The Madras High Court on Monday has directed the winding up on SpiceJet Limited and directed the official liquidator to take over the assets of the company since it couldn’t discharge its debts to a corporate creditor.
The single-judge bench of Justice R. Subramanian was hearing a plea against the carrier by Credit Suisse AG, a creditor of SpiceJet, based in Zurich, Switzerland with the following prayer to wind up the carrier and appoint an official liquidator to take charge of the assets, properties, stock in trade and books of accounts of the Company, since it was unable to repay its debts owed to Credit Suisse.
The bench observed SpiceJet has not chosen to terminate the contract and continued to avail the services of the petitioner company (SR Technics) therefore the respondent company cannot turn and say that there is a violation of Aircraft Act or the C.A.R. Rules and therefore their liability ceased. Further the company has failed miserably in satisfying the pronged test layed down in Mathusudan Gordhandas & Co. v. Madhu Woollen Industries (P) Ltd by the Apex Court. Given its inability to pay its debts under Section 433 (e) of the Companies Act 1956, the company is liable to be wound up.
Rahul Balaji, counsel for the petitioner, contended that Section 433 (e) of the Companies Act 1956, provides for winding up of a Company, if it is found that the Company is unable to pay its debts. The counsel contended that once a notice under Section 434 (1)(a) of the Companies Act 1956 had been issued and the Company fails to pay the debt demanded under said notice within the three weeks period or to secure or compound for it to the reasonable satisfaction of the creditor, a company is deemed to be unable to pay its debts. With presumption of inability to pay under the Companies Act provision mentioned above, an order to wind up should follow, unless the debtor company can show the debt can’t be enforced or that there is a bona fide dispute.
Balaji said SpiceJet hasn’t denied availing services of SR Technics to maintain and repair aircraft engines under its 2011 agreement and the supplementary agreement of August 2012. The counsel said given the situation of accepting invoices and issuing bills of exchange etc, SpiceJet cannot argue that the debt can’t be enforced legally.
The court noted that a bare reading of the said clause shows that parties are bound to fulfil obligations occurring before termination and does not prevent parties from claiming breach of any obligation against each other. Though the clause allows SpiceJet Limited to end the contract if SR Technics did not have valid authorization, such termination didn’t take place. Even then, the termination would not relive SpiceJet of obligations incumbent on it before ending the contract.
SpiceJet counsel Senior Advocate V. Ramakrishnan said the agreements between SR Technics and the respondent are not stamped in accordance with the Indian Stamp Act and cannot be enforced therefore. Ramakrishnan also said the bills of exchange have not been endorsed by SR Technics.
Ramakrishnan said the endorsements on the reverse of each of the seven bills of exchange that were subject matter of Credit Suisse’s petition were in the form required or suggested and therefore invalid. He pointed out a seal of SR Technics has been affixed but that seal is absent in endorsements made.
The bench said it did not find merit in the contention that the debt cannot be enforced since endorsements are not in the form required and found the defence taken not bona fide.