Lessors cannot take possession of Go First planes, rules appellate tribunal

In a significant development, the National Company Law Appellate Tribunal (NCLAT) upheld the order passed by the National Company Law Tribunal (NCLT) today, admitting the application filed by Go First Airlines to initiate voluntary insolvency proceedings. The decision dealt a blow to the lessors of Go First Airlines' aircraft, as the NCLAT turned down their plea to take possession of the aircraft.

The lessors, including SMBC Aviation Capital Ltd, GY Aviation, and SFV Aircraft Holdings, had moved the NCLAT after the NCLT in Delhi accepted Go First Airlines' application for insolvency proceedings. These lessors had leased out 21 aircraft to Go First Airlines.

During the hearing, the lessors informed the NCLAT that they had already approached the Directorate General of Civil Aviation (DGCA) to initiate deregistering and repossessing Go First's aircraft. They argued that since the aircraft lease had terminated before the moratorium was granted, the moratorium should not impose a freeze on third-party assets.

However, the NCLAT ruled favour of the insolvency proceedings and rejected the lessors' plea. The NCLAT stated that any further relief should be sought from the adjudicating authority, emphasising that the appellants should approach the appropriate forum for their grievances. This decision by the NCLAT upholds the NCLT's earlier order and paves the way for Go First Airlines' insolvency proceedings to proceed. The case has garnered attention due to its impact on the aviation industry and the contractual obligations between airlines and lessors.

As the situation unfolds, stakeholders will closely monitor the next steps in Go First Airlines' insolvency process and the potential implications for the aircraft lessors to approach the NCLT to initiate the corporate insolvency resolution process under the Insolvency and Bankruptcy Code (IBC).

The airline cited faulty engines supplied by American company Pratt & Whitney (P&W) as the primary reason for the increase in the grounding of its aircraft, which rose from 31 per cent in 2020 to over 50 per cent in April 2023.

According to Go First claims, this extensive grounding resulted in a staggering loss of over ₹10,800 crore for the company. The NCLT Delhi, in response to the plea, admitted it on May 10 and subsequently declared a full moratorium for the airline. As part of the ruling, the NCLT directed the company's suspended board of directors to extend their full cooperation to the Insolvency Resolution Professional (IRP) to ensure the preservation of jobs without any layoffs.

The airline's decision to seek corporate insolvency and hold Pratt & Whitney accountable for the faulty engines highlights the financial and operational challenges faced by Go Airlines in recent years. The grounding of a significant portion of its fleet due to engine-related issues has significantly impacted the airline's operations, resulting in substantial financial losses.