NCLT orders Go First liquidation as CoC opts for no revival prospects

CoC opts for liquidation after failed resolution plans; NCLT approves request

The National Company Law Tribunal (NCLT) on Monday ordered the liquidation of low-cost carrier Go First on the request of its Committee of Creditors (CoC), thus bringing an end to the 20-month-long insolvency proceedings. A CoC is a group of lenders who work together to decide the future of a borrower's debt.

 

A bench of NCLT comprising Judicial Member Mahendra Khandelwal and Technical Member Dr Sanjeev Ranjan allowed an application for liquidation by the CoC.

 

At the 37th CoC meeting on July 23, 2024, estimated cost for the liquidation process was informed as Rs 21.6 crore, which was agreed to be funded by CoC members as per their voting share.

   

The airline had told the tribunal that “the Resolution Plans received were neither compliant with the mandatory requirements of the IBC (Insolvency and Bankruptcy Code) nor commercially acceptable to the CoC, therefore, in view of the unviability of resuming commercial operations of the Corporate Debtor (Go First), the CoC has opted for the liquidation of the Corporate Debtor”.

 

It also told the court that with regard to the source of funding for the SIAC (Singapore International Arbitration Centre) arbitration, the CoC approved the proposal to avail litigation funding from Burford Capital as per the terms of the Capital Provisions Agreement (CPA) to meet the estimated liquidation costs under Regulation 39B of the CIRP (Corporate Insolvency Resolution Process) Regulations.

 

The airline is seeking $1 billion in claims against PW over faulty engines that led to its grounding.

 

Go First had engaged UK-based finance firm Burford Capital, which is prepared to provide $20 million in the first tranche to finance the arbitration.

 

The NCLT had earlier said that the government has not yet approved foreign third-party funding under IBC, which could lead to similar requests from other borrowers.

 

Go First owes its lenders around Rs 6,200 crore. Central Bank of India, Bank of Baroda, and IDBI Bank are some of the secured creditors of the airline, with admitted claims of Rs 1,934 crore, Rs 1,744 crore, and Rs 75 crore, respectively.

 

The airline had filed for voluntary insolvency on May 2, 2023 under Section 10 of the IBC, and on May 10, 2023 the NCLT admitted its plea.

 

Go First’s lessors had then moved the National Company Law Appellate Tribunal (NCLAT), saying their assets (aircraft and engines) should be returned to them. The assets were retained by the airline as the moratorium had begun. However, the lessors had argued that since they had terminated the leases before the insolvency plea was accepted by the NCLT, their assets should be returned to them.

 

A moratorium is a temporary suspension of an activity or law until future consideration warrants lifting of the suspension.

 

On May 22, 2023, the NCLAT upheld the NCLT order of accepting Go First’s insolvency application but told the lessors to seek clarification from the NCLT whether their assets were exempt from the moratorium.

 

The lessors then moved the Delhi High Court, seeking a direction to the DGCA (Directorate General of Civil Aviation) to deregister their aircraft and release them. The DGCA had initially refused to do so but on October 4, 2023, the Ministry of Corporate Affairs issued a notification, exempting all transactions and agreements related to aircraft and their engines from moratorium under Section 14 of the IBC.

 

The Delhi High Court on April 26, 2024 directed the DGCA to deregister planes leased to Go First within five working days, giving respite to the lessors. All 54 aircraft were given back to the lessors by May 2024. The court ordered that all maintenance tasks in respect of the aircraft will be undertaken by the lessors and all their authorised representatives up to and until the time the aircraft are deregistered and exported, in pursuance of Rule 32A of the Aircraft Rules.

 

In September 2024, the CoC filed an application to liquidate the company, with no signs of revival of the airline. The NCLT bench had previously expressed concerns about the appointment of Shailendra Ajmera as the liquidator and later approved Dinkar Venkatasubramanian as the official liquidator.

 

The CoC was represented by advocate Vishnu Sriram, and the Resolution Professional by advocate Diwakar Maheshwari.