Madras High Court upholds single judge's order against SpiceJet

A division bench of the Madras High Court on Tuesday upheld a recent verdict of a single judge ordering the winding up of private airliner SpiceJet Limited and directing the official liquidator attached to the High Court to take over the assets of the company.

Holding the appellant company had not made out any ground to entertain the appeal, the bench of Justices Paresh Upadhyay and Sathi Kumar Sukumara Kurup dismissed the appeal preferred by the private carrier, today.

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

The bench, however, extended the operation of the interim stay granted by the single judge, till January 28 to enable the airliner to prefer an appeal before the Supreme Court. The single judge had suspended the operation of his order for a limited period with a direction to the company to remit USD 5 million, as a condition precedent to avail the interim relief.

 

Meanwhile, a SpiceJet spokesperson said "the company is examining the order and will take appropriate remedial steps as per legal advise received."

The charge against SpiceJet was that it had failed to honor its commitment to pay the bills for over USD 24 million raised by a Swiss company towards maintenance, repairing and overhauling of the aircraft engines and components.

Originally, while allowing the company petition from Credit Suisse AG, the stock corporation registered under the laws of Switzerland, the single judge had held the airliner had miserably failed to satisfy the three pronged test suggested by the Supreme Court in a similar case and hence had rendered itself liable to be wound up for its inability to pay its debts under Section 433 (e) of the Companies Act 1956.

The company petition had prayed for winding up of SpiceJet under the provisions of the Companies Act, 1956 and appoint the Official Liquidator of the High Court as the Liquidator of SpiceJet with all powers under Section 448 of the Companies Act to take charge of its assets, properties, stock in trade and books of accounts.

According to the petitioner, SpiceJet had availed the services of SR Technics, Switzerland, for maintenance, repair and overhauling of aircraft engines, modules, components, assemblies and parts, which were mandatory for its operations. An agreement for such services for 10 years was entered into between SpiceJet and SR Technics on November 24, 2011. The terms of payments were also agreed.

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

The amendments included extension of time for payment of money due under various invoices raised by SR Technics and also a deferred payment scheme. As there was a general increase in the cost, the 2012 supplemental agreement included adjustment of flight hour rates and provisions for escalation were also made. The petitioner had been making repeated requests to SpiceJet to make payments under the various invoices.

Since it did not honour its commitment under the agreements with SR Technics and that it was not in a position to meet its financial obligations, the petitioner issued a statutory notice. As there was no response, it preferred the company petition before the High Court to wind up SpiceJet and obtained a favourable order.

Aggrieved, SpiceJet preferred the appeal.

SpiceJet contended it had entered into an agreement with the Swiss company for a period of 10 years in 2011.

However, midway, it discovered that the aircraft maintenance company did not have a valid authorisation from the Director General of Civil Aviation between January 1, 2009 and May 18, 2015. The single judge had wrongly assumed SpiceJet had entered into the agreement despite knowing about the absence of DGCA approval and held that it could have terminated the agreement midway once it came to know of the absence of the official authorisation.

Termination was not a mandatory requirement. Once it (SpiceJet) came to know the fact, it stopped payments. There was no finding in the arbitral award that the air carrier was aware of the non approval even before entering into the agreement, the appeal said, adding that an 'illegal claim' for dues would not come under the definition of 'debts' as stated in the Companies Act.