Go First promoters may find it tough to regain control of airline

Wadia Group may find it difficult to obtain approval if they apply to regain control of Go First under Insolvency and Bankruptcy (IBC) law Rules unless 90 percent of the lenders agree to take the company out NCLTbankruptcy process.

The only way promoters can bid is under Section 12A of the IBC which provides for a settlement between management and former creditors, said Nadia Sarguru, Principal Partner, MZM Legal LLP. Under 12-A, she said, the NCLT could allow an application accepted for voluntary insolvency to be withdrawn with the approval of 90 percent of the voting share in the creditors committee.

She added that an applicant can only withdraw an application for voluntary insolvency by contacting the NCLT through an interim resolution specialist.

“Unqualified Promoters”

Atif Mathur, partner at SNG & Partners, said promoters cannot bid on the debtor company’s assets in the Go First insolvency case. Section 29a of the IBC bars promoters from the bidding process.

Also read: The Go First account will likely be announced in the NPA in the April-June quarter

Mathur said the purpose of the disqualification under section 29a of the IBC had been set by the High Court to provide a sustainable revival and to ensure that a person who is the cause either by design or default cannot be part of the dissolution process.

Raj Bhalla, partner at law firm MV Kenny, said that if the promoters recover the assets of the firm, it will be for an absolute sum with no separation between the amount of principal and interest and no question of waiver of interest during the moratorium.

Also read: The NCLT recognizes Go First’s insolvency application, and assigns an IRP

If a promoter, who has not been prevented from bidding for his company, is undergoing bankruptcy proceedings and has not been declared a willful defaulter, he can also regain control of the company using the provision of a ‘scheme of arrangement’ under section 230 of the said companies act.

Although Abhilash Lal of Alvarez & Marsal has been appointed as a temporary professional in the resolution, it must be ratified by creditors within 30 days as the NCLT appointed it at the request of the debtor companies, a senior banker said.

Although most banks have designated the airline as a standard account, the RBI has proactively made a 15 per cent allotment. Bank of Baroda is also likely to make similar provisions. The bank will report its results for the fourth quarter of fiscal year ’23 on May 16.

Also read: The DGCA is asking Go First to stop selling tickets

He said the airline had given guarantees of Rs 1,500-2,000 crore to the banks in the form of land.

Another banking source said the issues with the airline appear to be more operational than financial, and if there is an impact, operational creditors are likely to be hit harder than banks.

(With input from Anshika Kayastha)