NEW DELHI/MUMBAI: The New Delhi bench of the National Company Law Tribunal (NCLT) on Wednesday granted bankruptcy protection to Go First, giving the country’s third largest carrier a shot at survival.
It has appointed Abhilash Lal of Alvarez & Marsal as the interim resolution professional to take over the management and board of Go First. It also directed the company’s suspended board to cooperate with Lal to ensure there are no employee layoffs. Go First, founded by textile tycoon Nusli Wadia, has 7,000 staff.
Further, it ordered a moratorium on the carrier’s assets and leases. NCLT’s biggest relief to Go First has been to prohibit “recovery of any property by an owner or lessor, where such property is occupied by or in the possession of the corporate debtor”. This will prevent the 45 aircraft for which lessors had filed repossession applications with the DGCA from being taken back at least for six months.
A big lessor, SBMC Aviation Capital, is learned to have already challenged this order in NCLAT and others could do the same. Go First has 55 aircraft in its fleet. The airline had blamed US engine maker Pratt & Whitney for its financial crisis, which led it to file for bankruptcy protection. It subsequently cancelled all its flights. It is not yet known when and if the airline will start flying again and with what fleet size. Due to the uncertainty over operations, the DGCA has barred the airline from selling tickets.
Go First is learned to be planning to resume flights on May 24 with a reduced fleet of 23 planes. However, it will need the DGCA’s nod to do so by convincing the regulator that it has the financial resources to resume operations safely and also the new management needs to reply to the show-cause notice based on which the regulator will take a call on the airline’s licence.
After the resolution professional takes charge of Go First’s affairs, he will have to call for claims from creditors for the purpose of constitution of the committee of creditors, said Dhir and Dhir Associates’ associate partner Ashish Pyasi. “Simultaneously, he will have to ensure that the company remains a going concern and business operations continue so that there is a maximisation of value of assets.” Pyasi said the resolution professional will also have to expedite the other process related steps so that resolution plans can be called at the earliest.
In its 41-page order, the NCLT said: “In view of the unpaid debt subsisting above Rs 1 crore and default committed towards the same, and Go (First) being not disqualified under Section 11 of IBC, we have no other option but to admit the present application.”
It also asked the management to deposit Rs 5 crore for immediate expenses.
Go First, in its application filed before the NCLT, had said that it had won an arbitration case against P&W in Singapore that ordered the American firm to supply spare engines to the airline but the latter had failed to comply with it. Subsequently, it initiated enforcement proceedings against P&W in a Delaware court as well as in other relevant jurisdictions. P&W plans to oppose the move, according to a Delaware court filing seen by Reuters. NCLT has directed the resolution professional to take all necessary steps, including the execution of the arbitral award, to keep Go First as “a going concern” and run its services smoothly.