New Delhi: A division bench of the Madras High Court Tuesday upheld a December order by a single judge directing the winding up of SpiceJet Airlines after it failed to repay a debt of over $24 million.
The court was hearing an appeal by the airline to set aside the single-judge order to wind up the company and on the appointment of a provisional liquidator.
The matter pertains to a debt of more than $24 million that SpiceJet owes Swiss financial services company, Credit Suisse, with respect to engine maintenance services provided to the airline by a firm called SR Technics for over a decade.
The division bench of Justices Paresh Upadhyay and Sathi K.S. Kurup dismissed the appeal, holding that there was no reason to interfere with the winding-up order.
It dismissed the two contentions submitted by SpiceJet.
The first was that the documents submitted by the creditor were not stamped and therefore were inadmissible in India, and, hence, the court could not take on record anything submitted by Credit Suisse.
Secondly, SpiceJet said the dues regarding SR Technics could not be maintained since the company did not have the requisite licences or approvals from India’s Directorate General of Civil Aviation (DGCA) to maintain such engines.
The court also dismissed a volume of cases cited by the airline in its defence, noting that they were of no substance to the proceedings.
“None of the said authorities would help the appellant. Further, none of the said authorities would make the order of the company court, admitting winding-up petition and appointment of official liquidator as provisional liquidator, unsustainable. Those authorities do not need any discussion beyond this. These appeals need to be dismissed,” said the court.
However, it extended the stay granted to the airline to 28 January, giving it time to challenge the current order in the Supreme Court.
In 2015, Credit Suisse had approached the Madras High Court after receiving no response to a notice it had sent to SpiceJet regarding the debt, as required under the Companies Act, 1956. The creditor sought winding up the company under provisions of the Act.
On 6 December, Justice R. Subramaniam had ordered the winding-up of the airline. He had also appointed a liquidator to handle its finances. Every high court has a single-judge bench hearing company court matters.
The winding-up process allows the liquidator to sell off stocks, pay off the creditors, and distribute the assets to partners and shareholders.
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The arguments
In its appeal, SpiceJet had denied the debt, claiming that there was “no bonafide dispute” as to the said payment, and therefore the company could not be wound up according to the provisions of the Companies Act.
Meanwhile, Rahul Balaji, the advocate representing Credit Suisse, said the order on winding up and appointment of the liquidator was not erroneous in any manner. He submitted that the court must not interfere with the winding-up proceedings, as noted in the division bench’s order.
Balaji submitted that, in December 2021, he had filed before the single-judge bench of the high court, several documents providing evidence of the debt owed by SpiceJet to the Swiss corporation. Credit Suisse was entitled to recover the monies from SpiceJet, and such a claim was bonafide, he further submitted.
‘Appellant blows hot & cold to suit convenience’
The division bench held that there were no grounds of interference with the single-judge bench’s December order to wind up SpiceJet Airlines.
Dismissing the contention regarding the “unstamped” documents, the court held that it need not go into the same at this stage. Referring to earlier decisions of the Bombay and Madras high courts, it held that whether the documents were stamped or not is not an issue at all.
“The only point to be verified is whether the debt is bonafide disputed and whether the said defence is a substantial one. Applying this test, keeping in view the binding decision in this regard, which is referred to by the company court in the impugned order… such a defence cannot be said to be a bonafide defence and at the stage of admission of the petition, it need not be gone into,” the court further said.
The bench also dismissed the contention that lack of licences for engine maintenance from the DGCA obviated the debt.
Terming SpiceJet’s contention of lack of knowledge about licences a “show”, the bench noted several instances from the past where the airline was completely aware of the lack of such licences. It referred to international arbitration proceedings where the company had admitted the lack of licences with the provider.
“Record shows that the appellant company (SpiceJet) blows hot and cold together to suit its convenience,” said the court, while additionally noting a 2020 communication from the DGCA.
Akshat Jain, a first-year student of law at NLU, Delhi, is an intern with ThePrint.
(Edited by Gitanjali Das)
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