A bench headed by Chief Justice N V Ramana, while staying the publication of winding up notice and the order directing the official liquidator attached to the Madras High Court to take over the assets of the low-cost airline, questioned the approach of SpiceJet.
The Supreme Court Friday granted three weeks to SpiceJet to resolve financial dispute with Swiss firm Credit Suisse AG and stayed the Madras High Court order on its winding up, saying that it was a “serious matter” and the airlines cannot say it is a busy organisation and would not pay.
The bench, also comprising Justices A S Bopanna and Hima Kohli, took note of the submissions of senior advocate Harish Salve that SpiceJet would try to resolve the issue with the Swiss firm. “Senior counsel Harish Salve sought three weeks' time for trying to resolve the matter and Mr K V Vishwanathan (appearing for the Swiss firm) also agreed to the adjournment. Meanwhile, the high court order is stayed for three weeks,” the bench said in its order.
At the outset, Salve sought three weeks' time to sort out the dispute with the Swiss firm whose counsel did not oppose the plea for adjournment, but raised questions over the offer being made by the low cost airlines. “They are saying they want to make a serious offer. They can have three weeks. What is being offered now is not even worth mentioning,” Vishwanathan said.
“What is this? Do you want to run or close the shop ...you better produce your financial status. It is not the way to run your airlines. You cannot say that you are a busy airline and I do not want to pay anybody,” the bench observed. “You see this a serious matter. If you do not want to run the airline then we will declare that you are insolvent and go for the liquidation,” it said.
Salve said SpiceJet would try to “sort” it out in three weeks with the Swiss firm leading the bench to grant the time and stayed the operation on order of the single judge bench of the high court. SpiceJet moved the apex court against the January 11 order of a division bench of the high court upholding a recent verdict of the single judge ordering its winding up and directing the official liquidator attached to the high court to take over the assets.
Credit Suisse AG had moved the single-judge bench of the high court alleging that SpiceJet failed to honour its commitment to pay the bills for over USD 24 million raised by it towards maintenance, repairing, and overhauling of the aircraft engines and components. The top court, on January 25, had agreed to hear on Friday the plea of the low cost airline against the high court order. The division bench had rejected the appeal of SpiceJet holding that it did not make out any ground to entertain the appeal.
While dismissing the appeal against the December 6, 2021 order of the Company judge Justice R Subramaniam, the division bench, however, had extended the operation of the interim stay granted by the single judge till January 28 to enable the airliner to prefer an appeal before the Supreme Court. The single judge had suspended the operation of his order for a limited period with a direction to the company to remit USD 5 million as a condition precedent to avail the interim relief.
Originally, while allowing the company petition from Credit Suisse AG, the stock corporation registered under the laws of Switzerland, the single judge had held that the airline had miserably failed to satisfy the three-pronged test suggested by the Supreme Court in a similar case and hence had rendered itself liable to be wound up for its inability to pay its debts under Section 433 (e) of the Companies Act 1956.
The company petition, filed by the Swiss firm, had prayed for winding up of SpiceJet under the provisions of the Companies Act, 1956 and appoint the Official Liquidator of the High Court as the Liquidator of SpiceJet with all powers under Section 448 of the Companies Act to take charge of its assets, properties, stock in trade and books of accounts.
According to the Swiss firm, SpiceJet had availed the services of SR Technics, Switzerland, for maintenance, repair, and overhauling of aircraft engines, modules, components, assemblies, and parts, which were mandatory for its operations. An agreement for such services for 10 years was entered into between SpiceJet and SR Technics on November 24, 2011. The terms of payments were also agreed upon.
On August 24, 2012, a supplement pact was also entered into to change certain terms of the agreement. The amendments included an extension of time for payment of money due under various invoices raised by SR Technics and also a deferred payment scheme. As there was a general increase in the cost, the 2012 supplemental agreement included adjustment of flight hour rates, and escalation provisions were also made. The Swiss firm had been making repeated requests to SpiceJet to make payments under the various invoices.
Since it did not honour its commitment under the agreements with SR Technics and that it was not in a position to meet its financial obligations, the Swiss firm had issued a statutory notice. As there was no response, it preferred the company petition before the High Court to wind up SpiceJet and obtained a favourable order.
Aggrieved, SpiceJet preferred the appeal before the Division bench which came to be dismissed on January 11. SpiceJet contended it had entered into an agreement with the Swiss company for a period of 10 years in 2011. However, midway, it discovered that the aircraft maintenance company did not have a valid authorisation from the Director-General of Civil Aviation between January 1, 2009, and May 18, 2015, the airline had said in its appeal.
The single judge had wrongly assumed SpiceJet had entered into the agreement despite knowing about the absence of DGCA approval and held that it could have terminated the agreement midway once it came to know of the absence of the official authorisation, the low-cost airline had said.
Termination was not a mandatory requirement. Once it (SpiceJet) came to know the fact, it stopped payments. There was no finding in the arbitral award that the air carrier was aware of the non-approval even before entering into the agreement, the appeal said, adding that an 'illegal claim' for dues would not come under the definition of 'debts' as stated in the Companies Act, it had said.
With inputs from PTI.