Go First seeks interim moratorium, NCLT says no such provision under IBC

Go First on Thursday sought an interim moratorium and various directions from the National Company Law Tribunal (NCLT), including restraining lessors from taking back aircraft and regulator Directorate General of Civil Aviation (DGCA) from taking any adverse action against the airline.

NCLT, however, said that there is no provision for an interim moratorium under the Insolvency and Bankruptcy Code (IBC), as reported by The Economic Times (ET).

Go First told the court that the primary aim of filing for insolvency was to revive the airlines and it seeks a comprehensive debt restructuring.  

The Wadia group-owned airline, which has liabilities worth Rs 11,463 crore, filed for voluntary insolvency resolution on Friday and cancelled all its flights for three days starting from May 3. The DGCA on Thursday asked the airline to refund the full ticket money to the buyers. The airline also stopped the sale of tickets till May 15.

In its petition filed before NCLT, the budget airline sought directions to restrain aircraft lessors from taking any recovery action as well as restrain the DGCA and suppliers of essential goods and services from initiating adverse actions.

Another plea is that the DGCA, Airports Authority of India (AAI), and private airport operators should not cancel any departure and parking slots allotted to the company.

The airline also said it wanted fuel suppliers to continue supply for aircraft operations and not terminate the present contractual arrangements.

Go First, which started flying more than 17 years ago, has said the non-supply of engines by Pratt & Whitney resulting in the grounding of more than half of its fleet has led to the current situation.

The carrier has total liabilities of Rs 11,463 crore to all creditors, including a default of Rs 3,856 crore towards operational creditors.

The dues towards aircraft lessors are Rs 2,600 crore, according to the plea filed before NCLT.

As on April 30, the debt exposure towards financial creditors stood at Rs 6,521 crore.

The airline's net loss rose to Rs 3,600 crore last fiscal from Rs 1,807.8 crore in 2021-22. The net loss was Rs 1,346.72 crore in 2020-21.

Further, Go First has cited the example of Jet Airways, saying that lessors took swift re-possession of the planes leading to serious depletion of its asset value.

Citing Jet Airways, the Wadia group firm said prior to insolvency, it had a fleet size of 112 aircraft.

However, after the insolvency was triggered against Jet Airways, it was left with only 11 aircraft, which significantly affected its prospects of resolution under IBC, said Go First.

CIRP refers to the Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code (IBC).

Go First has a domestic market share of around eight per cent.

With Air India, AirAsia and SpiceJet already reeling under financial stress, if Go First is not resolved, then it will further monopolise the market leading to loss of consumers and all the stakeholders, it said.

(With agency inputs)