SpiceJet ordered to deposit $5 million in 2 weeks over unpaid dues
08 Dec 2021
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The Madras High Court has ordered SpiceJet to deposit an amount equivalent to $5 million within two weeks or face liquidation and taking over of its assets over unpaid dues.
The HC, vide its order dated 6 December 2021, stayed an earlier order of winding up SpiceJet and appointing an official liquidator, for a period of three weeks, according to the airline.
SpiceJet in its official statement also informed that the High Court's stay is subject to the condition that the company deposits an amount equivalent to $5 million within a period of two weeks.
"The company is examining the order and shall initiate appropriate remedial steps, including preferring an appeal before the appellate jurisdiction within the time frame allowed by the Madras High Court. The company believes it has a good case on merits and is hopeful of having favourable outcome in the appeal", SpiceJet's statement on December 7 reads.
Earlier, on 6 December, the Madras High Court allowed Credit Suisse AG's winding up petition against SpiceJet for failing to pay around $20 million in dues to Switzerland-based SR Technics, which undertakes maintenance, repair and overhauling of Air Craft Engines for airlines.
The court also directed the official liquidator to take over the assets of SpiceJet.
Credit Suisse AG had moved the Madras HC under Section 433 (e) of the Companies Act 1956, under which court can order winding up of the company if it fails to meet overdue payment obligations.
Allowing the petition, Justice Subramanian noted that Spicejet had accepted its liabilities, in terms of an agreement entered into between the two companies for a period of 10 years in 2011, by executing certificates of acceptance.
The petitioner firm argued before the court that a winding-up process against a debtor can be initiated if the elements of debt and inability to pay the same are present. These requirements are squarely fulfilled in the case of SpiceJet, it contended.
However, SpiceJet sought to argue that the debt, on the basis of which winding up is sought, is not enforceable and is in fact against public policy of India.
Questioning the validity of unstamped bills of exchange raised by SR Technics, SpiceJet argued that when existence of debt cannot be proved in the absence of stamped documents, then the question of ability to pay the same would not arise.
Moreover, the petitioning firm was in breach of the agreement between the two, SpiceJet claimed.
The single-Judge delved into the law invoked in this case and examined exactly when a notice for winding up of a company can be issued under Section 434 of the Companies Act.
If there is an outstanding debt of more than Rs500 and a written notice for clearing this debt is made but to no avail within three weeks’ period, the requirements of the law are fulfilled.
The case of SpiceJet falls within this framework, the court concluded.
The court also examined the defences taken by the airline company against the plea for winding up and concluded that disputes pertaining to debt can be dealt with by the official liquidator or company court at a later stage.
Other contentions did not hold ground with the court which ultimately directed for the company to be wound up, leaving its further legal options for appeal open.
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