Introduction

The National Company Law Tribunal (NCLT) has ordered the liquidation of budget airline Go First Airways, marking the end of its turbulent insolvency proceedings. This decision follows the Committee of Creditors’ (CoC) application, which was approved by an NCLT bench comprising Judicial Member Mahendra Khandelwal and Technical Member Dr. Sanjeev Ranjan.

Go First, formerly known as Go Air, has struggled with financial instability, supply chain issues, and legal challenges since filing for insolvency in May 2023. The tribunal’s verdict signals a major development in India’s aviation and insolvency landscape. This article delves into the background, legal proceedings, impact, and future implications of Go First’s liquidation.

Background of Go First’s Insolvency Crisis

Go First’s financial struggles began long before its insolvency filing. The airline, owned by the Wadia Group, cited significant operational and financial distress due to the non-availability of aircraft engines from Pratt & Whitney. This shortage led to the grounding of nearly half of its fleet, severely impacting operations and revenue.

On May 2, 2023, Go First voluntarily filed for insolvency under Section 10 of the Insolvency and Bankruptcy Code (IBC), 2016, which allows corporate debtors to initiate the Corporate Insolvency Resolution Process (CIRP). The NCLT admitted the plea on May 10, 2023, and appointed a Resolution Professional (RP) to oversee the airline’s affairs.

Key Legal Developments in the Insolvency Proceedings

1. Dispute Over Aircraft Leases and Moratorium

One of the major legal disputes during Go First’s insolvency proceedings was the conflict between its lessors and the insolvency moratorium. The airline’s lessors argued that their assets (aircraft) had been unfairly retained despite terminating their leases before insolvency proceedings began.

The NCLAT (National Company Law Appellate Tribunal) upheld the NCLT’s decision on May 22, 2023, stating that lessors could seek clarification regarding the moratorium from the NCLT. However, this did not satisfy the lessors, who then approached the Delhi High Court.

The lessors sought an order directing the Directorate General of Civil Aviation (DGCA) to deregister their aircraft. Initially, the DGCA resisted, citing the insolvency moratorium. However, the Ministry of Corporate Affairs (MCA) later clarified that Section 14(1) of the IBC does not apply to transactions involving aircraft, engines, airframes, or helicopters.

Following this clarification, the *Delhi High Court, on April 26, 2024, ordered the DGCA to deregister Go First’s fleet, which was completed by early May 2024. The maintenance and export of the deregistered aircraft were then transferred to the lessors under *Rule 32A of the Aircraft Rules.

2. Decision to Liquidate the Airline

With no operational aircraft and no viable resolution plan, Go First’s Committee of Creditors (CoC) decided to liquidate the company in September 2024. The CoC formally filed an application for liquidation, which was approved by the NCLT in January 2025.

During the proceedings, the NCLT had initially raised concerns about allowing Resolution Professional (RP) Shailendra Ajmera to serve as the liquidator. Consequently, the CoC appointed Dinkar Venkatasubramanian as the official liquidator.

3. Legal Representation and Advocacy

Several prominent legal firms represented different stakeholders in the case:

• Khaitan & Co: Advocates Diwakar Maheshwari, Kumar Saurabh Singh, and Vishnu Sriram represented the Resolution Professional.
• JSA Advocates: Advocate Soumitra Majumdar appeared for the Committee of Creditors (CoC).

Implications of Go First’s Liquidation

1. Impact on India’s Aviation Industry

The liquidation of Go First marks another significant collapse in India’s aviation industry, following past failures such as Jet Airways and Kingfisher Airlines. Key implications include:

• *Increased Market Consolidation: With Go First exiting, the market will see further consolidation, benefiting stronger players like *IndiGo, Air India, and Akasa Air.
• Rising Airfare: Reduced competition may lead to increased airfares, especially on routes where Go First was a key operator.
• Challenges for New Entrants: The financial struggles of Go First highlight the challenges of operating in India’s price-sensitive aviation market, making it harder for new airlines to enter.

2. Legal Precedent for Insolvency Cases in Aviation

The Go First case sets a crucial legal precedent for future insolvency proceedings involving airlines. Key takeaways include:

• Clarification on IBC’s Scope: The Ministry of Corporate Affairs’ clarification that Section 14(1) of the IBC does not apply to aircraft assets will shape future insolvency disputes in aviation.
• Priority of Lessors’ Rights: The case reinforces the importance of timely deregistration and asset recovery for aircraft lessors in insolvency cases.

3. Financial Losses and Impact on Employees

Go First’s liquidation will have significant financial and employment repercussions:

• *Losses for Creditors: The airline owed *₹6,521 crore to financial creditors, who are unlikely to recover their full dues.
• *Job Losses: Over *5,000 employees of Go First are affected, adding to the rising unemployment in the aviation sector.

What’s Next? The Road Ahead

1. Liquidation Process

The appointed liquidator, Dinkar Venkatasubramanian, will oversee the liquidation process, which includes:

• Selling off remaining assets to repay creditors.
• Resolving pending legal disputes with vendors, employees, and lessors.

2. Potential Legal Challenges

Legal disputes may continue, particularly regarding:

• Employee compensation and severance packages.
• Pending claims from vendors and service providers.
• Resolution of financial liabilities to banks and creditors.

3. Impact on Future Airline Regulations

The government may consider regulatory changes to prevent similar insolvency cases in the future, including:

• Stronger financial oversight of airlines.
• Better dispute resolution mechanisms between airlines and lessors.
• Enhanced protections for employees in insolvency cases.

Conclusion

The liquidation of Go First Airways is a landmark case in India’s aviation and insolvency sectors. It highlights the financial vulnerabilities of budget airlines, the complexities of insolvency laws, and the challenges faced by lessors and creditors.

While the decision ensures legal closure, it raises concerns about the stability of India’s aviation market. The case will serve as a crucial reference for future insolvency proceedings, shaping policies on airline financial management, creditor rights, and industry regulations.