Read Time: 09 minutes

Madras High Court: On Wednesday, a bench of Justices Paresh Upadhyay and Sathi Kumar Sukumara Kurup was informed by senior counsel V. Ramakrishnan, representing SpiceJet, that the company had deposited an amount equivalent to $5 million in court. Spiecejet was acting in accordance to a single judge’s direction to stay his order of winding up and deposit the amount to enable the SpiceJet to go on appeal.

Background:

Justice R. Subramanian of the Madras High Court had directed SpiceJet Limited to wind up the company for non-payment of over $24 million to SR Technics, a Swiss company which maintains, repairs and overhauls aircraft engines, and components. SpiceJet has preferred the present appeal against the single bench order.

The petition filed by Credit Suisse AG, a Zurich based stock corporation, which had been assigned the right to receive the payments due to SR Technics.

According to Credit Suisse SpiceJet had reached an agreement with SR Technics for maintenance, repair and overhauling (MRO) services for a period of 10 years on November 2011. Upon providing of services under the agreement, SR Technics had raised invoices and the SpiceJet had issued seven bills of exchange for the monies due under the invoices. SpiceJet also acknowledge(s) the debts from time to time by issuing certificate of acceptance in relation to the bills of exchange implying that it does not dispute the correctness of the claim made in the invoices. Upon the knowledge that SpiceJet will not be able to pay the money owed the petitioner issued a statutory notice.

Contention of Petitioner:

Advocate Rahul Balaji representing the petitioner contended that:

1. There must be a debt existing; and
2. It should be proved that the respondent is unable to pay the debt.
3. Once the above two requirements are satisfied, the other considerations namely, whether the debt is enforceable or whether the defence raised by the respondent is bona fide or not, need not be gone into at this stage.

Mr. Balaji has contended that a debt exists and a notice was issued under the Companies Act to the Airlines. 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 Once a notice has been issued under Section 434(1) (a) of the Act and the failure of the company which in receipt of the said notice to repay the amount within three weeks or to secure the debt or to compound for it becomes evident, the winding-up procedure inevitably follows. To dispute the admission of winding up, the respondent company should prove a bona fide dispute or unenforceability of debt under Indian law, contended Mr. Balaji.

Further, SpiceJet has not disputed the utilisation of services by SR Technics. This, along with the fact that the invoices were accepted, Bills of Exchange and Certificates of Acceptance were issued by the first party airlines negates their argument that the debt is non-enforceable.

Per contra, Mr. V. Ramakrishnan, Senior Counsel appearing for the respondent contended that a mere existence of a debt and its non-payment would not attract an order of winding up under Section 433 of the Companies Act. He submitted that it is open to the respondent resisting a winding up petition to show that there is a bona fide dispute regarding the debt. It has been submitted that enforcement of such debt would be against the public policy in India. Further that the documents relied upon in support of the debt or the documents relied upon to prove the debt are not properly stamped in accordance with the law relating to stamping in India.

After a lengthy hearing, the Court on Wednesday observed the following:

“Since other paper books tendered to the Court on behalf of the appellant, which are also referred by learned Senior Advocate for the appellant during the course of hearing, are yet to be made available to the learned counsel for the respondent (appearing on caveat), it is deemed fit to defer the hearing till tomorrow.”

The Court further observed that five million USD is already tendered to the Registry of this Court, as ordered by the learned single Judge, hence the condition of stay of the impugned order as stipulated therein is already complied with by the appellant.

The matter is listed for further hearing during the course of the day.

Case Title: SpiceJet Vs. Credit Suisse AG