NCLT gives green signal to Go First to fly aircraft if registered

The National Company Law Tribunal (NCLT) on Wednesday said Go First could fly aircraft in its possession if those planes were still registered with the civil aviation regulator.

“It is pertinent to mention that the Directorate General of Civil Aviation (DGCA) has not deregistered the aircraft, which means that they are available to the corporate debtor (Go First in this case) to resume operations. Therefore, as long as the aircraft/engines are registered, they can be used for operating or flying to keep the corporate debtor as a going concern, however, within safeguards/safety norms prescribed by the regulators,” the NCLT’s interim order stated.

The tribunal was hearing a plea filed by lessors — Bluesky 31 Leasing Company, Bluesky 19 Leasing Company, Jackson Square Aviation Ireland, SMBC Aero Engine Lease, Engine Lease Finance, and BOC Aviation (Ireland) — mainly to refrain Go First from operating the aircraft owned by them for commercial use.  The tribunal said that to keep Go First alive, the aircraft leased to it must be flown. “In order to keep the corporate debtor as a going concern, the aircraft have to be flown, hence, the aircraft shall be with the corporate debtor and shall be operated by the corporate debtor. Therefore, we see no reason to allow this interim relief claimed by the applicants (engine and aircraft lessors),” the order stated.

The tribunal also denied requests of lessors to inspect the leased engines of the aircraft. Since the resolution professional (RP) has already been allowed to care for and maintain the aircraft by the tribunal, there was no need to allow any inspection, it said.

Previously, the Delhi High Court had allowed Go First to maintain the planes, while the lessors were allowed to inspect them monthly.

Clarifying the tribunal’s position after the high court order, the Bench held that the single-judge order of the HC on July 5 was an interim order passed in its writ jurisdiction, and no law was laid down. Lessors have filed applications under the IBC and so the NCLT order needs to be considered in light of the provisions contained in the IBC, the order stated.

The Resolution Professional had told the tribunal that it was the duty of the RP under Section 25 of the Insolvency and Bankruptcy Code(IBC) to maintain the assets. It had also been argued by the RP that there was no need for inspection, as he was under obligation to maintain and protect the assets as per the duty assigned to him under the Code.

“Allowing inspection (by lessors) would only act as an impediment to the effective discharge of the duties of the Resolution professional which, inter alia, includes the protection and maintenance of the engines at the prescribed levels of efficiency/safety, which would be necessary to keep the corporate debtor as a going concern. Furthermore, the purpose of inspection is to see whether these aircraft/engines are properly cared for and protected or not. We have already asked the RP to maintain the aircraft, therefore, no fruitful purpose would be served by allowing this prayer. Hence, we are not inclined to allow this prayer,” the order said.

The tribunal also said that in the aviation industry, most airlines lease the aircraft for their operation and taking away the aircraft of the cash-strapped airline would result in its death. “In other words, the aircraft are not as such the property of the airlines. Therefore, the application of the provision of the IBC and the process of insolvency would have no meaning in respect of airlines as corporate debtors, if the sole essence of the corporate debtor’s business is taken away. It would result in corporate death of the corporate debtor, leaving no scope for resolution of the corporate debtor,” the order observed.

Wednesday’s order of the NCLT is only an interim order and the tribunal will hear applications by the lessors seeking to exempt the aircraft whose leases were terminated from the moratorium period. The lessors terminated the leases of possibly 30 aircraft before the insolvency plea of Go First was admitted by the NCLT on May 10.

It takes the DGCA at least five days to deregister the aircraft on the application of lessors. However, the process could not be completed as the airline was put under a moratorium.

The NCLT is expected to hear this case again on August 4. The Delhi High Court will hear applications by lessors for deregistering their aircraft on August 3.

Go First stopped flying on May 3.

What tribunal said

• As long as Go First aircraft are registered with DGCA, they can be flown
• Allowing inspection by lessors would hinder RP’s duties
• Lessors' plea to restrict the airline from flying rejected
• If Go First's aircraft are taken away, it would result in its corporate death