The Madras High Court on Monday ordered Spice Jet Limited to be wound up and the official liquidator to take over the company's assets because it could not discharge its debts to a corporate creditor. The single-judge bench of Justice R. Subramanian was hearing a petition by Credit Suisse AG, a SpiceJet creditor based in Zurich, Switzerland, to wind up the carrier and appoint an official liquidator to take charge of the carrier's assets, properties, stock in trade, and books of accounts, because the carrier was unable to repay its debts to Credit Suisse.
The bench observed that because Spice Jet did not choose to terminate the contract and continued to use the petitioner company's (SR Technics) services, the respondent company cannot claim that there was a violation of the Aircraft Act or the C.A.R. Rules and thus their liability ceased. Furthermore, the company has failed miserably to meet the two-pronged test established by the Apex Court in Mathusudan Gordhandas & Co. v. Madhu Woollen Industries (P) Ltd. The company is liable to be wound up due to its inability to pay its debts under Section 433 (e) of the Companies Act 1956.
Rahul Balaji, counsel for the petitioner, contended that Section 433 (e) of the Companies Act 1956 allows for the winding up of a company if it is discovered that it is unable to pay its debts. The counsel contended that once a notice under Section 434 (1)(a) of the Companies Act 1956 is issued and the company fails to pay the debt demanded under said notice within three weeks or to secure or compound for it to the reasonable satisfaction of the creditor, the company is deemed unable to pay its debts. With the presumption of inability to pay under the above-mentioned Companies Act provision, an order to wind up should be issued, unless the debtor company can demonstrate that the debt cannot be enforced or that there is a genuine dispute. Balaji stated that Spice Jet has not denied using SR Technics' services to maintain and repair aircraft engines under its 2011 agreement and the August 2012 supplementary agreement. According to the counsel, given the situation of accepting invoices and issuing bills of exchange, Spice Jet cannot argue that the debt cannot be legally enforced
