On May 2, 2023, Go First filed a voluntary petition for insolvency in the Principal Bench of India’s National Company Law Tribunal (NCLT). This petition was heard last week, and the NCLT reserved their judgement. In light of the lessors wanting to deregister their aircraft, the airline management requested an early pronunciation of the decision. This was done today.
NCLT admits Go First’s plea for voluntary insolvency proceedings.
Today, on May 10, 2023, the NCLT admitted the application filed by Go First, seeking initiation of voluntary insolvency proceedings. The Principal Bench pronounced that a full moratorium is applicable for the company.
The Tribunal appointed Abhishek Lal, backed by Alvarez and Marsel, a global professional services firm, as the interim resolution professional (IRP) until the Committee of Creditors (CoC) appointed the resolution professional. Amongst other orders issued by the NCLT, it directed the board of directors, now suspended, to cooperate with the IRP. Also, the directive from the tribunal is to ensure there are no retrenchments due to this move.
Go First, earlier this month, reasoned that due to faulty engines supplied by engine maker Pratt & Whitney (P&W), the airline had half their aircraft grounded. The company claims this cost INR 10,800 crores in flights not operated and repair costs, and lessor rent still paid while the equipment was on the ground. The airline claims that it owes INR 11,463 crores to creditors, which include banks, vendors, lessors and so on.
Go First to return to “going concern.”
Going concern in legal parlance means a business that is still running. For the airline, it means the IRP will take over and attempt to restart the business of flying in the coming days. What needs to be clarified is the impact this has on the already filed IDERA requests. A common interpretation is that these lessors won’t be able to do anything about these aircraft being repossessed for another six months now that the airline has been put under NCLT’s insolvency process.
The airline has 7000 employees and 10,000 contracted employees.
After the NCLT order, Go First CEO Kaushik Khona told Mint,
This is a historic ruling as an application of insolvency has been admitted so fast. The order prevents a viable airline from becoming an unviable one. The purpose of IBC has always been revival.
While the exact course of action remains to be seen, Go First has gotten its wish granted by having the NCLT admit its insolvency resolution petition. This means that the airline will now be operated by a court-selected IRP, which will lay the groundwork for the airline’s debt to be restructured. When the airline flies again remains to be seen. If it works out, this case set atyle bankruptcy restructuring in India precedent for a US-Chapter 11-s.
What do you make of the NCLT order on Go First’s insolvency proceeding?
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