NCLT defers order on liquidation of Go First after queries raised over liquidator, third party funding

The National Company Law Tribunal (NCLT) on Tuesday deferred passing an order liquidating Go First airlines after legal questions arose over who would act as the liquidator and whether the tribunal would need to give its seal of approval for third party funding to pursue an arbitration at Singapore International Arbitration Centre (SIAC). .A bench of Judicial Member Mahendra Khandelwal and Technical Member Dr. Sanjeev Ranjan asked whether the tribunal could approve a company under liquidation to obtain third party funding. "Show us some judgments of precedents from NCLAT, Supreme Court," the bench told Senior Advocate Ritin Rai, who appeared for the airline's Resolution Professional (RP)."The Committee of Creditors (CoC) in their commercial wisdom have decided not to fund the arbitration. They have already spent ₹ 160 crore on the company," Rai said.He also indicated that the third party funder is not for India. The liquidation application, filed under Section 33(1) of the Insolvency and Bankruptcy Code (IBC), further asked directions from the tribunal to enable the RP Shailendra Ajmera to be made the liquidator of the company. However, the bench objected to this by pointing out a circular from Insolvency and Bankruptcy Board of India (IBBI) from July 2023, which recommended that a person other than the RP be appointed as a liquidator. "The RP can be involved in the liquidation process in some other capacity, but not as a liquidator," the NCLT said. It also observed that Go First is a peculiar case as the company will go into liquidation without having gone through the resolution process. Rai sought time to obtain instructions on the queries raised by the Bench.The case is now likely to be heard on November 8. .On May 2, 2023, Go First submitted a plea to the NCLT under Section 10, seeking voluntary admission to the Corporate Insolvency Resolution Process (CIRP). The NCLT admitted Go First’s application on May 10 and appointed a Resolution Professional (RP) to manage the company's affairs.In response, Go First’s aircraft lessors filed an appeal with the National Company Law Appellate Tribunal (NCLAT), arguing that their assets had been unfairly taken as they had terminated the leases prior to the moratorium. On May 22, 2023, the NCLAT upheld the NCLT’s decision and directed the lessors to submit an appropriate application to the NCLT for clarification regarding the applicability of the moratorium on the aircraft.The lessors filed a plea in the Delhi High Court against the Director General of Civil Aviation (DGCA), requesting the court to direct the authority to deregister their aircraft. They contended that the DGCA should comply with lessors' requests for deregistration.Initially, the DGCA had stated it could not deregister the aircraft due to an existing moratorium. However, on October 4, 2023, the Ministry of Corporate Affairs issued a notification clarifying that the provisions of subsection (1) of Section 14 of IBC would not apply to transactions or agreements concerning aircraft, engines, airframes and helicopters..Subsequently, DGCA filed an affidavit before the Delhi High Court clarifying that the notification exempting aviation leases from moratorium under the IBC should apply to pending cases as well.However, DGCA said that since Go First's case pending in the Delhi High Court, it will await court's directions. Simply put, DGCA's response said that the though notification exempting aviation leases from moratorium should ideally apply to Go First, the authority will wait for directions from the High Court as it was sub-judice.The Delhi High Court ordered DGCA on April 26 this year to deregister its fleet. Consequently, the DGCA deregistered all 54 of the airline's aircraft in early May. The Court ruled that maintenance of the aircraft would be handled by the lessors and their authorized representatives until the aircraft were deregistered and exported, in line with Rule 32A of the Aircraft Rules.Without any aircraft left and after running out of options to revive the airline, its Committee of Creditors (CoC) decided to liquidate the company and filed an application to this effect in September 2024.