2023 (8) TMI 197 - HC - Insolvency and Bankruptcy

Respondent violated court order by flying aircraft post lease termination, maintenance flights not justified.

SMBC Aviation Capital Limited And Ors. Versus Union Of India And Ors.

The Court found that Respondent No. 9 violated the interim order by flying Aircrafts without permission post lease termination. The Court emphasized that ... Termination of Lease agreements - Petitioners have been constrained to move this Application on account of the fact that the Respondent No. 9/RP of Go Airlines has commenced flying the Aircrafts of the Petitioners despite the fact that the Lease Agreements with respect to such Aircrafts have been terminated by the Petitioners - HELD THAT:- The provisions of the Aircraft Act, 1934 and the Aircraft Rules, 1937 provide that no person shall use and operate an Aircraft unless it is in accordance with the Aircraft Rules, 1937. Rule 30(6)(iv) of the Aircraft Rules, 1937 provides that the registration of an Aircraft registered in India may be cancelled where the lease in respect of the Aircraft has expired or been terminated - Non-payment of lease rentals by the Respondent No. 9/RP of Go Airlines constituted an event of default under the Lease Agreement(s) executed between the Petitioners and Respondent No. 9/RP of Go Airlines. Hence, the Lease Agreement(s) were terminated by the Petitioners. It is not disputed by the parties that Lease Agreements qua the Aircrafts in paragraph 7.1 above have been terminated and the process of deregistration of the Aircrafts has commenced. Once an event of default has occurred and the Petitioners have terminated the Lease Agreement(s) and commenced the process of deregistration of the Aircraft, flying such Aircraft will be contrary to the provisions of the Aircraft Act, 1934 and the Rules framed thereunder. The document termed as the ‘Airbus Manual’ (which appears to only be an extract of the complete Airbus Manual) has been relied upon to submit that during the parking period such flights require to be undertaken at intervals of 3 months. This document also does not help the case of the Respondent No. 9/RP, as Paragraph 3 of this document itself contains multiple options qua storage and maintenance. Paragraph 3(A)(4) also states that a maintenance/handling flight is requisite every two years, during a storage period, so that the Aircraft is preserved. It cannot be disputed by the either party that these Aircrafts have not been grounded for two years. Therefore, reliance placed on the Airbus Manual extract, as has been done by the Respondent No. 9 /RP of Go Airlines, cannot be accepted either - thus, the contention of the Respondent No. 9/RP of Go Airlines, that the reason, 2 of the 10 Aircrafts have been flown by Go Airlines is that these were handling flights forming part of the scheduled maintenance activity for the Aircraft, is misconceived. Let status quo be maintained in respect of handling/non-revenue flights of the Petitioners Aircrafts till the next date of hearing - List this Application for further hearing/disposal on 03.08.2023 at 3:00 PM. Issues Involved:1. Compliance with the Court's order dated 05.07.2023.2. Legality of flying the Petitioners' Aircrafts post lease termination.3. Maintenance requirements and handling flights.4. Urgency and necessity of flying the Aircrafts.Summary:1. Compliance with the Court's order dated 05.07.2023:The Petitioners sought urgent directions alleging that Respondent No. 9/RP of Go Airlines flew two Aircrafts owned by them without the Court's permission, violating the interim order dated 05.07.2023. The Court had directed that Aircrafts undergoing deregistration should not be flown. Despite this, Respondent No. 9 operated the Aircrafts on 25.07.2023 and 28.07.2023.2. Legality of flying the Petitioners' Aircrafts post lease termination:The Petitioners argued that flying the Aircrafts post lease termination contravenes the Aircraft Act, 1934 and Aircraft Rules, 1937. The Lease Agreements for ten Aircrafts were terminated, and deregistration processes commenced. The Court noted that no competent authority had invalidated the lease terminations.3. Maintenance requirements and handling flights:Respondent No. 9 contended that the flights were necessary for maintaining airworthiness as part of routine maintenance, citing the Airbus Manual and Resumption Plan approved by DGCA. However, the Court found the reliance on the Airbus Manual extract, which required handling flights every three months, to be insufficient. The Court emphasized that the Aircrafts had not been grounded for two years, thus the maintenance flights were not justified.4. Urgency and necessity of flying the Aircrafts:Respondent No. 9 failed to demonstrate any urgent or grave imminent threat necessitating the flights without prior notice. The Court held that 'scheduled maintenance' does not include flying the Aircrafts, even for non-commercial purposes. Consequently, Respondent No. 9 was restrained from continuing handling/maintenance flights.Conclusion:The Court ordered status quo regarding handling/non-revenue flights of the Petitioners' Aircrafts until the next hearing on 03.08.2023. Respondent No. 9 was granted time to file a reply, and the matter was listed for further hearing.