Financially-beleaguered Indian no-frills carrier SpiceJet has been ordered to wind up its operations by the Madras High Court, in an order passed earlier this week. The Madras High Court has also asked the official liquidator to take over the low-cost airline’s assets in a case related to non-payment of unpaid dues of $24 million to Credit Suisse AG, on the grounds of the proven inability of the Airlines to repay its debts.
The Indian carrier recently concluded a 10-year maintenance partnership with SR Technics, which began in November 2011. This saw it provided with maintenance, repair, and overhaul services. SpiceJet, whose losses widened in Q2, availed the services of SR Technics in Switzerland for aircraft maintenance and repair, among other related services. In 2012, a supplemental agreement was signed between the two parties that enabled the airlines to pay back the monies raised by SR Technics on various occasions through a deferred payment scheme.
In 2012, the stock corporation Credit Suisse AG was assigned all the rights to receive payments due to SR Technics through a financial agreement. The assignment also entitled the third party to receive payments from SpiceJet under the seven invoices issued by SR Technics. All the invoices date back to 2013.
The Madras HC had rejected the airline’s stand that SR Technics did not have a valid license to carry out aircraft maintenance services from India’s Director General of Civil Aviation (DGCA) as required under the Aircraft Act and, therefore, the enforcement of the claim would be against public policy. This was because Spicejet knowingly entered a contract with SR Technics despite this aspect. These contentions raised by the Airlines were rejected during the arbitration proceedings in the UK as well, added Mr. Rahul Balaji, the counsel for Credit Suisse AG.
While passing the order, Justice R Subramanian, also kept his order in abeyance for three weeks, if SpiceJet is able to deposit $5 million within two weeks. In a filing to stock exchanges, SpiceJet has maintained that it will soon initiate “appropriate remedial steps including preferring an appeal” against the order before a higher bench “within the time frame allowed by the Madras High Court.”