Go First, the country’s fourth-largest carrier, got relief from the National Company Law Tribunal (NCLT) after it allowed the appointment of a new insolvency resolution professional (IRP) who will take over the management to revive the cash-strapped airline run by Wadia Group. The Delhi Bench of NCLT also granted Go First protection under a moratorium from recovery by lessors and lenders.
The tribunal has appointed Abhilash Lal as IRP to run Go First going further.
The tribunal on Wednesday asked the airline to deposit Rs 5 crore with IRP for the initial cost of proceedings. The IRP has been directed to keep Go First as a going concern and not to retrench any employee.
Besides this, NCLT ordered that earlier management of Go First stands suspended. It said suspended management should extend all necessary support to IRP to allow for proceedings to go on smoothly. It added that no employees are to be laid off in the whole process.
With this, under section 10 of the IBC, Go First will get 330 days for completion of CIRP, which is the maximum period, including any extension or litigation period.
Last week, Go First announced that it has cancelled all its flights from May 3 to 5 after it moved the tribunal where it filed an application under Section 10 of the Insolvency and Bankruptcy Code, 2016. The carrier had sought initiation of voluntary insolvency proceedings and imposition of an interim moratorium under the Insolvency and Bankruptcy Code (IBC).
Reacting to the development, Go First CEO Kaushik Khona said the verdict was the best outcome that the company had expected. He said NCLT’s decision was a historic judgment in terms of history and in terms of the pace of proceedings. “This is the best thing that has happened to us. We will now discuss the future plan of action with the IRP. Our job was to see that the airline does not go down,” Khona told Business Today on the sidelines of the verdict.
He added that the moratorium order of NCLT will prevent lessors from taking back aircraft.
Go First’s plea at NCLT
Last week, the Delhi bench of the tribunal admitted the airline’s plea seeking imposition of an interim moratorium before reserving the order.
The carrier had asked for the appointment of an IRP to look into the crisis. It also argued that if it loses possession of the aircraft and the legal right to operate them, then the continuation of business will be at stake.
The carrier said that it is seeking a comprehensive debt restructuring and that it is not a malicious petition to avoid payments of dues.
However, the aircraft lessors opposed the petition and said that the moratorium will have harmful and serious consequences going ahead.
“Not a case for the first day, first show relief to be granted,” lessors told the NCLT bench led by Justice Ramalingam Sudhakar, adding that they have terminated the leases and are entitled to get the aircraft back. There have been multiple defaults by Go First for maintenance and other expenses, lessors said.
On Monday, Go First requested the tribunal to pass an order on the same urgently. It cited lessors’ attempts to take back its planes. Go First lawyers told the tribunal to pass an order urgently as lessors had moved to repossess the planes even as the insolvency proceedings are underway. GY Aviation Lease, SMBC Aviation Capital and Pembroke Aircraft Leasing submitted requests to the aviation regulator to take back at least 20 planes.
According to the bankruptcy filing by Go First, the carrier’s total liabilities to all creditors, including banks, financial institutions, vendors and aircraft lessors was Rs 11,463 crore. Banks such as Bank of Baroda, IDBI Bank, Central Bank of India and Deutsche Bank are among Go First’s financial creditors.
Under a consortium loan set-up, the Central Bank of India and Bank of Baroda have an exposure of Rs 1,300 crore. IDBI Bank has a smaller exposure of Rs 50 crore, the bankruptcy filing showed. A Reuters report said that Central Bank of India’s total exposure to the airline was around Rs 2,000 crore.
However, Axis Bank, in a statement to stock exchanges, clarified that it has no outstanding exposure to the airline.
On May 2, in its bankruptcy filing, the low-cost carrier said that it could no longer continue to meet its financial obligations and blamed engine maker Pratt & Whitney for its troubles and said that their faulty engines had resulted in the grounding of 50 per cent of its fleet consisting of 54 Airbus A320neos.
Go First’s airlines were powered by Pratt and Whitney’s PW-1100G geared turbofan (GTF) engines. Go First has been one of the first operators of the GTF PW1100G when the A320neo entered service with the airline in 2016.
Also read: Pratt & Whitney to oppose Go First’s push to enforce arbitration, says report
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