Can SpiceJet survive its legal battles?

While ripples of insolvency cases and financial crisis blow across the aviation industry, SpiceJet claims that the airline has better prospects ahead while pointing out the near completion of its legal battles and successful repayments.

Aircraft lessor Aircastle has recently lodged a fresh insolvency plea against SpiceJet, claiming non-payment of outstanding dues. This marks the third insolvency case filed against the airline, as Aircastle aims to initiate proceedings to recover its debts.

However, concerns regarding the maintainability of Aircastle's second insolvency plea have emerged, with the National Company Law Tribunal (NCLT) seeking explanations from Aircastle's legal representative. The NCLT has cited relevant legal precedents in its request, highlighting the need for clarification on the plea’s validity.

A spokesperson for SpiceJet expressed optimism as the airline’s long-pending legal cases approach their conclusion. The spokesperson said that the company is actively settling all ongoing cases, signaling brighter days ahead for the airline.

"Amid a backdrop of protracted legal battles, SpiceJet's commitment to resolving these cases demonstrates a proactive approach to addressing past challenges," he said.

"SpiceJet has even successfully completed the repayment of Rs 100 crore to City Union Bank. The final installment of Rs 25 crore was paid on June 30, 2023, effectively closing the entire loan account that was taken in 2012," said the spokesperson.

"The repayment to City Union Bank follows a successful settlement agreement with Nordic Aviation Capital (NAC), a major lessor for SpiceJet's Q400 aircraft. The agreement with NAC resolves all past liabilities for the Q400s leased by NAC to SpiceJet and enables the return and induction of three additional planes into the SpiceJet fleet," said the spokesperson.

However, in yet another case, SpiceJet, the financially troubled airline, last month was ordered by the London High Court to pay $15 million to two aircraft leasing companies, GASL Ireland and VS MSN.

During the court proceedings, it became evident that SpiceJet made various attempts to delay the court's schedule. At one point, the airline’s legal team withdrew from the case, citing non-payment of fees, as per sources.

Subsequently, SpiceJet requested more time, claiming that they were in the process of hiring a new legal team. However, the court was unimpressed with excuses and insisted that the proceedings must continue, leading to a summary judgment against the airline, said the sources. However, SpiceJet denied all such claims.

On Friday, the Supreme Court also dismissed SpiceJet’s application seeking an extension of time to pay Rs 75 crore to Kal Airways and Kalanithi Maran.

The bench, comprising Chief Justice DY Chandrachud and Justice PS Narasimha, stated that SpiceJet’s application was merely a delay tactic to avoid payment, despite the court’s orders. They emphasized the importance of following court orders, especially in commercial matters.

In February, the apex court had directed SpiceJet to pay Rs 75 crore to Kal Airways and Kalanithi Maran within three months for its interest liability under an arbitral award. The court had explicitly stated that failure to make the payment would result in the entire award becoming executable in favor of the decree holders.

Senior advocate Mukul Rohatgi, representing SpiceJet on Friday had requested a two-month extension of time as the initial three-month deadline had expired on May 13. He had asked the court to list the matter for further discussion in 3-4 days to explore potential solutions.

However, senior advocate Maninder Singh, instructed by advocates from Karanjawala & C., alleged that SpiceJet was disregarding the orders of all courts, including the Supreme Court. He argued that the airline had not complied with the Delhi High Court's 2020 order to file an affidavit disclosing its assets.

On May 29 this year, the Delhi High Court, in execution proceedings, directed SpiceJet and its chief, Ajay Singh, to pay the entire executable amount under the award to Kal Airways and Kalanithi Maran.

However, the Supreme Court declined to grant an extension of time, emphasizing the need to send a clear message that its orders must be followed, particularly in commercial matters. The court dismissed SpiceJet's application and ordered the full execution of the award.

A spokesperson for SpiceJet stated that the recent order by the Supreme Court reaffirmed its previous order issued in February 2023. Spokesperson said that the main petition challenging the award by both parties is pending disposal by the Delhi High Court.

"The matter pertains to the payment of interest on a principal amount of Rs 579 crore, which has already been paid," said the SpiceJet spokesperson. The spokesperson expressed the airline's commitment to finding an amicable settlement through discussions with Kalanithi Maran and his firm, KAL Airways.

However, with the increasing number of lawsuits both in the United Kingdom and India, it remains to be seen how SpiceJet will defend itself in these legal battles.