The Madras High Court has issued a winding-up order for SpiceJet regarding its debts to a Swiss engineering company. The airline reportedly failed to make a $24 million payment to SR Technics. As such, it may now have its assets taken over by liquidators.

Wound up over unpaid dues

Yesterday saw the Madras High Court issue a winding-up order to SpiceJet over the non-payment of $24 million to Swiss engineering company SR Technics. The Indian budget airline recently concluded a 10-year maintenance partnership with the firm, which began in November 2011. This saw it provided with maintenance, repair, and overhaul services.

However, Mint reports that having failed to make a $24 million payment for the company's services, SpiceJet is set to have its assets taken over by liquidators. According to Business Standard, SR Technics has the backing of Credit Suisse AG in this matter.

Just under a year after entering the initial 10-year deal, SpiceJet and SR Technics also drew up a supplementary agreement in August 2012. The premise of this was to change conditions of the existing deal. This included the deferral of certain payments to later dates.

Spicejet
Photo: Getty Images

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Three weeks to make things right

This is, of course, a serious matter for SpiceJet. However, it does have a period in which to act upon the order. The Hindu reports that it has been granted a three-week reprieve, on the condition that it can pay $4 million of its debts to SR Technics in two weeks.

According to Mint, the court can deem SpiceJet unable to pay its debts if it cannot settle the matter in three weeks. As such, the next 20 days will mark a crucial period for Spicejet when it comes to resolving the situation regarding its dues owed to SR Technics.

SpiceJet reported argued in its defense that SR Technics didn't have the authorization to undertake engine maintenance until May 2015. As such, it used this angle to propose that the debt was against Indian public policy. However, the judge rejected this argument. This was because Spicejet knowingly entered a contract with SR Technics despite this aspect.

SpiceJet 737
SpiceJet has been in the news lately for a number of disputes. Photo: Getty Images

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Longer-term financial struggles

The Madras High Court's recent winding up order isn't the only financial struggle that SpiceJet has faced of late. Indeed, Mint reports that the Indian low-cost carrier has made losses in the last seven quarters, with the latest amounting to 571 crore ($75.7 million).

That being said, Simple Flying did report last month that this represented an improvement compared to the airline's 729 crore ($98 million) Q1 loss. Furthermore, its revenues also increase by 23% during this period. It will now be interesting to see whether SpiceJet can respond to the court order in time despite these difficulties.

Simple Flying has contacted SpiceJet for a statement on this matter.

What do you make of this development? Have you ever flown with SpiceJet? Let us know your thoughts and experiences in the comments.