After the Madras High Court today ordered the winding up of private carrier SpiceJet Limited and directed the official liquidator to take over its assets, the homegrown airline said it's examining the order and will initiate appropriate remedial steps, including appeals before the appellate jurisdiction, in the time frame allowed by the court.
SpiceJet said it believes it has a "good case on merits" and is hopeful of having a favourable outcome in the appeal. The petition against SpiceJet was filed by Credit Suisse AG, a stock corporation registered under the laws of Switzerland.
Credit Suisse AG had said in its plea that SpiceJet availed of the services of SR Technics, Switzerland, for maintenance, repair and overhauling of aircraft engines, modules, components, assemblies and parts, for 10 years on November 24, 2011.
Credit Suisse AG initiated the petition as a purported assignee of SRT, claiming non-payment of amounts aggregating to $24.01 million under the agreement.
In a statement to the stock exchanges, SpiceJet said it opposed the petition because there's no "legally enforceable debt" as SRT didn't have the relevant Directorate General of Civil Aviation (DGCA) approval for providing these services.
"SRT made a fraudulent misrepresentation to the company of having applicable DGCA approval for providing the services. The company raised a bona fide dispute claiming that the provision of engine maintenance without DGCA approval is contrary to Indian and other applicable laws and voids the entire agreement. Since the agreement falls and is void, Credit Suisse as an assignee does not and cannot have any claim against the company," SpiceJet said.
The airline company said the Madras High Court, despite holding that SRT did not have a valid authorisation from DGCA to carry out engine maintenance during the currency of the agreement, rejected its defence and ordered its winding up and directed the official liquidator to take over its assets.
It also said, however, the Madras High Court via its order of December 6, 2021, was pleased to "stay the operation of the order for three weeks", subject to the condition that it deposits the amount equivalent to $5 million in two weeks.
As per the petitioner, SpiceJet had agreed to the terms of payments back in 2011 when the pact was signed. On August 24, 2012, a supplemental agreement was also entered into to change certain terms of the agreement. The amendments included an extension of time for payment of money due under various invoices and also a deferred payment scheme. Since there was a general increase in the cost, the 2012 supplemental agreement included adjustment of flight hour rates and provisions for escalation were also made, it said.
SR Technics had raised invoices and SpiceJet had issued seven bills of exchange for the monies due under the invoices. The petition said the airline also acknowledged the debts from time to time by issuing certificates of acceptance about the bills of exchange, which would imply the respondent had not disputed the correctness of the claim made in the invoices.
Credit Suisse AG, the petitioner in the case, had entered into a financing agreement in September 2012 with SR Technics, under which SR technics assigned all its present and future rights to receive payments to the petitioner company.
The petitioner said it made several requests to SpiceJet to make payments but it failed to honour its commitment, following which Credit Suisse moved the court. SpiceJet had contended the alleged debts are not legally enforceable and as such there cannot be a winding-up order under Section 433 of the Companies Act.
Rejecting these contentions, the judge said that a reading of certain Clauses in the agreement would show the parties to the contract are bound to fulfil all obligations, which occurred before the termination and it will not prevent either party from claiming against breach of any obligations under the agreement, including recovery of excess payments made by SpiceJet to SR Technics.
(With inputs from agencies)