The filing of voluntary insolvency proceedings by the promoters of Go Air in May 2023, being a first of its kind, gained a lot of limelight and the National Company Law Tribunal acted swiftly to admit the insolvency proceedings within a span of 10 days from the date of filing of the insolvency plea. At the time of initiation of proceedings against Go Air, the promptness on the part of the Promoters was being considered significant to assist an ailing airline company which stood grounded as on the date of initiation of insolvency proceedings. The insolvency proceedings as on the date of initiation of proceedings was an attempt on the part of the promoters to insulate the company from coercive recovery actions looming over the Company and was a practical instance wherein the litmus test as regards applicability of insolvency laws acting as “shield of protection” was brought to the forefront. Even though the promoters of Go Air managed to protect the Company from immediate coercive recovery action, the entire object of resolution of the Company still eludes the stakeholders as on date.
The review of economic and market scenarios around the above-mentioned insolvency proceedings cannot be oblivious to the impact of Covid-19 pandemic which had a far more severe impact on airlines world over. Various operating airlines around the globe during the said period reduced their operations by limiting flight operations and employees on the role of such companies. It is also a matter of public knowledge that various global airlines completely closed operations and proceeded with bankruptcy filings in the aftermath of Covid pandemic. The Indian aviation sector was also not left untouched and the crippling effect of Covid-19 pandemic finally took a tool on the Indian Aviation Sector and “Go Air”, operating primarily within the Indian sub-continent, was also relegated to proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC).
As a matter of fact, when Go Air filed proceedings under the Code in May 2023, the faulty engines of “Pratt & Whitney” were said to be the primary reason resulting in halting half of the operating flights of Go Air. The faulty engines while being one of the major contributories of the insolvency cannot be considered as the sole denominator instigating insolvency proceedings in the case of Go Air since Go Air admittedly sits on total debt of around INR 115 billion as duly admitted by the Resolution Professional. The promoters at the initial stage while moving insolvency proceedings had claimed that the Company did not have any pending obligations towards its financial lenders but have certain operational dues which were proposed to be resolved through a revival plan and immediate re-start of its operations.
However, as time progressed, in the insolvency proceedings of Go Air, claims of Financial Creditors were received amounting to approximately INR 65 billion. The insolvency proceedings on a day to day basis brought to forefront the intricacies and complexities involved in resolution process of a non-operating airline company particularly as regards refund of booked tickets, rights over leased aircrafts, grant of necessary approvals from Regulator, to name a few. Since its inception, the insolvency resolution process of Go Air has been witnessing contentious issues as regards the claim of the lessors to take back the aircrafts, treatment of third party claims, requirements of meeting necessary regulatory compliances while simultaneously salvaging and protecting the Company’s assets including litigation against Pratt & Whitney. The non-availability of funds to meet the operating expenses has resulted in loss of technical and professional staff, thereby gravely prejudicing the resolution process.
The fulcrum of insolvency proceedings, specially in the Indian context, hinges on resolution as both economic and social requirements of our Country require continued operations of business entities specially companies operating in aviation sector which is a key player in the development of India at the moment. The recent decision of the National Company Law Tribunal granting an additional period of 60 days to the creditors of the struggling aviation company, “Go Air” to complete the ongoing insolvency proceedings subsequent to receipt of two bids by Spice Jet, MD Ajay Singh with Busy Bee Aviation and Sky One has given a glimmer of hope to the lenders as well as the third party stakeholders including the general public. This extension of 60 days takes the insolvency proceedings of Go Air to the maximum period of 330 days within which the resolution process is required to be completed under the provisions of the Code failing which the Company can be sent to liquidation proceedings. Time is of essence for resolution of a company as enshrined in the Code and gains all the more significance in the resolution of an airline company. Airline Companies over a period of time after being grounded loose critical landing and parking slots, licenses and applicable approvals from the various International Associations for smooth operations ultimately placing the company at no point of return.
The swift and decisive action from the stakeholders is now warranted as the coming 60 days are critical for the ultimate turnaround of the Company. Form here there are only two scenarios, either approval of a Resolution Plan or liquidation of the Company.
In the end, the success of the insolvency laws will ultimately lie in giving wings to “Go Air” to capture the sky again.
Varsha Banerjee is a Partner at Dhir & Dhir Associates. Views expressed are strictly personal.
