Supreme Court nod for pilot’s insolvency proceedings against Air India

Aashish Aryan
The Supreme Court has asked the National Company Law Tribunal (NCLT) to consider afresh a plea by a serving Air India (AI) pilot who has sought to initiate insolvency proceedings against the airline for failing to pay his past dues. (Representational image)

The Supreme Court has asked the National Company Law Tribunal (NCLT) to consider afresh a plea by a serving Air India (AI) pilot who has sought to initiate insolvency proceedings against the airline for failing to pay his past dues.

A New Delhi bench of the NCLT, the adjudicating authority for insolvency resolution, had adjourned hearings in the matter sine die in February, after AI submitted to the tribunal that a similar matter was pending before the Supreme Court.

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Question over divestment

The challenge by the pilots could create hurdles for the Centre’s plan to float an EoI for divestment of its stake in the national carrier. The case outcome could become a precedent for other pilots approaching the NCLT to recover their dues from AI, besides impacting similar cases in debt-laden companies.

“It is open for Air India to take this up as a defence in the application that is filed by the petitioner before the NCLT. The NCLT order [adjourning proceedings sine die], therefore, is set aside and the NCLT will now go into the Section 9 application filed by the petitioner afresh, after considering objections by the respondent [AI],” a two-judge Supreme Court Bench of Justices Rohinton Nariman and V Ramasubramanian said in its order last month.

The pending dispute referred to by AI concerns a challenge to a judgment of the Bombay High Court, which had ruled that the airline could not have altered the terms of service of employees who had joined when the erstwhile domestic carrier Indian Airlines was merged with it in 2007.

The Supreme Court said that it was aware of the pending dispute, but the same could not come in the way of the NCLT hearing the insolvency petition filed by the pilot under Section 9 of The Insolvency and Bankruptcy Code (IBC).

Under Section 9, salaried employees can, acting as operational creditors, initiate insolvency proceedings against a corporate debtor.

The pilot had approached the NCLT towards the end of last year. After the tribunal’s order, he approached the top court in August this year.

A separate but similar plea by another pilot who is now retired, also seeking the initiation of insolvency proceedings against AI for failing to pay his dues, has been pending before the NCLT since the beginning of 2018.

The dues claimed by the serving and former pilots amount to nearly Rs 1 crore and Rs 70 lakh respectively, a person aware of the developments said. These dues are for the period between July 2012 and January 2016.

Cases such as these could create problems for the central government’s plan to float an Expression of Interest (EoI) for divestment of its stake in the debt-laden national carrier. The government had planned to float the EoI in November, but it could be delayed — it has been reported that a new proposal could come only by January 2020.

The Centre had floated an EoI last year to sell 76 per cent stake in AI, which has a debt of around Rs 57,000 crore. The attempt had failed.

The outcome of the case could become a precedent for other pilots approaching the NCLT to recover their dues from AI. It will also likely impact other cases where workers of debt-laden companies have not been paid their dues.

In June, the Indian Commercial Pilots Association (ICPA) wrote to AI chairman and managing director Ashwani Lohani asking him to clear dues worth nearly Rs 1,200 crore, failing which they would take the company to NCLT. The airline owes at least Rs 1 crore to all affected commanders, and nearly Rs 50 lakh to co-pilots, according to sources.

The ICPA last week wrote to the finance ministry and civil aviation ministry, seeking a meeting before the divestment process for AI is initiated. If the ministry does not accede to clearing the Rs 1,200 crore dues before any talks on sale are initiated, all employee associations of AI would either go on strike, or take the airline to NCLT, the sources claimed.

The dispute about past dues and allowances which arose between pilots and the government following the merger of AI and Indian Airlines too, has never been settled. The Indian Airlines Officers’ Association is currently in litigation in the Delhi High Court as well as the Central Government Industrial Tribunal.