Madras High Court Extends Stay On Single Judge SpiceJet Order Till January 11

Madras High Court extended till January 11, the operation of an interim stay on the verdict of a single judge, which ordered winding up of SpiceJet

Madras High Court Extends Stay On Single Judge SpiceJet Order Till January 11

Madras High Court has extended the interim stay on single judge's verdict against SpiceJet

The Madras High Court on Thursday extended till January 11, the operation of an interim stay on the verdict of a single judge, which ordered the winding up of private airliner SpiceJet for non-payment of $24 million to a Switzerland-based stock corporation.

This follows remittance of $5 million, as directed by the single judge, earlier.

Meanwhile, Spicejet preferred an appeal challenging the judgment dated December 6 of the single judge R Subramanian, which ordered the winding up of the private carrier and directed the Official Liquidator attached to the High Court to take over its assets.

While allowing a company petition from Credit Suisse AG, the stock corporation registered under the laws of Switzerland, the judge on December 6 had held SpiceJet 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 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 petitioner, SpiceJet, a private sector airline, 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. On August 24, 2012 a supplemental agreement was also entered into to change certain terms of the agreement.

The amendments included 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 provisions for escalation were also made. The petitioner 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 the SR Technics and that it was not in a position to meet its financial obligations, the petitioner 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, Spiecejet preferred the appeal. When it came up on Thursday, a division bench of Justices Paresh Upadhyay and Sathi Kumar Sukumara Kurup adjourned the matter till Monday (January 10). The operation of the interim stay will hold good till January 11, it added.

SpiceJet contended that 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 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.

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. 

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