NCLAT Chennai Stays Insolvency proceedings Against Charter Aircraft Service Provider 'Deccan Charters'

Deccan Charters is a Bengaluru based company which operates chartered helicopters and fixed wing aircrafts and also provides services such as aircraft maintenance, aircraft management and aviation training.

Background Facts

Deccan Charters Pvt. Ltd. (“Corporate Debtor”) is engaged in the business of chartered helicopters and fixed wing aircrafts, aircraft maintenance, aircraft management and aviation training. The Corporate Debtor is promoted by Captain G.R. Gopinath.

In 2017, Shaishav Shah & Family (GSEC) and Himanshu Shah & Family (Monarch Group) expressed their interest to participate in Commuter Airline Business of the Corporate Debtor, known as 'Air Deccan'.

Accordingly, GSEC-Monarch formed a Joint Venture company named as GSEC Monarch Deccan Aviation Pvt. Ltd. (“GMDAPL”).

In 2018, the Corporate Debtor availed a loan of Rs. 5 Crores from Krone Finstock Pvt. Ltd. (“Financial Creditor”). The Loan Agreement stated that the borrower shall not assign any of its obligation without prior approval of the Lender.

In 2019, the Corporate Debtor and GMDAPL entered into a Business Transfer Agreement (“BTA”). Under the BTA, GMDAPL agreed to undertake 100% of assets and liabilities of “Air Deccan” and settle the loan availed by the Corporate Debtor.

On 04.05.2022, the Financial Creditor filed an application under Section 7 of IBC seeking initiation of Corporate Insolvency Resolution Process (“CIRP”) against the Corporate Debtor, over a default of Rs. 9,82,24,077/-.

The Corporate Debtor argued that the debt repayment obligation has been transferred to GMDAPL as per the BTA. The Corporate Debtor had intimated the Financial Creditor regarding the transfer of business to GMDAPL and no objections were received. Therefore, the transfer of business and obligations is deemed to be approved by the Financial Creditor. The Corporate Debtor further argued that the NCLT cannot adjudicate upon contractual disputes between the parties.

Proceedings Before NCLT

The NCLT observed that the case did not concern adjudication of dispute pertaining to validity and cancellation of the Business Transfer Agreement. Further, the existence of a dispute is immaterial in proceedings under Section 7 of IBC.

On 05.04.2024, the NCLT initiated CIRP against the Corporate Debtor and appointed Mr. Manish Kumar as the Interim Resolution Professional.

Thereafter, the Suspended Director of the Corporate Debtor, Mr. Sanjay Saihgal (“Appellant”) filed an appeal against the NCLT order dated 05.04.2024.

NCLAT Verdict

The Bench stayed the CIRP while directing the Interim Resolution Professional to not to proceed with the CIRP until next date of hearing.

The Financial Creditor has been directed to file its Reply to the appeal. Following which, the Appellant has been given liberty to file Rejoinder. The next date of hearing is 26.04.2024.

Case title: Sanjay Saihgal v Krone Finstock Private Limited & Anr.

Case No.: Company Appeal (AT) (CH) (Ins) No.123/2024

Counsel for Appellant: Mr. P.H. Arvindh Pandian, Sr. Advocate, For Mr.Pawan Jhabakh, Advocate Mr. Jerin Asher Sojan, Advocate Mr. K.M. Ashif, Advocate.

Counsel for Respondents: Mr. R. Murari, Sr. Advocate-R1 Mr. Anshuman, Advocate -R2.

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