Supreme Court dismisses SpiceJet’s appeal, upholds decision to ground leased engines

India’s Supreme Court on Friday dismissed SpiceJet’s plea against a Delhi High Court order directing the cash-strapped airline to ground three engines leased from Team France 01 SAS and Sunbird France 02 SAS for non-payment of dues.

A three-judge bench headed by Chief Justice DY Chandrachud upheld the high court order, finding that SpiceJet had violated the consent order with the lessor. The court said the high court’s judgment was correct and expressed its reluctance to interfere.

The Supreme Court rejected a plea filed by SpiceJet senior counsel Amit Sibal to extend the suspension order. Sibal said the airline has already paid more than $8 million to lessors and was in talks in Singapore to reach a settlement. He sought relief until a deal is reached, but the court declined to intervene.

Sibal also told the court that while two of the three engines have been grounded, SpiceJet needs specialised stands to properly ground the engines before returning them to the lessor and sought more time. In response, the Supreme Court suggested SpiceJet explain its case to the Delhi High Court.

Also read: Mint Primer | How long will it take for IndiGo’s grounded fleet to resume flying?

Senior counsel Abhishek Manu Singhvi, representing the lessor, argued that SpiceJet had repeatedly violated the consent order despite appearing in court 18 times and facing two high court orders over the use of the engine. Singhvi said that under the consent order, SpiceJet was obliged to return the engine within 15 days if it failed to pay.

What is happening now?

The airline must now ground the engines as it has exhausted legal remedies to prevent this from happening. The latest decision adds to the burden on the cash-strapped airline. SpiceJet said in the court that it operates 21 aircraft and grounding the engines will lead to the grounding of two aircraft, disrupting its operations.

However, the airline said in a statement, “SpiceJet is currently in talks with the aircraft lessors to reach an amicable resolution. It is important to note that two of the three engines in question have been grounded and our operations remain completely normal and unaffected. We remain committed to ensuring seamless operations.”

Following the order, SpiceJet shares fell 3.50% to ₹At 2:15pm on Friday, the price was 65.99.

Medical Records

The airline had moved the Supreme Court challenging the Delhi High Court division bench order, but the court on September 11 dismissed its plea to overturn the single-bench order grounding the three engines.

A division bench headed by Justice Rajiv Shakdher rejected SpiceJet’s contention, saying it did not wish to interfere with the single court’s order and urged both parties to seek a settlement.

The initial order, issued by the single court on August 14, asked SpiceJet to ground the aircraft by August 16 and send back the engine for inspection within 15 days.

Also read | SpiceJet’s road to recovery: A long and difficult climb to regain market share

The Supreme Court had previously rebuked SpiceJet, with Justice Shakdher saying: “You are using someone else’s property and you cannot use it if you do not pay the rent.” He also questioned the rationale behind SpiceJet’s assurance and suggested that if the airline had enough financial resources to meet its obligations, it would not have gone to court.

During the hearing, SpiceJet claimed that it was one of the few remaining airlines in India, struggling to stay afloat in a challenging environment. The airline detailed a genuine offer that included securities and shares pledged by directors to pay outstanding dues. It proposed to pledge aircraft or shares to secure payments, promising to continue to pay $1.6 million weekly and $1.2 million monthly instalments.

Plan to raise funds ₹Rs 300 billion

SpiceJet plans to raise ₹As of September 30, it has raised Rs 30,000 crore through the Qualified Institutional Placement (QIP) and has committed to ₹4.9 crore to settle the dues by the end of the month. However, the lessor rejected the offer, expressing displeasure over SpiceJet’s failure to make payments since December 2023 and questioned the airline’s financial stability.

France 01 and Sunbird France 02 filed a lawsuit against SpiceJet in December 2023, citing unpaid bills of more than $20 million, court documents show. Although SpiceJet has managed to pay $8.36 million, it still owes $9.41 million as of August 12.

The airline’s financial situation remains dire. The company reported a consolidated net profit of ₹Revenue for the June quarter was Rs 158.2 crore, down 20% from the previous quarter. ₹Total revenue fell 8.3% to Rs. ₹207.78 billion, while expenditure declined by more than 7% to ₹1,919.6 crores.

Also read: International airlines scramble to capture India’s domestic market

SpiceJet’s total liabilities are ₹11,252 crore at the end of June, down from ₹11,690.7 crore at the end of March; ₹Its profit stood at Rs 1,24,202 crore at the end of December 2023. The airline is currently under enhanced monitoring by the Directorate General of Civil Aviation (DGCA) of India due to flight cancellations and financial stress.

To meet these challenges, Chairman and Managing Director Ajay Singh plans to sell more than 10% of his stake in the airline to raise about ₹30,000 crore. Despite the dilution, he is expected to remain the largest shareholder, with his stake expected to fall to 30-35% after the financing.