SMBC Capital has opposed the NCLT order admitting GoFirst’s insolvency petition, and filed an appeal in the National Company Law Appellate Tribunal (NCLAT). The matter will be heard on May 11.

The debt-strapped airline has been facing opposition from its lessors, including SMBC Capital, after it filed for insolvency on May 2. As of April 24, the airline had defaulted dues of $56,658,325 to SMBC Capital. Its total exposure towards lessors is to the tune of ₹2,600 crore. Its total exposure to all creditors stands at ₹11,463 crore. The airline owes ₹6,521 crore to financial institutions.

Lessors had objected to the insolvency proceedings at the National Company Law Tribunal (NCLT), arguing that they should be served notice and that their objections should be heard. However, the NCLT rejected the plea, stating that creditors do not have the right to intervene at the pre-admission stage of voluntary insolvency actions.

The NCLT maintained that conditions of debt and default are satisfied and, therefore, the petition must be admitted. It added that it is open for the lessors to prefer an application even after the commencement of insolvency. Despite the rejection, GoFirst’s lessors, including SMBC, are unhappy and have moved an application with the National Company Law Appellate Tribunal (NCLAT).

A lawyer representing the lessors, who requested anonymity, said: “We were expecting that the bench will give us a fair chance of being heard prior to admitting the matter, however, that hasn’t happened.” Dhiraj Mhetre, partner at Khaitan Legal Associates, noted: “Given the firm stand of the Tribunal qua the leasing companies, we can expect to see more litigation on this.”

Adverse impact

SMBC has moved an application to challenge the insolvency commencement order, citing the Cape Town Convention, an international treaty aimed at facilitating aviation equipment leasing between contracting states. Mhetre explained: “IBC is a special legislation and is clear on its moratorium provisions. No international treaty can supersede that.” The moratorium will hamper SMBC’s right to seek repossession of leased aircraft.

As of May 9, requests for deregistration of at least 45 of GoFirst’s 54 aircraft have been received. The airline’s lessors are likely to face further hurdles as it navigates insolvency proceedings.

According to industry experts, the GoFirst and Spicejet episode is likely to have an adverse impact on aircraft leasing in the market. In the near future, it is likely to increase lease rentals, they added.

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