Go First Lenders to Contest Changes in India’s Bankruptcy Laws Amidst Aircraft Repossession Concerns
Lenders grappling with the financial implications of Go First’s insolvency are gearing up to challenge the Directorate General of Civil Aviation’s (DGCA) interpretation that recent changes to India’s domestic legislation empower lessors to reclaim their aircraft and engines from the beleaguered airline.
Reports indicate that out-of-pocket lenders, including Central Bank of India, Bank of Baroda, IDBI Bank, and Deutsche Bank, collectively owed $783 million by Go First, plan to dispute the DGCA’s legal opinion. The DGCA contends that amendments aligning India’s bankruptcy laws with the 2001 Cape Town Convention would render earlier court orders preventing asset repossession by lessors invalid.
The lenders, seeking the best chance to recover their funds, aim to argue that the legislative changes should not impact retrospective court orders. The fate of Go First’s relaunch hinges on retaining its aircraft, all of which were acquired from lessors. Despite the airline’s cessation of operations in May, lessors have faced challenges in repossessing their assets as India’s courts, particularly the National Company Law Tribunal, have issued orders keeping the assets in the country.
The lenders fear that future court rulings will favor lessors due to the legislative amendments. At the upcoming hearing on November 17 in the Delhi High Court, the lenders’ counsel is expected to argue that since Go First was already under bankruptcy protection when the law was amended, the changes should not apply retroactively.
The outcome of the legal battle will significantly impact Go First’s prospects, with the possibility of liquidation looming if the court permits lessors to reclaim aircraft. In such a scenario, the Wadia Group, owners of Go First, would be left with a 94-acre land parcel in Thane, valued at around $360.5 million, representing a partial recovery for the lenders.
The Committee of Creditors recently extended the insolvency resolution timeline in hopes of finding a buyer for Go First. Jindal Steel and Power Ltd. has expressed interest, but the resolution plan and creditor settlement remain uncertain. The legal proceedings will shape the future of Go First and the recovery prospects for its lenders. Stay tuned for updates as the situation unfolds in the Delhi High Court.