Delhi HC directs SpiceJet to pay $4mn against dues to two engine lessors

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Delhi High Court

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The Delhi High Court on Monday directed low-cost airline SpiceJet to pay $4 million against its dues to two engine lessors – Team France 01 SAS and Sunbird France 02 SAS.

New Delhi: The Delhi High Court on Monday directed low-cost airline SpiceJet to pay $4 million against its dues to two engine lessors – Team France 01 SAS and Sunbird France 02 SAS.

During the hearing, the lessors informed the court that SpiceJet had made a settlement offer, which they found unacceptable, which prompted them to pursue litigation.

The lessors also urged the court to restrain SpiceJet from using their three engines despite the lease termination.

While posting the hearing next on February 21, the court warned SpiceJet that failure to comply could result in orders for the grounding of the engines.

An airline source on Monday also told IANS that besides Rs 744 crores, SpiceJet has also secured Rs 160 crore through the Emergency Credit Line Guarantee Scheme (ECLGS) with a substantial bank balance of Rs 900 crore.

Last week, SpiceJet had allotted shares and warrants amounting to a total of Rs 744 crore in the first tranche of its preferential issue. The decision was taken by the company's Board of Directors on January 25, marking a significant step in bolstering SpiceJet's financial position.

The source further said that airline’s CMD Ajay Singh will personally oversee all major expenditures.

“Every rupee will be meticulously scrutinised, with no expenditure permitted without prior approvals. Singh has issued a stern directive of 'perform or perish', making it clear that underperformers will face significant challenges in the revitalised SpiceJet,” said the sources.

An airline official said that with fund infusion, the company will prioritise fleet upgrades, enhance on-time performance, and a customer-centric approach.

“Additionally, a series of cost-cutting measures will be implemented to streamline operations and enhance efficiency. Company expects it will raise substantial further capital in follow on rounds of financing,” said the official.

SpiceJet is due to complete another tranche of equity/warrants raise from remaining subscribers and has requested additional time from the competent authority to complete the process under the ongoing preferential issue, as approved by the shareholders of the company on January 10, 2024.

The extension is necessitated on account of limited banking days arising from long weekends during the intervening period.

In December 2023, the high court had asked SpiceJet to pay $450,000 to the lessors within two weeks. While the airline met this payment, the lessors sought further settlement due to outstanding amounts totaling $12.9 million over two years.

Earlier this month, the court had granted permission to Engine Lease Finance BV, a lessor to SpiceJet, to conduct inspections on an engine leased to the airline.

The airline has been directed to maintain status quo regarding the engines, with exceptions allowed only for purposes like refurbishing.

This directive had come in response to allegations by the lessor, accusing SpiceJet of cannibalising parts of the leased engine.

It informed the court that despite SpiceJet committing to grounding the engine on January 15, the airline continued its use.

Counsel for SpiceJet had assured the court that the airline would ground the engine promptly and submit a comprehensive response to address all allegations raised by the lessor.

Earlier, the court was informed that Engine Lease Finance Corporation Aviation Services Ltd and cash-strapped SpiceJet airline have arrived at an interim settlement.

During the hearing, both parties’ legal representatives had informed the court that settlement terms have been agreed and consequently, both legal teams requested an adjournment.

The court had granted the adjournment, scheduling the matter to be heard on February 8.

As part of the settlement, SpiceJet was required to make a payment of over $2 million to Engine Lease Finance BV by January. Additionally, SpiceJet has committed to returning the disputed engine by January 25.

However, Engine Lease Finance BV retains the right to maintain the termination and pursue legal action if SpiceJet fails to fulfil these obligations.

On September 27, Engine Lease BV had taken the matter to the Delhi High Court, seeking the return of the lone remaining engine. The lessor had initially leased nine engines to the carrier, and according to the terms of the lease agreement, eight engines had been returned as the agreement was terminated.

During the previous hearing, senior advocate Rajshekar Rao and attorney Anandh Venkatramani, representing Engine Lease, had requested the court to prevent SpiceJet from using the engine in question. The agreement clearly states that the airline is not authorised to continue using the engine once the lease has been terminated.

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