Delhi HC tells SpiceJet to personally guarantee payment to lessors

The Delhi High Court on Thursday told SpiceJet to confirm by Monday if their directors will pledge personal guarantees to pay engine lessors for three engines.

"If the company alone is liable and it has no money, then perhaps your directors should provide personal guarantees. Otherwise, it seems the directors themselves have no faith in the money coming in," the court remarked.

Coming down on the cash-strapped airline, the court said, "You’ve been repeatedly giving undertakings to the court. If you’re not in a position to pay, then you should ground these engines. Why are you using them if the company is unable to pay?"

The court had earlier given SpiceJet a final chance to settle a payment of Rs 50 crore to its engine lessors, Team France and Sunbird France. If the airline fails to meet this obligation, it risks having two of its engines grounded.

SpiceJet’s counsel Sandeep Sethi argued that grounding the aircraft would severely impact the company’s revenue and operations.

He said that SpiceJet plans to raise Rs 3,000 crore through a qualified institutional placement by 30 September to address its financial stress. He assured the court that Rs 4.9 crore would be paid in a lump sum from the equity proceeds by the end of September to cover the outstanding dues.

However, lessors said it is time that engines are grounded.

“We have given them a long rope. Your Lordships have been more than kind since December. It is time to consider grounding the aircraft. One engine flies 12 hours a day and the other 10 hours a day. These are among the most efficient engines in the market, and they are being used without payment," said Rajahekhar Rao, counsel for the lessors.

The lessors had filed a case against SpiceJet in December, claiming dues of more than $20 million for the engines.