Court upholds SpiceJet engine grounding order
SpiceJet approached the division bench against a single judge’s August 14 order directing that the three engines be grounded and returned to the lessors
New Delhi A division bench of the Delhi high court on Wednesday upheld an order passed last month by a single judge, directing embattled budget airline SpiceJet to ground three engines and returning them to lessors Team France 01 SAS and Sunbird France 02 SAS.
The bench, led by justice Rajiv Shakdher, observed that preventing the lessors from exercising their contractual rights at a stage when the airline’s financial condition is “weak” could result in loss of assets and money.
The bench, also comprising justice Amit Bansal, looked at records showing that SpiceJet was in default and had neither paid past nor current dues. SpiceJet, the court said, violated an agreed interim arrangement for payment of dues, and that the terms included the airline would have to ground the engines, which could be repossessed by the lessors in case of a breach.
“The fact that the financial condition of SpiceJet is weak is evident from its conduct and the stand taken on its behalf in court, which is that it is attempting to infuse funds through loans and/or equity. In the position in which SpiceJet is at this juncture, Team France and Sunbird France could well end up both without its engines or the monies due under the engine lease agreements. The repossession and export of subject engines upon a termination event occurring is a contractual right conferred upon Team France and Sunbird France under the engine lease agreements,” the bench said in a 33-page verdict.
“As alluded to above, if Team France and Sunbird France are prevented from exercising their contractual rights at this stage, they could possibly lose both their assets, i.e., the engines, and the money. Clearly, in the facts and circumstances of the case, there has been no failure of justice,” it added.
In August, the Indian regulator Director General of Civil Aviation (DGCA) had placed SpiceJet under enhanced surveillance with immediate effect that entailed increased spot checks and night surveillance to ensure the safety of the airline’s operations.
SpiceJet approached the division bench against a single judge’s August 14 order directing that the three engines be grounded and returned to the lessors, ruling that the airline was a defaulter and had no legal and contractual right to continue using the engines.
In its 21-page order, justice Manmeet PS Arora had said that SpiceJet was erratic in making payments to the lessors, and thus directed the airline to re deliver the engines within 15 days from the date of the order. It further directed the airline to offer prior inspection of engines to lessors through their authorised representatives at the Delhi airport within seven days.
The August 14 order was passed in an application filed by the lessors seeking to restrain the airline from operating the three engines, claiming that SpiceJet paid a sum of $8.36 million, leaving the total outstanding dues as on date at $9.41 million.
SpiceJet was represented before the division bench by senior advocate Amit Sibal, and the lessors were represented by senior advocate Rajshekhar Rao.
Sibal contended that the court did not have the jurisdiction to entertain the suit filed by lessors seeking repossession of their engines as the parties, as per the terms of the engine lease agreement, had irrevocably agreed to submit themselves to the jurisdiction of the competent court in England. He also argued that the single judge erred in ignoring that both contractual and non-contractual obligations in relation to the lease agreements were to be governed by UK laws.
Rejecting the contention, the court ruled that a harmonious reading of the clauses revealed that the parties forged an asymmetric jurisdiction clause that allowed the lessors to sue to lessee (SpiceJet) both in England and in courts in a country where the leased engine were located.
A SpiceJet spokesperson said: “Our operations continue as normal and remain completely unaffected. We are currently reviewing the court order.”