Chennai: Beleaguered low-cost carrier SpiceJet has been ordered to wind up by the Madras High Court after it failed to demonstrate any ability to pay back the $24 million owed to the Swiss stock corporation Credit Suisse ARG. An official liquidator has been ordered to take over the company's 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.
However, the court stipulated that a grace period of the weeks be afforded to the airline to give it a chance to pay $5 million which could potentially help it scrape through. The company is also planning to appeal the judgement as it has plans to repay.
In a filing to stock exchanges on Tuesday, SpiceJet said it will soon initiate "appropriate remedial steps including preferring an appeal" against the order before a higher bench "within the time frame allowed by the Madras High Court."
The case filed by Credit Suisse cites that SpiceJet had availed of the services of SR Technic to repair, overhaul and maintain its aircraft, their parts and assemblies, for the last 10 years which had amassed millions in debt. The carrier's argument that the debt was invalid as SR Technic did not have the relevant DGCA (Directorate General of Civil Aviation) approval for such activities was rejected by the court.
Credit Suisse provided the court with evidence that SpiceJet had acknowledged reminders of the debt several times over the years. As per the petitioner, SpiceJet had agreed to the terms of payments back in 2011 when the pact was signed. On August 24, 2012, a supplemental agreement to extend the time of payment was also entered into to change certain terms of the agreement.