Go First Airlines Faces Liquidation: NCLT Upholds CoC’s Decision After 20-Month Insolvency Process
In a significant development for the aviation industry, the New Delhi Bench of the National Company Law Tribunal (NCLT) has ordered the liquidation of Go First Airlines, bringing an end to its 20-month-long Corporate Insolvency Resolution Process (CIRP). The decision comes after the Committee of Creditors (CoC) unanimously voted to liquidate the airline, with a 100% approval from its members, following the failure to come up with a viable resolution plan.
A Long Road to Liquidation
The CoC’s decision to liquidate Go First Airlines was made on July 23, 2024, marking a decisive move after an extensive and tumultuous insolvency process. The NCLT had initiated the CIRP under Section 10 of the Insolvency and Bankruptcy Code (IBC) on May 10, 2023, after Go First Airlines (officially known as M/s Go Airlines (India) Limited) filed for insolvency. Shailendra Ajmera was appointed as the Resolution Professional (RP) by the CoC to manage the process.
Following the initiation of CIRP, the Interim Resolution Professional (IRP) made a public announcement on May 13, 2023, inviting interested parties to lodge claims against the airline. However, despite several attempts, no resolution plans were deemed commercially viable or compliant with the Code. As a result, the CoC voted to proceed with the liquidation of the corporate debtor, a decision that is expected to result in an anticipated liquidation cost of Rs. 21.6 crores.
CoC’s Authority and Tribunal’s Ruling
The NCLT tribunal, which consists of Justice Mahendra Khandelwal (Judicial Member) and Dr. Sanjeev Ranjan (Technical Member), upheld the CoC’s right to decide on liquidation. The Tribunal emphasized that the CoC possesses the authority to opt for liquidation at any stage after its formation and before the approval of a resolution plan. In this case, the CoC made its decision based on business acumen, highlighting that the company’s financial situation was beyond salvage.
The Tribunal refused to impede the CoC’s decision, recognizing that it was made in alignment with the CoC’s collective judgment on the best course of action. The NCLT further emphasized that the Adjudicating Authority should not interfere with the CoC’s decision to liquidate, thereby safeguarding the process under the provisions of the IBC.
Liquidation and Appointment of Liquidator
In a significant move, the Tribunal has also appointed Mr. Dinkar T. Venkatasubramanian as the liquidator for Go First Airlines in compliance with the IBBI (Insolvency and Bankruptcy Board of India) circular from July 2023. The appointment is in line with the guidelines suggesting that an insolvency professional, rather than the corporate debtor’s resolution professional, should take on the role of the liquidator.
To cover the liquidation costs, the CoC secured litigation financing from Burford Capital in relation to the SIAC arbitration. As per the terms of the Capital Provisions Agreement (CPA), the CoC members are to bear the liquidation costs according to their voting shares, ensuring transparency and fairness in the process.
Legal Provisions and Next Steps
The Tribunal also issued orders under Section 33(2) of the Insolvency and Bankruptcy Code, which stipulates that once the CoC approves a resolution plan for liquidation with more than 66% of the votes, the Adjudicating Authority must issue an order for liquidation. Given the CoC’s unanimous vote of 100%, the Tribunal issued a liquidation order for Go First Airlines and imposed a new moratorium under Section 33(5) of the Code.
With the liquidation process now underway, the Tribunal further directed the payment of compensation and expenses to the applicant, ensuring that all necessary legal and financial protocols are followed.
The Road Ahead for Go First Airlines
The liquidation of Go First Airlines signals the end of a challenging chapter for the airline, which was unable to recover from its financial troubles. For stakeholders, including creditors, employees, and passengers, the outcome of the insolvency process means a clear path forward, albeit with financial repercussions.
The case of Go First Airlines underscores the importance of the Corporate Insolvency Resolution Process as a tool to address corporate distress. It also highlights the critical role of the Committee of Creditors and the Adjudicating Authority in determining the future of distressed companies under India’s insolvency laws.
As the liquidation process unfolds, it remains to be seen how the assets of Go First Airlines will be managed and whether creditors will receive the settlements they are due. For now, the airline’s closure marks a significant moment in the broader story of India’s evolving corporate insolvency landscape.
