Go First Airlines insolvency: NCLT Delhi reserves plea for orders

The Principal Bench of the National Company Law Tribunal (NCLT) at Delhi on Thursday reserved orders in the application by Go First Airlines seeking initiation of voluntary insolvency proceedings against the company..A coram of President Justice Ramalingam Sudhakar and technical member LN Gupta heard the airline company at length on its prayer seeking imposition of interim moratorium..The airline company owning Go First moved the NCLT under the Insolvency and Bankruptcy Code (IBC) declaring bankruptcy and to initiate the corporate insolvency resolution process.Senior Advocates Neeraj Kishan Kaul and P Nagesh, with Advocates Pranjal Kishore and Akshay Sharma, contended that due to the increased grounding of aircrafts, the company started facing substantial losses..Nagesh argued that the company was seeking an imposition of interim moratorium to prevent lessors from taking possession of its 26 aircrafts. He submited that if the company loses possession of the aircrafts and the legal right to operate them, the continuance of its business will be at stake.This would in turn impact the employment of 7,000 direct and 10,000 indirect employees as well as debt repayment to creditors, he added..The Tribunal was, however, skeptical on allowing such a prayer, as it found no provision under the IBC to grant such a relief."Basically what you are asking is a pre-emptive action, to stop creditors from asking for money. Maybe you have to pay for fuel, and pay to the airport terminals. But how is one resolution professional going to manage all this?"After hearing the company for over three hours, the Bench reserved the plea for orders. .Go First Airlines claimed in its application that its flights were being grounded due to the recurring and persistent issues with engines supplied by American company, Pratt & Whitney (P&W).The company claimed in its petition that due to the faulty engines of P&W, the grounding of aircrafts increased from 31% in 2020 to more than 50% in April 2023.The company added that the non-availability of engines and engine failures had cost the company a loss of over ₹10,800 crore.In fact, the company also issued a statement on its Twitter handle saying that it would temporarily suspend all flight operations between May 3 to 5, 2023..It pointed out that due to the faulty engines and the additional impact of COVID-19, the company suffered losses and sought funds from banks and financial institutions under the emergency credit line guarantee scheme.As a result of deteriorating profitability, Go First Airlines defaulted in payment of lease rentals with the airport. It claimed to have started receiving demand notices and even termination notices.Go First submitted that as on date, it has paid ₹19,980 crore to its creditors. It added that a sum of ₹11,463 crore was owed to its creditors which includes banks, financial institutions, vendors and aircraft lessors.It was pointed out that as on April 28, 2023, the company had defaulted on payment of ₹1,202 crore to its creditors and ₹2,660 crore to the airport lessors."Currently, the assets of the company are not sufficient to meet its liabilities. Due to such financial stress, the essential goods and service providers (including fuel suppliers) are not ready and willing to offer their services and it is becoming increasingly difficult to run the business of the company as a going concern," the plea underscored.