Deccan Aviation's row with aircraft lessors reaches SC

New Delhi: Deccan Aviation has moved the Supreme Court to resolve the dispute with aircraft lessor GECAS Group of Companies over the terms of lease agreement.
After the merger between Deccan Aviation&aposs low-cost airline Air Deccan and Kingfisher Airlines, it was decided to terminate the lease agreements prematurely with lessors to eliminate surplus aircraft and avoid duplication of flights.
A bench headed by Justice D K Jain has admitted the plea by Deccan Aviation (whose low-cost carrier Air Deccan has since been renamed Kingfisher Red after its merger with Kingfisher Airlines) challenging the Karnataka High Court ruling that refused to interfere in the dispute involving commercial activity of Deccan with its aircraft lessors.
Earlier, on Deccan&aposs plea the Karnataka high court had given an exparte order restraining the lessors from repossessing the aircraft. However, the court vacated its stay order on a plea by GE Commercial Aviation Services, a part GECAS group, and dismissed Deccan&aposs petition on the ground that though the lessors had given consent to the merger scheme, it would not take away their rights to repossess the aircraft.
GECAS Group of Companies had invoked the cross default clause and had held up around 4.714 million dollars in the form of cash and letters of credit when only rental amount of 1.643 million dollars was due in respect of four aircraft.
According to Deccan senior counsel F Nariman and Pratap Venugopal, the court which had sanctioned the merger scheme under Section 391 of the Companies Act cannot refuse to decide its dispute with its creditors. Resolution of the dispute was a must for proper working of the merger scheme, they added.
31/05/09 Indopia

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Categories: Deccan Aviation May 2009, Foreign May 2009, Kingfisher May 2009