The Delhi High Court’s recent order allowing the Directorate General of Civil Aviation to process the applications filed by several lessors for deregistration of 54 planes is a body blow to the resolution process of Go First. The airline had 59 aircraft when it stopped operations in early May last year. With virtually all but five aircraft gone, there would be very little assets left with the airline. The court verdict, therefore, makes it difficult for any prospective resolution applicant to see any value in bidding for the ailing airline. After the verdict, a successful resolution may elude Go First, leading to the most likely result—the liquidation of the company.
Go First has been going through the insolvency resolution process since May 10 last year. The airline’s process is being overseen by resolution professional Shailendra Ajmera, who had so far successfully managed to avoid deregistration of the leased aircraft. The National Company Law Tribunal had, in the past, rejected the lessors’ plea of deregistering the planes citing Section 14 of the Insolvency and Bankruptcy Code (IBC), which gives a company undergoing the insolvency process protection against legal proceedings.
However, this protection was taken away after a change in rule effected by the Ministry of Corporate Affairs last October. It said the provisions under Section 14 of the IBC would not apply to agreements governed by the Cape Town Convention and Cape Town Protocol, which guide international interests in ‘mobile equipment’ including aircraft. The Delhi High Court was also mindful of the fact that because of such measures, the global aviation leasing watchdog has taken down India’s compliance index from 3.5 to 2 points out of 5.
The grounding of Go First is a blow to the aviation sector, which is now becoming a duopoly between IndiGo and the Tata Group, with the two together accounting for almost 85 percent of the market in terms of passengers carried. The future of Jet Airways, which has been acquired by Jalan-Kalrock consortium under the IBC, is still uncertain. The resolution process of Go First had seen two buyers showing interest in the airlines, but the latest court decision puts the resolution process at risk.