CHENNAI: Madras High Court has ordered closure of private carriers SpiceJet Ltd and the High Court to take possession of its assets in a petition filed by the Swiss company on unpaid dues.
The court was allowing the petition of a company of Credit Suisse AG, a stock corporation registered under the laws of Switzerland, which had prayed for the winding up of the Indian firm under the provisions of the Companies Act, 1956 and to appoint an official liquidator of the High Court . Liquidator with all powers under section 448 of the Companies Act to take charge of SpiceJet’s assets, assets, stock in business and books of accounts.
“The respondent company (SpiceJet) has miserably failed to satisfy the three pronged test suggested by the Supreme Court in Mathusudan Govardhandas & Co v Madhu Woolen Industries (P) Ltd, and is therefore liable to injure itself for its incompetence Pay its debts under section 433(e) of the Companies Act 1956,” Justice R Subramanian said in his order on Monday and directed the private carrier to wind up and take its assets to the official liquidator.
According to the petitioner, SpiceJet had availed the services of SR Technics, Switzerland for maintenance, repair and overhauling of the aircraft’s engines, modules, components, assemblies and parts, which are essential for its operation.
An agreement was signed between SpiceJet and SR Technics on November 24, 2011 for performance of such services for a period of 10 years.
The terms of payment were also agreed upon. A supplementary agreement was also made on 24 August 2012 to replace some of the terms of the agreement. The amendments also include extension of time for payment of dues under various challans and a deferred payment scheme.
As there was a general increase in costs, the 2012 supplementary agreement included an adjustment of flight hour rates and provisions for an increase were also made.
On the provision of services under the agreement, SR Technics had generated the invoices and SpiceJet had issued seven bills against the money payable under the challans. It also acknowledged debts from time to time by issuing certificates of acceptance in respect of bills of exchange, which would imply that the defendant did not dispute the correctness of the claim made in the invoice.
The petitioner, namely Credit Suisse AG, entered into a financing agreement with SR Technics in September 2012 and under a transaction agreement, the latter assigned all its present and future rights to the petitioner company to receive payment under the agreement.
The assignments included bills of exchange issued by SpiceJet pursuant to the 2011 agreement and the 2012 supplementary agreement.
The petitioner company claimed that in view of the work done by SR Technics, the petitioner is entitled to receive the payment of dues under seven challans from SpiceJet.
The petitioner is making repeated requests to the airline to make the payment under various challans. As it did not honor its commitment under the agreements with SR Technics and SpiceJet is not in a position to meet its financial obligations, the petitioner issued a statutory notice. As there was no response, it preferred the petition of the present company before the High Court for winding up SpiceJet.
SpiceJet argued that the said loans are not legally enforceable and hence there cannot be a winding up order under section 433 of the Companies Act.
The petitioner is not a creditor of SpiceJet and in the absence of any contractual relationship between the debtor and the creditor, the winding up proceedings shall not lie.
The agreement between SpiceJet and SR Technics does not authorize the assignment to the present petitioner. SR Technics had also issued a notice under section 434 of the Companies Act in January 2015 and did not pursue the winding up, it argued and claimed there was no liability to pay the lot debt.
Dismissing the arguments, the judge observed that a reading of certain clauses in the agreement would show that the parties to the contract are bound to perform all the obligations incurred prior to the termination and that neither party can claim against the breach of any obligations. won’t stop doing it. Agreement including recovery of additional payment made by SpiceJet to SR Technics.
The above clause would make it very clear that the contract was open for SpiceJet to terminate as SR Technics did not have valid authorization, but termination would not relieve SpiceJet of its obligations arising under the contract. Such termination is taking effect.
Of course, SpiceJet had chosen not to terminate the contract. It had continued to avail the services.
“Therefore, in my opinion, it cannot now turn back to say that there is a contravention of the provisions of the Aircraft Act or the CAR Rules made thereunder and hence the liability is extinguished. Thus I find that the respondent company miserably failed to satisfy The three pronged test suggested by the Hon’ble Supreme Court in Mathusudan Govardhandas & Co. v. Madhu Woolen Industries (P) Ltd., Supra, and hence held himself liable to be liquidated for inability to pay his debts under section 433 was (e) of the Companies Act 1956. Therefore, I am of the opinion that this company petition should be allowed and the respondent company should be directed to be wound up. The official liquidator is directed to take over the assets of the respondent company,” The judge said.
The court was allowing the petition of a company of Credit Suisse AG, a stock corporation registered under the laws of Switzerland, which had prayed for the winding up of the Indian firm under the provisions of the Companies Act, 1956 and to appoint an official liquidator of the High Court . Liquidator with all powers under section 448 of the Companies Act to take charge of SpiceJet’s assets, assets, stock in business and books of accounts.
“The respondent company (SpiceJet) has miserably failed to satisfy the three pronged test suggested by the Supreme Court in Mathusudan Govardhandas & Co v Madhu Woolen Industries (P) Ltd, and is therefore liable to injure itself for its incompetence Pay its debts under section 433(e) of the Companies Act 1956,” Justice R Subramanian said in his order on Monday and directed the private carrier to wind up and take its assets to the official liquidator.
According to the petitioner, SpiceJet had availed the services of SR Technics, Switzerland for maintenance, repair and overhauling of the aircraft’s engines, modules, components, assemblies and parts, which are essential for its operation.
An agreement was signed between SpiceJet and SR Technics on November 24, 2011 for performance of such services for a period of 10 years.
The terms of payment were also agreed upon. A supplementary agreement was also made on 24 August 2012 to replace some of the terms of the agreement. The amendments also include extension of time for payment of dues under various challans and a deferred payment scheme.
As there was a general increase in costs, the 2012 supplementary agreement included an adjustment of flight hour rates and provisions for an increase were also made.
On the provision of services under the agreement, SR Technics had generated the invoices and SpiceJet had issued seven bills against the money payable under the challans. It also acknowledged debts from time to time by issuing certificates of acceptance in respect of bills of exchange, which would imply that the defendant did not dispute the correctness of the claim made in the invoice.
The petitioner, namely Credit Suisse AG, entered into a financing agreement with SR Technics in September 2012 and under a transaction agreement, the latter assigned all its present and future rights to the petitioner company to receive payment under the agreement.
The assignments included bills of exchange issued by SpiceJet pursuant to the 2011 agreement and the 2012 supplementary agreement.
The petitioner company claimed that in view of the work done by SR Technics, the petitioner is entitled to receive the payment of dues under seven challans from SpiceJet.
The petitioner is making repeated requests to the airline to make the payment under various challans. As it did not honor its commitment under the agreements with SR Technics and SpiceJet is not in a position to meet its financial obligations, the petitioner issued a statutory notice. As there was no response, it preferred the petition of the present company before the High Court for winding up SpiceJet.
SpiceJet argued that the said loans are not legally enforceable and hence there cannot be a winding up order under section 433 of the Companies Act.
The petitioner is not a creditor of SpiceJet and in the absence of any contractual relationship between the debtor and the creditor, the winding up proceedings shall not lie.
The agreement between SpiceJet and SR Technics does not authorize the assignment to the present petitioner. SR Technics had also issued a notice under section 434 of the Companies Act in January 2015 and did not pursue the winding up, it argued and claimed there was no liability to pay the lot debt.
Dismissing the arguments, the judge observed that a reading of certain clauses in the agreement would show that the parties to the contract are bound to perform all the obligations incurred prior to the termination and that neither party can claim against the breach of any obligations. won’t stop doing it. Agreement including recovery of additional payment made by SpiceJet to SR Technics.
The above clause would make it very clear that the contract was open for SpiceJet to terminate as SR Technics did not have valid authorization, but termination would not relieve SpiceJet of its obligations arising under the contract. Such termination is taking effect.
Of course, SpiceJet had chosen not to terminate the contract. It had continued to avail the services.
“Therefore, in my opinion, it cannot now turn back to say that there is a contravention of the provisions of the Aircraft Act or the CAR Rules made thereunder and hence the liability is extinguished. Thus I find that the respondent company miserably failed to satisfy The three pronged test suggested by the Hon’ble Supreme Court in Mathusudan Govardhandas & Co. v. Madhu Woolen Industries (P) Ltd., Supra, and hence held himself liable to be liquidated for inability to pay his debts under section 433 was (e) of the Companies Act 1956. Therefore, I am of the opinion that this company petition should be allowed and the respondent company should be directed to be wound up. The official liquidator is directed to take over the assets of the respondent company,” The judge said.
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