SC to consider SpiceJet's plea against Delhi HC order grounding 3 engines

The Supreme Court said Thursday it will consider listing low-cost airline SpiceJet's plea challenging a Delhi High Court verdict grounding three aircraft engines for defaulting on payments to lessors.

A bench comprising Chief Justice D Y Chandrachud and Justices J B Pardiwala and Manoj Misra asked the counsel for the airline to send an e-mail seeking an urgent hearing of its plea against the high court verdict of September 11.

"Please circulate the e-mail," the CJI said, adding that the appeal may be listed.

A division bench of the Delhi High Court on Wednesday held that the carrier had violated an agreed interim arrangement for payment of dues and upheld an order of a single-judge bench asking the low-cost airline to ground the three engines for defaulting on the payments.

 

The single-judge bench of the high court had on August 14 directed SpiceJet to ground three engines by August 16 and hand them over to their lessors -- Team France 01 SAS and Sunbird France 02 SAS.

A high court bench of Justices Rajiv Shakdher and Amit Bansal refused to interfere with an August 14 order of the single-judge bench to ground the three aircraft engines and hand them over to the lessors, and disposed of SpiceJet's appeals against it.

SpiceJet had challenged the August 14 order of the single-judge bench.

"The appeals are emblematic of the adage that fools create assets and wise men use them. The use of a lessor's assets without recompense, on agreed terms, by the lessee often leads to consequences which disrupt the interests of both sides," the high court said.

After the HC verdict, a SpiceJet spokesperson said, "Our operations continue as normal and remain completely unaffected. We are currently reviewing the court order."

The high court said the record revealed that SpiceJet was in default, and past and current outstanding dues remain unpaid.

"At the risk of repetition, it must be stressed that SpiceJet has violated an agreed interim arrangement for payment of dues, which included a term that upon breach, it would ground the engines that Team France and Sunbird France could then repossess," it said.

The bench said the second condition also stood fulfilled as the engines being depreciable assets would be of little use to the lessors if they were used without recompense.

"The fact that the financial condition of SpiceJet is weak is evident from its conduct and the stand taken on its behalf in court, which is that it is attempting to infuse funds through loans and/or equity.

"The position in which SpiceJet is at this juncture, Team France and Sunbird France could well end up both without its engines or the monies due under the engine-lease agreements. Therefore, compensation in terms of money does not seem probable from the point of view of Team France and Sunbird France," it said.

It said if the lessors are prevented from exercising their contractual rights at this stage, they could possibly lose both their assets, the engines and the money.

The single judge had passed the order on pleas moved by the lessors seeking a direction to SpiceJet to hand over the possession of the three engines on the termination of the lease agreements.

It was stated in the pleas that following the termination, the plaintiffs had directed the airline to ground and re-deliver the engines and pay all outstanding dues, but the carrier had failed to do so.

"It is, however, clarified that the defendant will remain liable for making payments, which it undertook in an order dated May 29, 2024, towards the admitted outstanding of USD 4.8 million and towards the weekly payments arising on account of the use of the engines under the aegis of this court.

"The return of the engines does not absolve the defendant from its liability for the payments, which have admittedly fallen due, and to that extent, the plaintiff is entitled to recover the said amount from the defendant through execution of the order dated May 29, 2024," the court had said.

It had said that SpiceJet is a "defaulter and has no legal and contractual right to continue the use of the engines".

In its response to the applications, the airline's counsel had submitted that after filing the suit, the defendant made a payment of USD 7.18 million between December 14, 2023 and May 24, 2024.

The counsel had said after the settlement terms were recorded before the court in May, the airline made a payment of USD 1.48 million and as of August 12, there was an admitted default to the extent of USD 2.67 million towards the outstanding amount.

He had said while the defendant admits that there has been a default, it is making its best endeavour to regularise these defaults and sought an extension of time until September 30 to clear the dues.