Go First lessors move HC, seek deregistration of aircrafts by DGCA

Several aircraft lessors of Go First on Friday argued before the Delhi High court seeking de-registration of their aircrafts by the Directorate General of Civil Aviation (DGCA), after the crisis-hit airline filed for voluntary insolvency resolution proceedings before the National Company Law Tribunal (NCLT) resulting in a moratorium on the airline’s financial obligations .

The NCLT had placed a moratorium on the Wadia group airline’s financial obligations and recovery of aircraft by lessors in its decision on May 10 which was subsequently upheld by the National Company Law Appellate Tribunal (NCLAT) on May 22.

The lessers sought deregistration and repossession of 20 aircrafts leased to Go First airline under the provisions of Irrevocable Deregistration and Export Request Authorization (IDERA) after the NCLT reserved its verdict, as per filings posted on DGCA website.

Appearing for one of the lessors, EOS Aviation 12 (Ireland) Limited, senior advocate Dayan Krishnan submitted before a single judge bench of Justice Tara Vitasta Ganju, “Question is on the deregistration of our aircrafts. We are the lessors; we had terminated it before any insolvency had taken place. Under the aircraft rules, this is a matter where there is no discretion left with the DGCA. It has been covered by a coordinate bench judgment which interprets the rules…The Insolvency Bankruptcy Code (IBC) or the NCLAT has no jurisdiction with respect to deregistration. That is a matter between me and the DGCA. It is covered by aircraft rules which IBC has no jurisdiction to decide…”.

Appearing for another lessor, senior advocate Mukul Rohatgi said, “The DGCA is not a party in the NCLAT proceedings. It is my property. The Interim Resolution Professional (IRP) under Section 18 of IBC has no power to take over the asset from a third party. Other side is now represented by an IRP who has stepped in due to a voluntary admission of a winding up of Go First…”.

Rohatgi referred to Section 18 of the The Insolvency and Bankruptcy Code, 2016 which pertains to the “duties of interim resolution professional” (IRP). He pointed to the explanation which states that that term “assets” in the section shall not include assets owned by a third party in possession of the corporate debtor held under trust or under contractual arrangements. It shall not include any assets of any “Indian or foreign subsidiary of the corporate debtor” and shall also not include assets notified by the Centre in consultation with any financial sector regulator.

Among other reliefs, Rohatgi prayed “for a limited prayer” that the aircrafts must be “deregistered mandatorily in 5 days” referring to a judgment of coordinate bench of the HC and further submitted that “this so-called rejection on the ground of NCLT proceedings is completely ultra vires the powers of DGCA”. The HC after hearing the petitioner lessors for over an hour listed the matter for May 30 for hearing the submissions of the respondents.

The NCLAT had said that the lessors were free to raise their claims regarding the termination of aircraft leases before the NCLT. They had claimed that they were not properly heard by the NCLT when it admitted Go First’s voluntary insolvency plea. The admission of the bankruptcy plea led to a moratorium coming into play automatically. The moratorium prohibits recovery of any asset in possession of the corporate debtor by the owner of the asset (aircraft in this case). The NCLAT also allowed IRP Abhilash Lal to continue operating Go First in accordance with the NCLT order, which said the airline’s status as a going concern should be maintained.

Between May 4 and May 9, lessors sought de-registration and repossession of 45 of Go First’s fleet of 55 aircraft. Go First stopped flying from May 3.

The lessors asked the DGCA to allow them to repossess and fly out the planes using their IDERAs. An IDERA empowers lessors to get their aircraft deregistered from the registry of the country where the lessee is based, repossess them, and fly them out, in cases like lease payment defaults. As per norms, aviation regulators are required to deregister the aircraft and allow the lessors to repossess them within five working days of a request being filed.