assertions was that SR Technics did not have a valid licence to function as an aircraft maintenance service provider in India between 2009 and 2015, when the contracts were signed. The court found that SpiceJet inked the contracts with SR Technics despite being aware that the latter did not hold a licence issued by the Directorate General of Civil Aviation (DGCA). The court found no merits in the airline’s assertions.

 

String of out of court settlements

 

The out of court settlement between SpiceJet and Credit Suisse in which the airline agreed to pay the money is among a series of such settlements carried out in recent times. The airline has told courts that it is settling its share transfer dispute with Kalanithi Maran in a similar fashion. The airline had also reached out of court settlements with some of its aircraft lessors, including Irish company Goshawk Aviation in August. The airline has claimed that it is in the process of modernising its fleet and despite financial troubles is looking to expand operations. The DGCA has asked SpiceJet to only operate half of its fleet owing to safety concerns after a spate of mid air scares this year.