Madras HC Asks SpiceJet To Deposit $5 Million In 2 Weeks Or Face Liquidation – Here's Why

SpiceJet is set to be liquidated to pay around $21 million which it owns in debt to Switzerland-based firm Credit Suisse AG.

(File Photo)

New Delhi: The Madras High Court on Tuesday asked an official Liquidator attached to the High Court to take over the assets of private air carrier SpiceJet Limited and start the process of winding up process, in a plea filed by a Swiss company over unpaid dues.

According to reports, SpiceJet is set to be liquidated to pay around $21 million which it owns in debt to Switzerland-based firm Credit Suisse AG.

However, the airlines claims that Madras HC has stayed the order for a period of three weeks, subject to the condition that it deposits the amount equivalent to $5 million within two weeks.

According to reports, SpiceJet has failed to make a payment of $24.01 million to Credit Suisse AG "as a purported assignee" of SRT Technics after availing services including maintenance, repair and overhauling of aircraft engines, modules, components, assemblies and parts, which are mandatory for its operations. 

An agreement for the performance of such services for a period of 10 years was entered into between SpiceJet and SRT Technics on November 24, 2011.

Meanwhile, SpiceJet contended the alleged debts are not legally enforceable and as such there cannot be a winding up order under Section 433 of the Companies Act.

In a filing to the Bombay Stock Exchange (BSE) today, SpiceJet said, "The Madras High Court through its order dated December 6, 2021 has stayed the earlier order of winding up and appointment of official liquidator for a period of three weeks, subject to the condition that the Company deposits the amount equivalent to $5 million within a period of two weeks."

The court was allowing a company petition from Credit Suisse AG, which prayed for winding up of Spicejet under the provisions of the Companies Act, 1956 and appoint the Official Liquidator of the High Court as the Liquidator with all powers under Section 448 of the Companies Act to take charge of SpiceJet's assets, properties, stock in trade and books of accounts.

The petitioner also claims that it has been making repeated requests to the airline to make payments under various invoices.

Rejecting the contentions made by both the parties, the HC Judge said a reading of certain clauses in the agreement would show the parties to the contract are bound to fulfill all obligations which occurred prior to the termination and it will not prevent either party from claiming against breach of any obligations under the agreement including recovery of excess payments made by SpiceJet to SRT Technics.

Notably, SpiceJet had not chosen to terminate the contract and continues to avail the services.

"Therefore in my opinion, it cannot now turn around and say there is a violation of the provisions of the Aircraft Act or the C.A.R. Rules made there under and therefore the liability ceased. I thus find that the respondent Company has miserably failed to satisfy the three pronged test suggested by the Hon'ble Supreme Court in Mathusudan Govardhandas & Co. v. Madhu Woollen Industries (P) Ltd., supra, and hence had rendered itself liable to be wound up for its inability to pay its debts under Section 433 (e) of the Companies Act 1956. I am therefore of the opinion that this Company Petition should be allowed and the respondent Company directed to be wound up. The Official Liquidator is directed to take over the assets of the respondent Company," the Judge said.

(With inputs from PTI.)