Delhi High Court Declines To Interfere With Single Judge Order Directing SpiceJet To Ground Aircraft Engines Due To Non-Payment Of Dues

In a setback to debt-ridden low-cost airline company SpiceJet, the Delhi High Court refused to interfere with the Single Judge order directing SpiceJet to ground three aircraft engines for defaulting on payments to engine lessors.

Granting a specific relief to the France-based aircraft engine suppliers/lessors, the Single Judge of the High Court by order dated 14.08.2024 has directed SpiceJet to ground the three engines and restrained it from further using the engines. The court also directed SpiceJet to deliver the engines to the lessors at their place where the cost incurred in delivery would be borne by SpiceJet.

The lessors secured relief against the non-payment of the outstanding rental amount for the use of engines by SpiceJet. As stated in the Single Judge order, there was an outstanding debt totalling Rs. 4.8 million USD to be paid by SpiceJet for which the lessor approached the High Court seeking specific performance of the agreement which stated that upon non-payment of the debt amount the lessee/SpiceJet needs to ground the engines.

Upholding the impugned order, the bench comprising Justices Rajiv Shakdher and Amit Bansal observed that if Team France and Sunbird France (lessors herein) are prevented from exercising their contractual rights at this stage, they could lose both their assets, i.e., the engines, and the money.

“In this case, clearly there is no dispute about the fact that the lease arrangement vis-à-vis the subject engines obtained between the disputants. The record reveals SpiceJet is in default, and past and current outstanding dues remain unpaid. At the risk of repetition, it must be stressed that SpiceJet has violated an agreed interim arrangement for payment of dues, which included a term that, upon breach, it would ground the engines that Team France and Sunbird France could then repossess.”, the Court observed.

The Court accepted the lessor's arguments that the case is made out for the grant of urgent interim and observed that SpiceJet is using the subject engines to the detriment of Team France's and Sunbird France's interests without recompense.

Further, the court noted that irreparable injury would be caused to the lessors because engines being depreciable assets would be of little use to Team France and Sunbird France if they were used without recompense. It also held that the balance of convenience lay in favour of the lessor as the repossession and export of subject engines upon a termination event occurring is a contractual right conferred upon Team France and Sunbird France under the engine lease agreements.

“As alluded to above, if Team France and Sunbird France are prevented from exercising their contractual rights at this stage, they could possibly lose both their assets, i.e., the engines, and the money.”, the court held.

“Clearly, in the facts and circumstances of the case, there has been no failure of justice. In any event, given that SpiceJet would have a second shot at raising these objections via its written statement, the impugned judgment and order, in our opinion, needs no interference.”, the court added.

The Court also rejected SpiceJet's argument regarding the jurisdictions of the Indian Courts to entertain such suits for specific performance and seeking an injunction. The bench stated that, at this point, there is no indication under the relevant Indian law that would prevent the court from ordering the repossession and export of the engines in question.

Accordingly, the Court dismissed the appeal.

Appearance:

For Petitioners Mr Amit Sibal, Sr Adv with Mr K Sasiprabhu, Mr Kartikeya Asthana, Mr Sanjeevi Seshadari, Mr Manan Shishodia, Mr Darpan Sachdeva and Mr Ankit Handa, Advs.

For Respondents Mr Rajshekhar Rao, Sr Adv with Mr Anandh Venkataramni, Mr Saket Satapathy, Mr Anubhav Dutta, Ms Mansi Tyagi, Ms Akshita Totla, Mr Rishit Vamadalal, Ms Vishkha Gupta, Mr Devvrat Singh and Mr J Shivam Kumar, Advs.

Case Title: SPICEJET LIMITED Versus TEAM FRANCE 01 SAS (and connected matter)

Citation: 2024 LiveLaw (Del) 1011

Click here to read/download the judgment