The National Company Law Tribunal (NCLT) has allowed aircraft lessor Aviator ML 29641 Limited to withdraw its insolvency petition against SpiceJet after the two sides reached a settlement, providing the airline relief in one of the insolvency cases pending against it.
The tribunal, however, came down heavily on both parties over the timing of the settlement disclosure. The settlement was brought before the NCLT after the matter had already been argued and was at the stage of pronouncement of orders.
A special Bench comprising Judicial Member Mahendra Khandelwal and Technical Member Anu Jagmohan Singh allowed Aviator ML to withdraw its petition, but directed both parties to pay ₹7.5 lakh each to the Prime Minister’s National Relief Fund. The withdrawal will take effect after proof of payment is submitted to the NCLT Registry.
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What Led to the NCLT Proceedings?
Aviator ML had approached the NCLT against SpiceJet under Section 9 of the Insolvency and Bankruptcy Code (IBC), seeking initiation of insolvency proceedings against the airline.
The petition was one of several insolvency cases filed by aircraft lessors against SpiceJet. The cases have been heard together before the NCLT Special Bench as the airline faces multiple disputes with lessors over outstanding obligations.
A Section 9 petition usually does not automatically mean that a company has entered insolvency. An operational creditor can use Section 9 to seek initiation of the Corporate Insolvency Resolution Process (CIRP), but the NCLT must first decide whether the petition meets the requirements under the IBC.
In the SpiceJet matter, the Aviator ML petition had reached an advanced stage before the settlement was disclosed.
Why Did the NCLT Object to the Settlement?
The NCLT’s objection was not to the parties reaching a settlement. Its concern was the late disclosure of the agreement. The tribunal had already heard arguments and reserved the matter for orders. The parties subsequently informed the Bench that they had reached a settlement.
The development forced the tribunal to defer the scheduled pronouncement and consider how the settlement should be dealt with.
During the subsequent hearing, the parties sought to have the settlement recorded by the tribunal and requested protection in case the agreement was not honoured. The NCLT declined to record the settlement terms and said it would permit only an unconditional withdrawal of the insolvency petition. The tribunal also refused to grant liberty to revive the insolvency proceedings on the basis of the settlement agreement. The Bench questioned why the parties had waited until the matter had reached the stage of pronouncement before informing the tribunal about their settlement.
The tribunal ultimately permitted the withdrawal but imposed costs on both sides.
What Does the Withdrawal Mean for SpiceJet?
The withdrawal removes the Aviator ML petition from the immediate insolvency proceedings against SpiceJet. But it does not mean that the airline’s wider insolvency concerns have been resolved. Seven other insolvency petitions filed by aircraft lessors against SpiceJet remain. The NCLT has withdrawn its reserved orders in those seven matters and directed that they be placed before the regular Bench for fresh consideration.
This means the remaining proceedings will now have to be considered afresh rather than being decided under the orders that had earlier been reserved by the Special Bench.
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What Happens Next for SpiceJet?
The focus now shifts to the seven remaining insolvency petitions. SpiceJet has welcomed the NCLT’s decision on the Aviator ML matter and described it as a positive step towards resolving its outstanding issues. The airline has also said it remains committed to working with its partners to find mutually acceptable solutions.
For the airline, the settlement provides some immediate relief, but the broader legal challenge remains. An insolvency petition is not the same as a company being admitted into the Corporate Insolvency Resolution Process. In the Aviator ML matter, the petition has now been allowed to be withdrawn following the settlement. The remaining seven cases will however continue to determine the extent of the insolvency pressure facing SpiceJet.
The latest development therefore gives the airline some breathing room, but its wider battle with aircraft lessors is still before the NCLT.
* Source: NCLT proceedings in the Aviator ML 29641 Limited vs SpiceJet Limited matter and publicly available reports of the tribunal proceedings.
