Supreme Court Dismisses SpiceJet's Plea Against HC Order To Handover Aircraft Engines To Lessors

The Supreme Court today (September 20) refused interfere in the order of the Delhi High court which directed the cash-strapped airlines SpiceJet to return three aircraft engines for defaulting on payments to engine lessors.

The bench led by CJI DY Chandrachud comprising Justices JB Pardiwala and Manoj Misra was hearing an SLP by SpiceJet against the September 11 Order of the High Court's division bench upholding the grounding and handing over of the engines due to non-payment to its France based lessor companies.

The Impugned order had upheld the single bench's order granting interim relief to the lessors over the breach of agreement between the parties.

The bench was informed that 8.66 million dollars were already by SpiceJet with a shortfall of 2.67 million dollars. The airlines had asked for time till September 30 to pay the balance.

Referring to the interim agreement between the parties, which was relied by the High Court, CJI remarked that the consent agreement provided for a specific clause for the consequences of non-payment.

"The consent order provides a consequence, you have not paid full payment, they are entitled.."

The Counsel for SpiceJet further informed the court that negotiations are already underway with the lessors.

"We are ready to pay, infact we are in talks with them to pay ...we have never been defiant"

CJI reiterated the consent order before the High Court and said " why should you bargain, if you don't comply, you have to return the engines."

The bench while dismissing the matter suggested the parties to negotiate and come back on Monday to place on record if any reconciliation has happened.

" We will record what both of you have agreed"

While the counsels for SpiceJet objected to the dismissal, the CJI refused to entertain the petition any further, noting "We cannot interfere, it's correct order".

The Counsel for SpiceJet informed the bench that as of today, 2 of the 3 engines in question are grounded - a stand was required to be arranged to return them which would a month to be arranged. While on the other hand, the impugned order has directed the return within 15 days.

The Court dismissed the matter without granting liberty to SpiceJet to move an application before Trial Court with regards the above difficulty of delay in returning of the grounded engines.

Background

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.

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.

Case Details : SPICEJET LIMITED Versus TEAM FRANCE 01 S.A.S SLP(C) No. 21345-21346/2024

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