The Supreme Court of India on Friday stayed a winding-up order by the Madras High Court against SpiceJet by three weeks. The SC bench, led by the Chief Justice of India NV Ramana, granted this time to the airline to work out a plan to repay $24 million to Swiss lender Credit Suisse. However, the SC's decision came with some sharp remarks against the airline.
The SCI told SpiceJet that if it was not inclined on clearing the same, then they would be declared insolvent. "It's a serious matter, if they (SpiceJet) don't want to run airlines we'll declare insolvent & go for liquidation", CJI Ramana told Harish Salve, the advocate for SpiceJet. "Do you want to run the airline or close it?", the SC is quoted asking.
These comments came in response to Credit Suisse's advocate, KV Vishwanathan, stating that the settlement offer that SpiceJet has made is currently not even worth mentioning.
The SC's decision is the third such legal decision in the payment dispute between the airline and the lender.
In December, a single-judge bench order by Justice R Subramanian of the Madras High Court ordered the winding up of the airline, asking the official liquidator to take over its assets. SpiceJet "has miserably failed to satisfy the three pronged test suggested by the Supreme Court in Mathusudan Govardhandas & Co Vs Madhu Woollen Industries, 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," the high court said in its order, as reported here.
Earlier this month, a division bench of the Madras High Court upheld the order by the single bench. However, it put a stay on its own order till January 28, letting the airline appeal in the Supreme Court.
The root of this dispute lies in a 2011 maintenance and service agreement between SpiceJet and SR Technics, a Swiss firm. The next year, SR Technics entered into a financing agreement with Credit Suisse that gave the latter all present and future payment rights from SpiceJet under the agreement.
This is not the only financing dispute that SpiceJet is embroiled in. In anticipation of a negative fallout of today's SC order, the Airports Authority of India was reportedly on the verge of encashing SpiceJet's bank guarantees worth ₹120 crores. SpiceJet has previously taken the Airports Authority of India to court to prevent it from encashing its bank guarantees.
Auditors have cast doubts over SpiceJet's ability to remain a going concern. Previously unpaid dues includes default on tax payments, GST payments and ₹90 crores worth of deposits to be made in the employee provident fund. This can be read here.
SpiceJet's share closed at ₹64.20, 5.85% higher on the National Stock Exchange.