SC’s Call: Go First RP Appeal on Aircraft Inspection Denied?

In a significant development in the ongoing saga of cash-strapped airline Go First (formerly known as GoAir), the Supreme Court (SC) of India recently rejected the appeal by the airline’s Resolution Professional (RP) against a Delhi High Court order. The high court ruling had granted permission to the airline’s lessors to inspect the aircraft leased to Go First. This decision has generated considerable interest within the aviation industry and legal circles, raising questions about jurisdiction and the rights of lessors in the face of insolvency proceedings.

Go First, faced with financial constraints and technical difficulties due to the non-availability of engines from Pratt & Whitney, ceased its flight operations on May 3, 2023. Consequently, the airline voluntarily initiated Corporate Insolvency Resolution Proceedings (CIRP) under the National Company Law Tribunal (NCLT) on May 10, 2023. The move aimed to restructure the airline’s financial liabilities and navigate the challenging circumstances it found itself in.

However, the proceedings took an interesting turn when the Delhi High Court permitted the lessors of Go First to access and inspect the aircraft that they had leased to the airline. A division bench of the high court upheld this ruling, which prompted Go First to approach the Supreme Court seeking clarity on the jurisdictional issues and the status of around 30 aircraft and their engines.

Supreme Court’s Verdict

On Monday, the Supreme Court, headed by the Chief Justice of India, declined to intervene in the matter, citing that the proceedings were already before a single judge of the Delhi High Court. The bench emphasized that the single judge would not only address the jurisdictional issues but also oversee the day-to-day proceedings related to the case. The Supreme Court’s decision underscores the principle of judicial restraint and allows the lower courts to exhaustively consider the matter at hand.

Key Legal Points

1. Jurisdictional Dilemma: A central point of contention is the question of jurisdiction – whether the case should be heard by the NCLT or the Delhi High Court. Go First has been asserting that the NCLT holds jurisdiction over the case, while the high court has argued otherwise. This disagreement adds complexity to the legal landscape and necessitates a clear determination of which judicial entity possesses the authority to handle the case.
2. Lessor’s Rights: The Delhi High Court’s decision to allow the lessors to inspect the leased aircraft raises important questions about the rights of lessors during insolvency proceedings. The ruling acknowledges that lessors have a legitimate interest in safeguarding their assets and assessing their condition. This stance has implications for the broader aviation industry and the contractual relationships between airlines and lessors.
3. Principles of Insolvency: The initiation of CIRP under the Insolvency and Bankruptcy Code (IBC) is designed to provide a framework for resolving distressed entities’ financial difficulties. The case of Go First highlights the interplay between the insolvency framework, contractual obligations, and the rights of various stakeholders involved, including lessors, lenders, and passengers.
4. Consumer Protection: Go First’s RP seeking NCLT approval to refund passengers who had booked tickets for travel after May 3 demonstrates an important aspect of insolvency proceedings – ensuring consumer protection. This aspect highlights the delicate balance between resolving financial distress and addressing the interests of consumers impacted by the company’s insolvency.

Conclusion

The rejection of Go First’s RP’s appeal by the Supreme Court against the Delhi High Court’s order to allow lessors to inspect the aircraft brings to the forefront several intricate legal questions concerning jurisdiction, lessor’s rights, and the broader principles of insolvency resolution. As the case continues to unfold before the single judge of the Delhi High Court, it will likely contribute to shaping legal precedents that address the complex and evolving dynamics between the aviation industry and insolvency proceedings in India. Legal experts, industry stakeholders, and those concerned with the intersection of commercial law and the aviation sector will undoubtedly closely watch the outcome of this case.

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