Is govt notification exempting aviation leases from moratorium applicable for Go First, Delhi HC asks DGCA

New Delhi: The Delhi High Court on Thursday directed aviation watchdog, Directorate General of Civil Aviation (DGCA), to file a response to the question whether the Ministry of Corporate Affairs' notification exempting aviation leases from moratorium under the Insolvency and Bankruptcy Code, 2016, is applicable to cash-strapped Go First airline.

The court's directions came during the hearing of a case involving aircraft and engine lessors of the grounded airline Go First, who were contesting against the DGCA not de-registering their aircraft.

During the hearing, Additional Solicitor General Chetan Sharma requested an extension to seek clarity from the government regarding the applicability of the notification in the Go First case.

However, senior advocates Amit Sibal and Dayan Krishnan for lessors, opposed the request saying that the government's stance is already clear as aviation leases are exempt from the moratorium.

On the other hand, senior advocates Neeraj Kishan Kaul and Ramji Srinivasan informed the court of their intention to address the merits of the case, emphasising that they have several other issues to cover.

They urged the court to hear them, considering that the lessors had already presented their case on the merits for over a month.

However, after hearing the arguments, the court opted to proceed with the case and has listed the matter for hearing next on November 3 when the airline’s Resolution Professional (RP) is expected to commence his arguments.

On May 26, aircraft lessors - Pembroke Aircraft Leasing 11 Ltd, SMBC Aviation Capital Ltd, Accipiter Investments Aircraft 2 Ltd and EOS Aviation 12 (Ireland) Ltd - had moved the high court seeking deregistration of their planes by the DGCA, so that they could take them back from the airline.

The airline, its representatives, and the National Company Law Tribunal (NCLT)-appointed Interim Resolution Professional (IRP) were restricted by the court from removing, replacing or taking out any part or components, or records of the 30 aircraft without taking prior written approval from lessor of the particular aeroplane.

The low-cost airline first stopped flying on May 3 and is undergoing voluntary insolvency resolution proceedings before the NCLT.

On lessors’ petitions seeking deregistration of their aircraft, the DGCA had told the high court that it was due to a technical glitch on its portal that the applications of several aircraft lessors were shown as ‘rejected’. It had said it was not processing such requests after a moratorium on financial obligations and transfer of assets of the crisis-hit airline post insolvency resolution proceedings.

At this, the court had asked the DGCA's counsel Anjana Gosain as to why different responses were sent to different lessors on repossession requests.

Gosain had apprised the court that when lessors send deregistration requests to the regulator, it is done in five working days and that in this case, no application has been rejected. "There was a glitch in the portal due to which it showed that the applications have been rejected," she had said.

Earlier, the lessors had said it is "illegitimate" of the DGCA to deny deregistration. The lessors' contention is that Go First has no right to use their aircraft as the leases concerning them have been terminated.

The National Company Law Appellate Tribunal on May 22 upheld the insolvency proceedings against Go First in a setback to efforts of its lessors to repossess their aircraft. Upholding the NCLT's May 10 order, the appeals tribunal disposed of the lessors' petition and asked them to file an appeal before the NCLT.

The airline had approached the NCLT "due to the ever-increasing number of failing engines supplied by Pratt & Whitney's International Aero Engines, which has resulted in Go First (airline brand) having to ground 25 aircraft (equivalent to approximately 50 per cent of its Airbus A320neo aircraft fleet) as of May 1, 2023".