NCLT Delhi Admits Go Airlines Into Insolvency, Directs IRP To Ensure Employees Are Not Retrenched

Background Facts

M/s Go Airlines (India) Limited (“Corporate Applicant/Corporate Debtor”) is engaged in the business of Airlines and is the third largest airline operator in India. It has been running a low-cost Airline service under the brand name ‘Go Air’ for the past 17 years and holds license issued by the Directorate General of Civil Aviation (DGCA) for carrying out commercial air operations in India. In May 2021, GoAir was renamed as ‘GoFirst’. The Corporate Debtor has an employee strength of about 7000 direct and 10,000 indirect employees. Moreover, it serves critical airports such as Leh & Port Blair and is the largest operator in Jammu & Kashmir.

Pratt & Whitney (“P&W”) had supplied defective engines to the Corporate Debtor due to which the latter’s several aircrafts were grounded and could not take off. &W declined to provide any repair or replacement to the Corporate Debtor. The matter was referred to an emergency arbitration before the Singapore International Arbitration Centre (SIAC), wherein the Emergency Arbitrator passed Awards dated 03.02.2023 and 15.04.2023, directing P&W to supply 10 serviceable engines by 27.04.2023 and 10 serviceable engines each month till December 2023. However, the Awards were not complied with by P&W and enforcement proceedings are pending adjudication.

For this reason, the Corporate Debtor was constrained to cancel 4,118 flights with 77,500 passengers in the last thirty days. The Corporate Debtor filed a petition under Section 10 of the Insolvency and Bankruptcy Code, 2016 (“IBC”), voluntarily seeking initiation of the Corporate Insolvency Resolution Process (“CIRP”) against itself. On 02.05.2023, the DGCA issued a Show Cause Notice to the Corporate Debtor on the issue of cancellation of flights scheduled on 03.05.2023 and 04.05.2023.

When the petition under Section 10 of IBC was being heard, an objection was raised that a notice must be issued to the creditors of the Corporate Debtor before admitting the said petition, to enable them to raise objections. Further, the Operational Creditors of the Corporate Debtor also expressed their willingness to file an application under Section 65 of IBC for seeking reliefs. It was contended that application under Section 65 of IBC must be heard prior to adjudication of petition filed under Section 10.

NCLT Verdict

The first issue before the Bench was “Whether there is any mandatory requirement of issuing notice to the Creditors before admitting an Application filed under Section 10 of IBC 2016?”

It was held that under Section 10 of IBC there is no mandatory requirement of issuing notice to the Creditor(s) at the pre-admission stage, rather giving notice to the Creditor(s) is a matter of discretion to be exercised on a case-to-case basis on valid grounds.

The second issue that emerged for consideration is “Whether an Application under Section 65 can be entertained even after the commencement of CIRP?”

The Bench held that there is no bar in entertaining/considering/adjudicating a Section 65 Application after the initiation of the CIRP.

Further, the Bench observed that the existence of debt and default being proved; the petition being complete in terms of Section 10(2) and 10(3) of IBC; and the Corporate Debtor/Corporate Applicant not being ineligible under Section 11 of IBC, the petition is liable to be admitted. Accordingly, the petition under Section 10 of IBC has been admitted and CIRP has been initiated against the Corporate Debtor. Moratorium under Section 14 of IBC has been imposed and Mr. Abhilash Lal has been appointed as the Interim Resolution Professional (“IRP”).

The Bench has given the following specific directions on the issue of retrenchment of employees:

“(c) The IRP also shall ensure that retrenchment of employees is not resorted to as a matter of course. In any event, any such decision/event should be brought to the attention of this Adjudicating Authority.”

Further, the Suspended Board of Directors and Ex-Management of the Corporate Debtor have been directed to extend all necessary support and cooperation to the IRP to maintain the status of Corporate Debtor as a “a going concern” and running its operations/services smoothly.

Case Title: Go Airlines (India) Limited

Case No.: Company Petition No. (IB)-264(PB)/2023

Counsel for Applicant: Sr. Adv. Neeraj Kishan Kaul, Sr. Adv. P. Nagesh Sr. Adv. Diwakar Maheshwari, Adv. Pranjal Kishore Adv. Roohan Kelkan, Adv. Deepak Joshi, Adv. Akshay Sharma, Adv. Mr. Lalit Mohan.

Counsel for Lessor: Sr. Adv. Arun Kathpalia, Mr. Pranay Gogal, Mr. Chiranjivi Sharma, Mr. Kshitij Wadhwa, Mr. Aditya Dhupar, Mr. Arvinder Nath, Mr. Ankit Garg.

Counsel for Others: Mr. Ritesh Singh, Mr. Ajay Kumar, Ms. Gurnoor Kaur, Advs. for Unsecured Creditors ELFC, Jackdon Square Aviation, Minshing Finance Leasing Co. Ltd., Bank of China Aviation.

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