“Clear up and come back to us. We are giving you a long rope,” Supreme Court said to Chairman and Managing Director (CMD) of Spice Jet Ajay Singh. Supreme Court questioned about its ability to bid for the takeover of another financially struggling low-cost airline (Go First) while it remained unable to settle its debts with a global investment bank, even after facing contempt of court proceedings.
The Supreme Court of India on Monday (19th February) raised significant concerns regarding SpiceJet’s financial management and priorities, particularly spotlighting the airline’s bid for the insolvent Go First, despite existing financial obligations to Credit Suisse. The apex court’s pointed inquiry,
“Why don’t we take judicial notice of newspaper reports that you’re planning to take GoAir (now Go First)? You have that much cushion and you won’t repay?”
reflects a critical examination of SpiceJet’s commitment to settling its debts amidst expansion endeavors.
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During the proceedings, the court’s skepticism towards SpiceJet’s financial strategy was palpable, with Justices Hima Kohli and Ahsanuddin Amanullah. Jutice Kholi advising the airline’s Chairman and Managing Director, Ajay Singh, to “Clear up and come back to us. We are giving you a long rope.” This statement underscores the judiciary’s willingness to allow SpiceJet an opportunity to rectify its financial commitments, albeit with a clear expectation for resolution.
The legal discourse took a more stringent tone when the court withdrew Singh’s exemption from personal appearance, signaling the seriousness of the matter. Justice Amanullah’s remarks,
“Your exemption (from personal appearance) is withdrawn … We are putting you to notice. Why should we not take judicial notice of a newspaper report four days pack that you are coming with a package to take Go Airlines, and now you have that much of a cushion and will not repay? You are trying to scuffle – this is how our economy works?”
highlight the court’s frustration with SpiceJet’s financial maneuvers and the potential implications for the broader economy.
The court’s order further emphasized SpiceJet’s default status, stating,
“That the respondent (Spicejet) is in default is apparent from the datelines provided by the parties. The respondent is cautioned,”
which serves as a formal acknowledgment of the airline’s failure to meet its financial obligations as per the agreed timelines.
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Moreover, the Supreme Court’s response to SpiceJet’s request for additional time to settle its dues was unequivocal, with the remark,
“You want an extra 15 days to default?”
This rejection of the airline’s plea for more time illustrates the court’s diminishing patience and the urgency for SpiceJet to address its liabilities.
This legal confrontation sheds light on the complexities of managing financial obligations within the aviation sector, especially when juxtaposed with ambitious expansion plans. The Supreme Court’s directives to SpiceJet to settle its outstanding dues to Credit Suisse by March 15, alongside the ongoing monthly payments, underscore the judiciary’s role in ensuring corporate accountability and financial integrity.
As the deadline approaches and with Ajay Singh required to appear on the next hearing date of March 22, the aviation industry and its stakeholders are keenly watching the developments. The outcome of this legal scrutiny could have far-reaching implications for SpiceJet’s operational and financial strategy, potentially setting a precedent for how airlines navigate their growth aspirations in alignment with their fiscal responsibilities.
The matter will be taken up next on 22nd March.
CASE DETAILS: Credit Suisse AG and anr vs Ajay Singh and anr
Appeared for Credit Suisse – Senior Advocates Siddhartha Dave and Liz Mathew.
Appeared for SpiceJet and Ajay Singh – Senior Advocates Kapil Sibal, Shyam Divan and Vivek Tankha.
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