The National Company Law Tribunal on Wednesday admitted Wadia-owned Go First for insolvency proceedings and appointed Abhilash Lal of Alvarez and Marsal as the interim resolution professional (IRP). Meanwhile, SMBC Capital, one of the lessors to Go First, moved an application with the NCLAT against the said order.
The Delhi Bench, chaired by Justice Ramalingam Sudhakar and LN Gupta, also imposed a moratorium under Section 14 (1) of the Insolvency and Bankruptcy Code (IBC) to protect and maximise the value of the assets in line with the objectives of IBC, employment and larger public interest. The IRP has also been directed to ensure that retrenchment of employees is not resorted to as a matter of course.
“I think it’s a historic. Millions of prayers have been heard... I think it’s also historic in the sense that the purpose of IBC is to preserve a viable business before it becomes unviable. Let’s work on the revival,” said Kaushik Khona, CEO of Go First, after the hearing. The board and management of the airline have been suspended, and the bench has directed the board to deposit ₹5 crore with the IRP to meet the immediate expenses of the corporate insolvency resolution process.
GoFirst has outstanding debt to a range of creditors, including banks, financial institutions, vendors and aircraft lessors, which amount to a total of ₹11,463 crore. Of this, ₹6,521 crore is owed to financial institutions. The airline has also defaulted on payments to operational creditors, which include ₹1,202 crore to vendors and ₹2,660 crore to aircraft lessors.
According to sources, lenders have received protection for their assets, while lessors challenging the verdict could delay the resolution process. The account will be declared an NPA, but provisions will be made and stress is not expected due to strong collateral and government guarantees. The committee of creditors will also meet to decide on the resolution plan.
In its 41-page written order, the Bench addressed two main issues — whether there is a mandatory requirement of issuing notice to creditors before admitting an application filed under Section 10 of IBC and whether an application under Section 65 can be entertained even after the commencement of CIRP. The Bench said notifying every creditor can cause significant delays and reduce asset value, and hence, it is not mandatory, at the pre-admission stage, but discretionary based on valid reasons.
The Bench also noted that Go First needs to be considered as a “going concern” and that the IRP must take all necessary steps, including the execution of the arbitral award, to keep the airline afloat.