High Court directs liquidator to take over SpiceJet’s assets for unpaid dues

New Delhi: The Madras High Court has directed no-frills carrier SpiceJet Limited to wind up its operations after the airline failed to make payment of over $24 million to a Swiss company SR Technics for maintenance, repair and overhauling of aircraft engines, modules, components, assemblies and parts.

Justice R Subramanian, who passed the order on Monday, directed the official liquidator to take over the assets of the airline.

“I am therefore of the opinion that this Company Petition should be allowed and the respondent Company directed to be wound up,” Justice Subramanian said in the order.

“The Official Liquidator is directed to take over the assets of the respondent Company,” he added.

A copy of the court order has been reviewed by Mint.

The order further said that if SpiceJet fails to pay the debt demanded under the said notice within three weeks, a company is deemed to be unable to pay its debts.

“In view of the presumption of inability to pay created under Section 434 of the Companies Act, an order for winding up should automatically follow, unless the debtor Company is able to show that the debt itself is unenforceable or that there is a bona fide dispute,” it added.

The petition was filed Credit Suisse AG, which has been mandated to receive pending dues, on behalf of SR Technics.

According to the petitioner, SpiceJet had reached an agreement with SR Technics for maintenance, repair and overhauling (MRO) services for a period of 10 years on November 2011.

Both parties further entered into a supplemental agreement in August 2012 to change certain terms of the agreement, which included extension of time for payment of money due under various invoices raised by SR Technics and also a deferred payment scheme.

“Upon provision of the services under the agreement, SR Technics had raised invoices and the respondent had issued seven bills of exchange for the monies due under the invoices. The respondent also acknowledge(s) the debts from time to time by issuing certificate of acceptance in relation to the bills of exchange which would imply that the respondent had not disputed the correctness of the claim made in the invoices,” the order said.

“The petitioner (Credit Suisse AG on behalf SR Technics) has been making repeated requests to the respondent (SpiceJet) to make payments under the various invoices. Since the respondent did not honour its commitment under the agreements with the SR Technics and the petitioner reliably learnt that the respondent is not in a position to meet its financial obligations, the petitioner issued a statutory notice,” the order said.

“It neither evoked any response nor did the respondent Company pay the monies due under the various invoices. Claiming that the failure on the part of the respondent to pay the monies due, despite issuance of a notice under Sections 433 and 434 of the Companies Act, 1956, would tantamount to inability to pay the debts making the respondent liable for winding up under Section 433 (e) of the Companies Act 1956, the petitioner has come up with this Company Petition,” it added.

SpiceJet reported its seventh consecutive consolidated quarterly loss of about 571 crore during the three-month period that ended on 30 September.

Mounting losses have resulted in complete erosion of the airline’s net worth, with its liabilities exceeding its assets by 6,123.73 crore at the end of 30 September, the auditors of the airline, Walker Chandiok &.Co LLP said in the result statement.

Meanwhile, SpiceJet is also facing a lawsuit by aircraft lessor Goshawk and its trustee Wilmington Trust SP Services Dublin Ltd regarding unpaid dues at the Delhi High Court which is set to hear the case next on 14 December.

When contacted, a SpiceJet spokesperson didn’t immediately offer comments.

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