Madras High Court orders liquidation of SpiceJet for unpaid dues

The Madras High Court has ordered the liquidation of private carrier SpiceJet Limited and ordered the official liquidator at the High Court to resume its assets, in a plea filed by a Swiss company for unpaid dues.

The court allowed a corporate claim from Credit Suisse AG, a joint stock company registered under the laws of Switzerland, which requested the liquidation of the Indian company under the provisions of the Companies Act 1956 and appointed the official liquidator of the High Court as the Liquidator with full powers under section 448 of the Companies Act to take over the assets, property, business actions and books of account of SpiceJet.

The “respondent company (SpiceJet) failed miserably to meet the three-part test suggested by the Supreme Court in Mathusudan Govardhandas & Co. v. Madhu Woolen Industries (P) Ltd. failure to pay debts under section 433 (e) of the Companies Act 1956, ”Judge R Subramanian said in his order on Monday and ordered the liquidation of the private carrier and the official liquidator of take back its assets.

According to the petitioner, SpiceJet had used the services of SR Technics, Switzerland, for the maintenance, repair and overhaul of aircraft engines, modules, components, assemblies and parts, which are mandatory for its operations. An agreement for the performance of these services for a period of 10 years was concluded between SpiceJet and SR Technics on November 24, 2011.

Payment terms have also been agreed. On August 24, 2012, a supplemental agreement was also entered into to modify certain terms of the agreement. The changes included an extension of the time limit for payment of sums due under various invoices as well as a deferred payment scheme. Since there had been a general increase in costs, the 2012 Supplementary Agreement provided for an adjustment in flight hour rates and provisions for escalation were also made.

In providing the services under the agreement, SR Technics had prepared invoices and SpiceJet had issued seven bills of exchange for amounts due under the invoices. It also acknowledged the debts from time to time by issuing certificates of acceptance relating to bills of exchange, which would imply that the Respondent had not disputed the accuracy of the claim made in the invoices.

The petitioner, namely Credit Suisse AG, entered into a financing agreement in September 2012 with SR Technics and, by virtue of a settlement agreement, the latter ceded all of its current and future rights to receive payments under the agreement to the petitioner.

The assignment included bills of exchange issued by SpiceJet in accordance with the 2011 agreement and the 2012 supplementary agreement. In view of the assignments made by SR Technics, the petitioner is entitled to receive payment of the amounts due in respect of seven invoices from Spicejet, the petitioner claimed.

The petitioner has repeatedly asked the airline to make payments on various invoices. As it has not honored its commitment under the agreements with SR Technics and SpiceJet is unable to meet its financial obligations, the petitioner has issued a formal notice. In the absence of a response, he preferred the company’s present petition to the High Court to wind up SpiceJet.

SpiceJet argued that the alleged debts are not legally enforceable and as such there can be no liquidation order under section 433 of the Companies Act. The petitioner is not a creditor of SpiceJet and in the absence of any contractual relationship between debtor and creditor, liquidation proceedings will not take place.

The agreements between SpiceJet and SR Technics do not authorize the assignment to this applicant. SR Technics also issued a notice under section 434 of the Companies Act in January 2015 and did not pursue the liquidation, argued and asserted that there was no obligation to pay the debt same.

Dismissing the claims, the judge said that a reading of certain clauses in the agreement would show that the parties to the contract are required to fulfill any obligations that arose before the termination and that will not prevent either of them. ‘other parties to complain about the breach of any obligation under the agreement, including the recovery of overpayments made by SpiceJet to SR Technics.

The above clause would make it very clear that if it were open to SpiceJet to terminate the contract for the reason that SR Technics did not have a valid authorization, the termination itself would not release SpiceJet from the obligations under the contract. before this termination takes effect.

Admittedly, SpiceJet did not choose to terminate the contract. He had continued to take advantage of the services.

“Therefore, in my opinion, he cannot now turn around and say that there is a violation of the provisions of the Aircraft Act or the CAR rules therein and therefore the liability has ceased. I therefore find that the respondent company failed miserably to meet the three-part test suggested by the Honorable Supreme Court in Mathusudan Govardhandas & Co. v. Madhu Woolen Industries (P) Ltd., supra, and was therefore liable to liquidation for its inability to pay its debts under section 433 (e) of the Companies Act 1956. I am therefore of the opinion that this petition from the company should be authorized and the respondent company should be liquidated. The official liquidator is responsible for taking over the assets of the respondent company, “the judge said.

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