In Absence Of Privity Of Contract, Servicer Of Aircraft Lessors Has No Locus Standi To File Insolvency Proceedings Against SpiceJet: NCLT Delhi
The National Company Law Tribunal (“NCLT”), New Delhi Bench, comprising of Shri Mahendra Khandelwal (Judicial Member) and Shri Rahul Bhatnagar (Technical Member), has held that a Servicer of Aircraft Lessors, who is neither a party in Aircraft Lease Agreements nor the issuer of invoices, has no locus standi to seek initiation of insolvency proceedings against Spicejet Ltd. in the capacity...
The National Company Law Tribunal (“NCLT”), New Delhi Bench, comprising of Shri Mahendra Khandelwal (Judicial Member) and Shri Rahul Bhatnagar (Technical Member), has held that a Servicer of Aircraft Lessors, who is neither a party in Aircraft Lease Agreements nor the issuer of invoices, has no locus standi to seek initiation of insolvency proceedings against Spicejet Ltd. in the capacity of an Operational Creditor.
The Bench has dismissed a petition filed under Section 9 of IBC by Willis Lease Finance Corporation, seeking initiation of Corporate Insolvency Resolution Process (“CIRP”) against Spicejet Ltd. for the amounts due to the Aircraft Lessors.
BACKGROUND FACTS
Spicejet Ltd. is engaged in affordable aviation business with domestic, international and charter flight facilities in India.
Willis Lease (Ireland) Limited, WEST III Engines (Ireland) Limited, West IV Engines (Ireland) Limited and West V Engines (Ireland) Limited (collectively, “Lessors”) have leased aircrafts to Spicejet by executing respective Lease Agreements.
Willis Lease Finance Corporation (“WLFC/Applicant”) acts as a 'Servicer' for the said Lessors. WLFC contended that it has been authorized by Lessors through Servicing Agreements to raise invoices on SpiceJet; direct SpiceJet to make payments to designated accounts; and enforce the rights of the Lessors under the Lease Agreements in event of a non-payment by due date. WLFC has asserted that SpiceJet was has at all times acknowledged its authority as a 'Servicer' of the individual Lessors.
On 04.11.2022, WLFC issued a Demand Notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) to Spicejet demanding payment of USD 10,905,169.83/-. Subsequently, WLFC filed a petition under Section 9 of IBC, seeking initiation of CIRP against Spicejet. However, the petition was withdrawn to exclude certain invoices which were barred by Section 10A of IBC.
Thereafter, WLFC filed a second petition under Section 9 of IBC but without issuing a second Demand Notice under Section 8 of IBC. The amount in default was Rs. 53,96,65,759/-.
SpiceJet argued that WLFC cannot maintain the Section 9 Petition in relation to debts falling due under different Lease Agreements and to four different Lessors.
NCLT VERDICT
The Bench noted that neither any of the Lease Agreements were executed or invoices were issued by WLFC. Further, the payment details mentioned in the invoices show that the payment were owed to the Lessors who had issued the invoices. The Bench observed that no debt was owed to WLFC and the amounts were due and payable to the Lessors instead.
“In light of the aforementioned clauses of the respective Lease Agreements executed between SpiceJet Limited and different Lessors, it can be concluded that the amount was due and payable to the respective Lessors and not the Applicant in the instant case. On bare perusal of Section 5 (21) of IBC, it is clear that 'Operational Debt' is a claim in respect of provision of goods or services which should be based on a contract duly entered between the Corporate Debtor and the Operational Creditor. Moreover, it is settled law that an Operational Creditor is a person to whom an operational debt is owed. However, in the instant case, there was no debt owed to WLFC, which is evident from the perusal of the Lease Agreements and Part IV of the petition itself states that the debt is due and payable under various lease agreements, which was executed by different lessors.”
It was observed that Section 5(20) of IBC defines an Operational Creditor to also mean a person to whom an operational debt has been legally assigned or transferred. However, the operational debt was neither owed nor legally assigned or transferred to WLFC by the Lessors.
“The Applicant in the instant case does not have any direct contractual agreement with SpiceJet as neither any goods or services have been provided by WLFC to SpiceJet nor there is any contractual relationship between the parties. WLFC itself admits in the Petition that it is only the Servicer and Administrative Agent of the respective lessors and has inter-se arrangement with lessors in form of 'Servicing Agreements'. Also, the Corporate Debtor in the instant case is not a party to such Servicing Agreements. Therefore, it is undisputedly concluded that the Applicant is not a 'Operational Creditor' in the instant case.”
The Bench held that WLFC has no locus standi to file petition under Section 9 of IBC since there is no privity of contract between WLFC and SpiceJet. The petition has been dismissed.
Case title: Willis Lease Finance Corporation v Spicejet Ltd.
Case No.: IB NO. 249/(ND)/2023
Counsel For Applicant: Mr. Virendra Ganda, Sr. Adv. with Mr. Ashim Sood, Mr. Rajendra, Ms. Priyanka Shetty, Ms. Ambareen Mujawar, Ms. Aakansha Mathur, Ms. Tanya, Advs.
Counsel for Respondent: Mr. Krishnendu Datta, Sr. Adv. with Mr. Sanjay Gupta, Ms. Sharmistha Ghosh, Mr. Kushagra Kaul, Mr. Rajat Sinha, Advs.