Insolvency Proceedings cannot be filed against SpiceJet in absence of Privity of Contract

Willis Lease Finance Corporation Vs SpiceJet Limited (NCLT Delhi)

Conclusion: Servicer of aircraft lessors had no locus standi to file insolvency proceedings against SpiceJet in absence of privity of contract as it was only the Servicer and Administrative Agent of the respective lessors and had inter-se arrangement with lessors in form of ‘Servicing Agreements’ and applicant was not a ‘Operational Creditor’ in the instant case.

Held: Assessee-Willis Lease Finance Corporation (Operational Creditor) had its registered office at Florida, USA. SpiceJet Limited (Corporate Debtor) was a company registered under the Companies Act, 1956 having its registered office at New Delhi. The present Application was filed before the Adjudicating Authority duly authorized to initiate Corporate Insolvency Resolution Process (“CIRP”) proceedings under Section 9 of the IBC Code, 2016. The total amount due as on 10.04.2023 was claimed to be Rs 53,96,65,759/- (Rupees Fifty-Three Crore Ninety-Six Lacs Sixty-Five Thousand Seven Hundred and Fifty-Nine Only). Since the registered office of the respondent Corporate Debtor was in Delhi, this Tribunal was having territorial jurisdiction as the Adjudicating Authority with respect to maintainability/issue of notice of Company Petition within the period of limitation. It was held that in order to analyze that whether the present petition was maintainable, it was to be seen that whether the Applicant in the instant case, was operational creditor within the meaning of IBC, 2016. In light of the aforementioned clauses of the respective Lease Agreements executed between SpiceJet Limited and different Lessors, it could be concluded that the amount was due and payable to the respective Lessors and not the Applicant in the instant. On bare perusal of Section 5 (21) of IBC, it was clear that ‘Operational Debt’ was a claim in respect of provision of goods or services which should be based on a contract duly entered between the Corporate Debtor and the Operational Creditor. Moreover, it was settled law that an Operational Creditor was a person to whom an operational debt was owed. However, in the instant case, there was no debt owed to WLFC, which was evident from the perusal of the Lease Agreements and Part IV of the petition itself stated that the debt was due and payable under various lease agreements, which was executed by different lessors. Additionally, under definitions in Section 5(20) “operational creditor means a person to whom an operational debt was owed and included any person to whom such debt has been legally assigned or transferred”. However, in the instant case, neither the operational debt was owed to the instant applicant, nor it had been legally assigned or transferred to the instant applicant. The Applicant in the instant case did not have any direct contractual agreement with SpiceJet as neither any goods or services had been provided by WLFC to SpiceJet nor there was any contractual relationship between the parties. WLFC itself admitted in the Petition that it was only the Servicer and Administrative Agent of the respective lessors and had inter-se arrangement with lessors in form of ‘Servicing Agreements’. Also, the Corporate Debtor in the instant case was not a party to such Servicing Agreements. Therefore, it was undisputedly concluded that the Applicant was not a ‘Operational Creditor’ in the instant case. According, this Adjudicating Authority was of the view that the present application filed by Willis Lease Finance Corporation (Operational Creditor), under section 9 of the Code read with rule 6(1) of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016 for initiating CIRP against SpiceJet Limited (‘Corporate Debtor’), lack merit, was not maintainable and therefore stood dismissed.

FULL TEXT OF THE NCLAT JUDGMENT/ORDER

1. This is an Application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 (‘the Code’) read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 by Willis Lease Finance Corporation (‘Operational Creditor’) duly authorized by its Board for initiation of Corporate Insolvency Resolution Process (‘CIRP’) against SpiceJet Limited. (‘Corporate Debtor’).

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