SC to hear plea of SpiceJet against Madras HC order in winding up case

The Supreme Court on Tuesday agreed to hear on January 28 the plea of SpiceJet against a Madras High Court order admitting winding-up petition and directing the official liquidator to take over the assets of the low-cost airline.

SpiceJet has rushed to the top court against the January 11 order of a division bench of the High Court upholding a recent verdict of a single judge bench ordering it's winding up and directing the official liquidator attached to the High Court to take over the assets.

Credit Suisse AG, a Swiss firm, had moved the single-judge bench of the high court alleging that SpiceJet failed to honour its commitment to pay the bills for over USD 24 million raised by it towards maintenance, repairing, and overhauling of the aircraft engines and components.

This is the case of a winding-up of an Airline called SpiceJet. The protection is till Friday. I am requesting an early hearing otherwise the Airline will fold up. Please list it on Friday or Monday, senior advocate Mukul Rohatgi, appearing for the Airline, told the bench comprising Chief Justice N V Ramana and Justices A S Bopanna and Hima Kohli.

List it on Friday, the bench ordered.

The division bench of the high court had rejected the appeal of SpiceJet holding that it did not make out any ground to entertain the appeal.

While dismissing the appeal against the December 6, 2021 order of the Company judge Justice R Subramaniam, the division bench, however, had extended the operation of the interim stay granted by the single judge, till January 28 to enable the airliner to prefer an appeal before the Supreme Court.

The single judge had suspended the operation of his order for a limited period with a direction to the company to remit USD 5 million, as a condition precedent to avail the interim relief.

Originally, while allowing the company petition from Credit Suisse AG, the stock corporation registered under the laws of Switzerland, the single judge had held the airliner had miserably failed to satisfy the three-pronged test suggested by the Supreme Court in a similar case and hence had rendered itself liable to be wound up for its inability to pay its debts under Section 433 (e) of the Companies Act 1956.

The company petition, filed by the Swiss firm, had prayed for winding up of SpiceJet under the provisions of the Companies Act, 1956 and appoint the Official Liquidator of the High Court as the Liquidator of SpiceJet with all powers under Section 448 of the Companies Act to take charge of its assets, properties, stock in trade and books of accounts.

According to the Swiss firm, SpiceJet had availed the services of SR Technics, Switzerland, for maintenance, repair, and overhauling of aircraft engines, modules, components, assemblies, and parts, which were mandatory for its operations. An agreement for such services for 10 years was entered into between SpiceJet and SR Technics on November 24, 2011. The terms of payments were also agreed upon.

On August 24, 2012, a supplemental agreement was also entered into to change certain terms of the agreement.

The amendments included an extension of time for payment of money due under various invoices raised by SR Technics and also a deferred payment scheme. As there was a general increase in the cost, the 2012 supplemental agreement included adjustment of flight hour rates, and escalation provisions were also made. The Swiss firm had been making repeated requests to SpiceJet to make payments under the various invoices.

Since it did not honour its commitment under the agreements with SR Technics and that it was not in a position to meet its financial obligations, the Swiss firm had issued a statutory notice. As there was no response, it preferred the company petition before the High Court to wind up SpiceJet and obtained a favourable order.

Aggrieved, SpiceJet preferred the appeal before the Division bench which came to be dismissed on January 11.

SpiceJet contended it had entered into an agreement with the Swiss company for a period of 10 years in 2011.

However, midway, it discovered that the aircraft maintenance company did not have a valid authorisation from the Director-General of Civil Aviation between January 1, 2009, and May 18, 2015, the airline had said in its appeal.

The single judge had wrongly assumed SpiceJet had entered into the agreement despite knowing about the absence of DGCA approval and held that it could have terminated the agreement midway once it came to know of the absence of the official authorisation, the low-cost airline had said.

Termination was not a mandatory requirement. Once it (SpiceJet) came to know the fact, it stopped payments. There was no finding in the arbitral award that the air carrier was aware of the non-approval even before entering into the agreement, the appeal said, adding that an 'illegal claim' for dues would not come under the definition of 'debts' as stated in the Companies Act, it had said.

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