NCLT Issues Notices to CoC & IBBI Over a Plea to Refund Rs. 597 Crores to Around 15.5 Lakh Passengers
NCLT Issues Notices to CoC & IBBI Over a Plea to Refund Rs. 597 Crores to Around 15.5 Lakh Passengers
The National Company Law Tribunal (NCLT), New Delhi bench, has issued notices to the Committee of Creditors (CoC) of Go First and insolvency regulator Insolvency and Bankruptcy Board of India (IBBI) over a plea to refund Rs. 597.54 crores to around 15.5 lakh passengers who booked tickets for travel on and after 3rd May.
The NCLT bench comprising Mahendra Khandelwal (Judicial Member) and Rahul P Bhatnagar (Technical Member) said that the feasibility and implementation of such a business plan should be ‘subject to suggestions of members of Committee of Creditors (CoC)’. The bench asked the Resolution Professional to take specific approval from the lenders over the refund of the amount.
Go First stopped had halted its flights since 3rd May, 2023, and voluntarily filed for initiation of corporate insolvency resolution process (CIRP) against itself, as it was unable to fly due to technical difficulties faced by the non-availability of engines from Pratt & Whitney.
Thereafter, several air passengers had approached NCLT directly by writing e-mail requests/phone calls for refunds of booked cancelled tickets. On this, the NCLT had issued an advisory on 3 July, directing them to approach the RP to claim a refund as per the procedure of the Insolvency and Bankruptcy Code, 2016 (IBC).
During the hearing, Go First sought permission from the bench to refund Rs. 597 crores to 15.5 lakh passengers, involving those who had booked flights till 10 July.
Appearing for the airline’s resolution professional, Senior Advocate Ramji Srinivasan argued that the company receives about 97 percent of its bookings through booking aggregators and the other three percent directly from its website. He argued that aggregators maintain an escrow account with the airline where the aggregators deposit some money against which they make bookings for customers.
According to the RP, as on the date of cancellation, the escrow account was Rs. 820 crores with Rs. 380 crores for current booking and Rs. 440 crores for future booking.
With the cancellations since 3rd May, the airline has shifted payments to the aggregators, as a result of which the current balance was submitted to be Rs. 550 crores.
The counsel informed the NCLT that if the amount is not made available to the aggregators, the airline’s resumption plans will be affected. Thus, he sought for the Tribunal’s orders on the same.
The Tribunal however, noted that since any order passed to this effect will have a direct bearing on the CoC, the RP must get a resolution from them on refunds before the next date of hearing. Moreover, the Tribunal while noting the wavering change of plans, was of the deemed view that it would be better if a specific resolution over payment for refund is taken. The bench also inquired whether anyone had filed an objection to this refund plan.
Responding to this, the Counsel stated that such an action was taken in view of the public interest and suggested bringing the IBBI, which is a regulator into this issue.
“We issue notice to the CoC, IBBI and direct them to file their replies. We will hear the case further on 7 August,” ordered NCLT.
Consequently, the bench while concurring with the submission forwarded by the counsel, issued notices to the CoC of Go First and IBBI directing them to file their replies and posted the matter for the next hearing on 7 August.
