The Wadia Group may find it difficult to get approval if they apply to regain control of Go First under the Insolvency and Bankruptcy Code (IBC) rules unless 90 per cent of lenders agree to take the company out of the NCLT-led insolvency process.
Nadiya Sarguroh, Principal Associate, MZM Legal LLP, said the only way the promoters can bid is under Section 12A of the IBC which provides for a settlement between the erstwhile management and creditors.
By virtue of 12-A, NCLT can allow withdrawal of an application admitted for voluntary insolvency with the approval of 90 per cent voting share of the committee of creditors, she said.
The voluntary insolvency application can only be withdrawn by the applicant by approaching the NCLT through the interim resolution professional, she added.
‘Promoters ineligible’
Ateev Mathur, Partner, SNG & Partners, said promoters cannot bid for the assets of the corporate debtor in the Go First insolvency case. Section 29A of the IBC bars the promoters from the bidding process.
Also read: Go First account likely to be declared NPA in April-June quarter
The purpose of the ineligibility under Section 29A of IBC has been held by the Supreme Court to provide a sustainable revival and to ensure that a person who is the cause either by design or default cannot be a part of process of solution, said Mathur.
Raj Bhalla, partner at law firm MV Kini, said if the promoters get back the assets of the company, it will be for an absolute amount with no segregation of the amount of principal and interest and there is no question of waiver of interest during the moratorium period.
Also read: NCLT admits Go First’s insolvency petition, appoints IRP
If a promoter, who has not been barred from bidding for his company, undergoing insolvency proceedings and who has not been declared as willful defaulter, can also take back control of the company by using the provision of ‘scheme of arrangement’ under Section 230 of the Companies Act, she said.
Aashit Shah, Partner, JSA said the interest clock usually stops when the moratorium commences and creditors have to file their claims based on the debt (including accrued interest) amount on the date of CIRP commencement. If the promoter is a successful resolution applicant, he is not obligated to pay back the interest that was stopped during the moratorium period, said Shah.
Though Abhilash Lal of Alvarez & Marsal was appointed as interim resolution professional, it has to be ratified by creditors in 30 days as NCLT has appointed him at the corporate debtor behest, said a senior banker.
Even while most banks have classified the airline as a standard account, Central Bank of India has proactively made 15 per cent provisioning. Bank of Baroda, too, is likely to make similar provisioning. The bank will announce its Q4 FY23 results on May 16.
Also read: DGCA asks Go First to stop ticket sales
The airline has given a collateral of ₹1,500-2,000 crore to banks in the form of land, he said.
The issues with the airline seem to be more operational than financial related and if there is an impact, operational creditors are likely to be hit more than banks, said another banking source.
(With inputs from Anshika Kayastha)