Alterna Aviation Withdraws Insolvency Bid Against SpiceJet, Eyes Delhi High Court for Dispute Resolution

Alterna Aviation, through its special purpose vehicle (SPV) Alterna Aircraft VB Limited, has decided to withdraw its insolvency bid against India’s low-cost carrier, SpiceJet, at the National Company Law Tribunal (NCLT). The decision, accepted by the NCLT Delhi bench on March 18, 2024, allows Alterna to redirect its efforts to the Delhi High Court in pursuit of recovering over USD11 million, as awarded by the UK High Court.

The legal tussle between the two entities revolves around a lease dispute concerning two Boeing 737-800 aircraft, leading to Alterna being awarded USD11.1 million and an additional GBP265,000 (approximately USD337,243) by the High Court of England and Wales in March 2023. Despite the judgement, SpiceJet has neither appealed the decision nor fulfilled the financial obligations, prompting Alterna to seek enforcement through India’s legal system.

Initially, Alterna argued that the financial debt owed by SpiceJet warranted the NCLT’s intervention under India’s Insolvency and Bankruptcy Code (IBC). However, SpiceJet countered that the NCLT was not the appropriate venue for debt recovery, and the bench itself expressed doubts about its jurisdiction in this matter.

The move to withdraw the insolvency bid against SpiceJet at the NCLT, therefore, marks a strategic shift by Alterna to explore alternative legal avenues for dispute resolution. The decision comes in the backdrop of SpiceJet successfully defending against insolvency petitions from other creditors, including Wilmington Trust SP Services (Dublin) and Willis Lease Finance, and reaching out-of-court settlements with AerCap and Cross Ocean Partners among others.

Alterna’s upcoming legal action in the Delhi High Court signifies a growing trend among litigants to enforce monetary awards and resolve disputes against airlines without pushing for insolvency. This approach not only seeks to ensure financial recovery but also maintains the operational continuity of the airline involved.

As Alterna Aviation prepares to initiate proceedings in the Delhi High Court, the aviation industry watches closely, as this case could set a precedent for future disputes involving airline insolvencies and debt recovery through legal channels other than the NCLT. The outcome may influence how lessors and financial institutions approach recovery strategies against airlines facing financial challenges in India and potentially other jurisdictions.