Fresh changes to the insolvency code removed the moratorium hurdle that lessors faced in taking back control of aircraft from bankrupt airlines.
Transactions, arrangements, or agreements related to aircraft, aircraft engines, airframes, and helicopters will be exempt from the moratorium under the new amendment to the Insolvency and Bankruptcy Code, 2016, according to a government notification.
Under IBC in India, a "moratorium" refers to a legally mandated period during which creditors are prohibited from taking any legal action to recover their debts from a debtor undergoing a corporate insolvency resolution process.
If this amendment is implemented retrospectively, it would affect the moratorium declared in the insolvency case of Go First.
In May, Go First applied for voluntary insolvency resolution proceedings before the National Company Law Tribunal. The airline attributed its financial difficulties to Pratt & Whitney's problematic engines.
According to Go First, the percentage of grounded aircraft due to issues with Pratt & Whitney's engines increased from 7% in December 2019 to 31% in December 2020 and further to 50% in December 2022.
Several of Go First's lessors, including SMBC Capital Aviation, GAL, CDB Aviation, Sonoran Aviation Company, and MSPL Aviation, opposed the airline's insolvency application. They argued that their agreements with the airline had expired before the insolvency application was accepted and, as a result, the aircraft should be returned to them.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
