Indian low-cost airline SpiceJet has today had its appeal against a winding up order rejected by a High Court in Madras. MRO provider SR Technics is seeking $24 million in unpaid fees relating to engine maintenance on the airline’s Boeing 737 fleet. SpiceJet maintains that SR Technics did not have the authorization of the civil aviation authority in India to conduct maintenance. The airline has until January 28th to launch an appeal in Supreme Court.
SpiceJet’s appeal is rejected
The Madras High Court has dismissed SpiceJet’s appeal against a winding up order. The order was levied due to non-payment of $24 million to SR Technics, a company conducting maintenance and repair for aircraft.
Should the winding up process go ahead, it would allow the liquidator to sell off stocks, distribute assets to partners and shareholders, and to pay the creditors the monies owed.
The High Court originally instructed the winding up process on December 6th, on a petition filed by Credit Suisse, whom SR Technics had given the authority to collect their payments. SpiceJet moved to appeal, but the appeal was rejected.
However, Justice Paresh Upadhyay and Justice Sathi Kumar Sukumara Kurup saw that the order was been suspended until the 28th of January to enable the airline to present a further appeal before the Supreme Court, should it wish to do so.
According to reporting by Business Standard, the company will indeed appeal again against the order in Supreme Court. A source told the publication,
“The judgement goes against the basic precedent that you cannot wind up a company if it has unpaid debt. Besides, SpiceJet’s other contentions have not been considered.”
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SpiceJet’s appeal is based on a claim that SR Technics does not have valid authorization from the Directorate General of Civil Aviation to conduct the maintenance for which it was contracted. The airline entered into an agreement with the company for a 10-year period. But the company failed to secure authorization from January 2009 to May 18th, 2015.
The original agreement between SpiceJet and SR technics was dated November 24th, 2011. It involved engine maintenance services, specifically for the airline’s Boeing 737 fleet and its CFM 56 engines. The contract was worth an estimated $415 million, with work to be carried out at SR Technic’s Zurich overhaul shop. However, the company claims it is owed a total of $24.01 million.
SpiceJet claims that the debt is not legally enforceable because SR Technics did not possess the DGCA approval for provision of services under the agreement. It claims that SR Technics has made a fraudulent misrepresentation of having such approval.
The airline’s dispute claims that engine maintenance provision without the approval of DGCA is against Indian and other applicable laws. It says this voids the entire agreement on this basis it believes it should not have to repay the money.
However, the court said that SpiceJet didn’t cancel the contract, even when it was aware of the lack of DGCA approval. As such, the court rejected SpiceJet’s defense and has ordered the winding up of the company and the takeover of its assets. SpiceJet has until January 28th to find another path of recourse, otherwise it risks the end of its operations.