Delhi HC issues contempt notice to Spicejet for non-return of assets to TWC Aviation

Troubled budget airline SpiceJet has once again attracted the ire of the Delhi high court for failing to settle dues with its lessors. On Tuesday, the court issued a contempt notice to the airline's management after it disregarded a prior order mandating the return of two airframes and three engines to lessor TWC Aviation Capital Ltd. The airline's unpaid dues are reported to total $14 million.

The division bench of the high court has set a final deadline of July 8 for SpiceJet to return all leased assets, including the airframes, engines, and all technical records, to TWC Aviation. Failure to comply may result in the court directing the grounding of the engines.

"If there is no compliance with the direction, we will pass consequential directions for grounding the aircraft carrying the subject engines," remarked the division bench.

However, the court clarified that contempt proceedings could be dropped if SpiceJet complies with the directive by the specified deadline.

Legal battles

During the court proceedings, SpiceJet said that it had returned the two airframes within the deadline of 17 June but requested a one-week extension to return the three engines, which are currently operational in other aircraft. The airline cited logistical challenges in securing suitable replacement engines.

“By June 17, 2024, we were able to return the two aircraft frames and indicated to the respondent that we are prepared to return them. However, there has been some delay in securing replacement engines. We have taken steps to obtain them and have entered into various agreements and made substantial payments to numerous aircraft lessors,” said senior lawyer Amit Sibal, representing SpiceJet.

TWC Aviation, however, refused to accept the airframes without the engines and accused SpiceJet of repeatedly seeking extensions while continuing to profit from the engines without compensating the lessor. 

"I just can't fly planes without engines," remarked senior counsel Dayan Krishnan on behalf of the lessor, urging the court to ground the affected aircraft immediately.

Sibal emphasized the impact on passengers, saying, "This is a public airline with thousands of passengers flying daily. We are willing to provide a written undertaking that regardless of finding replacements, we will return the engines by July 8 even if it means grounding aircraft."

TWC Aviation also demanded that the engines be returned to airports in Delhi and Chennai, where the airframes are currently located. SpiceJet's senior counsel requested time to receive instructions from the management regarding the delivery location.

The court will hear the case next on 9 July.

SpiceJet's woes

On 27 May, the division bench rejected SpiceJet's plea challenging a single bench order to return the assets, citing substantial dues owed to lessors and alleged misuse of assets, particularly the use of lessor's engines in other aircraft, which violates regulations.

The single bench had on 15 May ordered SpiceJet to return two leased Boeing aircraft and their engines to TWC Aviation by 28 May due to unpaid dues. The court emphasized the need to prevent further damage to the lessor's assets based on an inspection report provided by TWC Aviation.

TWC Aviation had leased two Boeing aircraft and three engines to SpiceJet in 2019 for a 12-month period, but the airline defaulted on its $180,000 monthly rent. Disputes arose during the pandemic, leading to legal actions in courts in India and England.

In March, the High Court of England and Wales issued an interim injunction against SpiceJet, barring the use of TWC's engines on other aircraft due to concerns about misuse and potential damage. Despite SpiceJet's challenge, the court ruled in favour of TWC, ordering the return of the leased assets.

SpiceJet has been embroiled in multiple legal battles over unpaid dues, facing contempt notices from both the Delhi high court and the National Company Law Tribunal. The airline has previously faced similar actions for non-payment of debts to creditors like Credit Suisse and for failing to honour the arbitral award owed to Sun Group chairman Kalanithi Maran and Kal Airways.

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