India’s National Company Law Tribunal (NCLT) on Wednesday allowed Go Airlines (India) Ltd.’s application for voluntary insolvency resolution.

The division bench of Justice Ramalingam Sudhakar and Technical Member L.N. Gupta, in an oral order, admitted Go Airlines, which operates ultra-low-cost airline Go First, under the corporate insolvency resolution process and issued a moratorium, including prohibiting the return of leased assets.

On May 4, the tribunal had reserved its order in an application by the budget airline, which voluntarily sought the initiation of insolvency proceedings amid cash crunch.

The carrier’s counsel argued that aircraft lessors are now moving to take possession of planes in the absence of the order.

Previously, Go Airlines said if it loses aircraft possession and the legal right to operate them, then the continuation of business will be at stake. The carrier had also said it is seeking a comprehensive debt restructuring and it is not a malicious petition to avoid payments of dues.

The aircraft lessors had challenged the company’s move, arguing that they have serious objections to the demand for a moratorium by Go Airlines. They said that the moratorium will have harmful and serious consequences.

The NCLT today also appointed Abhilash Lal, backed by Alvarez and Marsel, as the interim resolution professional (IRP) of the company.

The airline's earlier management stands suspended and no employees are to be laid off, the tribunal said, adding that suspended management will extend all support necessary to IRP to maintain a status of the airline as going concern.

Last week, Jefferies said the insolvency of Go Airlines will have a limited impact on the Indian banks.

(Send feedback to editor@cornerofficejournal.com)