SpiceJet Loses Appeal In Winding-Up Case

The Madras High Court dismissed SpiceJet Ltd.'s appeal challenging a single-judge order, which directed winding up of the airline

<div class="paragraphs"><p>A Boeing Co. 737 aircraft operated by SpiceJet Ltd. [Photographer: Dhiraj Singh/Bloomberg]</p></div>
A Boeing Co. 737 aircraft operated by SpiceJet Ltd. [Photographer: Dhiraj Singh/Bloomberg]

The Madras High Court on Tuesday dismissed SpiceJet Ltd.'s appeal challenging a single-judge order, which directed winding up of the airline. The division bench of the Madras High Court, however, extended the single judge's stay on proceedings till Jan. 28 granting the airline time to approach the Supreme Court.

On Dec. 6, the single-judge bench had directed the official liquidator to take over the assets of the airline for liquidation but granted a three-week stay at the request of the company to appeal against the order. The relief was conditional on the airline giving a bank guarantee worth $5 million in two weeks.

SpiceJet Vs Credit Suisse

The case relates to the 2011 aircraft maintenance agreement between SpiceJet and Switzerland-based SR Technics. In total, SR Technics raised seven invoices in 2013. SpiceJet wanted to defer the payment. At this point, Credit Suisse, Switzerland came to its rescue.

SpiceJet provided certificate of acceptance of the invoices raised by SR Technics, signed bills of exchange, endorsed by the airline's banker. Basis these, Credit Suisse paid SR Technics on SpiceJet's behalf. And SR Technics assigned all its present and future rights to receive payments under the agreement to Credit Suisse.

The non-payment of dues worth $24 million, as claimed by Credit Suisse, prompted it to move court with a winding up plea.

In response, SpiceJet argued that the alleged debt owed to SR Technics wasn't legally enforceable and there can't be a winding up order under the Companies Act, 1956.

SpiceJet argued that the documents relied upon by Credit Suisse weren't properly stamped and couldn't be relied upon to establish a debt. It also told the court that SR Technics didn't have a valid license from the Directorate General of Civil Aviation. Consequently, no amount can be said to be payable and that there is bonafide dispute with regard to the said payment.

SpiceJet's Defence Not Substantial: Madras High Court

The division bench of the Madras High Court didn't find merit in SpiceJet's arguments and said the single judge order needs no interference.

Pointing to precedents, the division bench pointed out that at the time of admission of the winding up petition, it's not relevant whether the document relied upon is sufficiently stamped or stamped at all. In saying so, the court dismissed the airline's first argument.

The second argument on SR Technics not having a valid license, the court noted the airline blows hot and cold together to suit its convenience. It noted that SpiceJet was aware of the fact that SR Technics did not possess the approval of DGCA. So, this argument needs to be rejected outrightly, the high court concluded.

For the above reasons, both the defences raised by the appellant [SpiceJet] are rejected. At least, they aren't accepted as bonafide defence. The admission of the petition therefore need not be interfered with.
Madras High Court

At the request of SpiceJet's counsel, the court stayed the operation of the order until Jan. 28.