SpiceJet Yet Again Caught In The Storm Of Unpaid Dues!

Riding the aviation industry by storm in September, the Economic Offences Wing (EOW) of the Delhi Police officially initiated a probe into SpiceJet, one of India’s low-cost carriers and now the the aircraft lessor Aviator ML 29641 Ltd has filed a case with the National Company Law Tribunal(NCLT) against SpiceJet for the due payment of around Rs 58cr. The reason for the inquiry in the EOW case is the accusation of manipulation of Provident Fund which raises doubts revolving around the financial management and the honesty of the airline towards its employee welfare.

The Accusations and Lawsuit –

Delhi police officials confirmed that a FIR had been filed against SpiceJet’s top management, including its managing director and four other high-ranking officials. The legal action follows charges that the airlines did not credit the mandatory 12 percent of employees’ salaries into their Provident Fund A/Cs as ought to have been done according to Indian labor laws.

The supposed mismatch is out of proportion in scale: the authorities calculate the uncredited amount at around Rs 65 crore or roughly 7.8 million USD. That would be money to be set aside for the financial security of SpiceJet’s over 10,000 employees to be sought in the future.

The FIR, which forms the block of the criminal probe, attracts two important sections of the Indian Penal Code:

• Section 409 (relating to criminal breach of trust by a public servant, banker, merchant, or agent);
• Section 120B (relating to criminal conspiracy).

The complaint that paved the way for this inquiry was on 16.09, filed by the EPFO, displaying the problem had been in the making for quite some time.

The FIR lists several of SpiceJet’s top folks, including Managing Director Ajay Singh, Director Shiwani Singh, Independent Director Anurag Bhargava and two others, Ajay Chhotelal Aggarwal and Manoj Kumar. As “responsible persons for the conduct of the business of the establishment,” those identified relied on documents submitted to the EPFO.

Alleged Violations by SpiceJet –

The root cause of the EOW case is that SpiceJet deducted, between June 2022 and July 2024, the prescribed 12 per cent from the salary of its employees for their Provident Fund contributions, but did not put these to the EPFO within the stipulated date of August 15, 2024. It is essential  to note that under Section 6 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 it is the duty of an employer to deposit such deductions into the EPFO in time.

Since these contributions were not deposited in 15 days from the close of each month, thus the airline was caught in violation of Paragraph 38(1) of the EPF Scheme 1952. This spikes the likelihood of denying employee interest on such contributions had they been remitted on time and also doubts about the financial management and priorities of the aviation firm.

Regarding the case registered with the NCTL, SpiceJet is in default in the  lease agreement dated – June 16th, 2017 for a boeing 737 aircraft. The lessor’s petition asserts that the outstanding amount is around Rs 58cr. While the NCTL has heard the lessor’s plea, it refused to issue notice to SpiceJet and has given time to the airline to issue response. 

The next hearing has been scheduled for 11th November.

However it is to be noted that this is not the first case where the airline has not paid the aircraft lessors, the list of names who have filed for insolvency against SpiceJet is long – 

Wilmington Trust SP Services (Dublin)

Willis Lease Finance

Celestial Aviation

Aircastle

Alterna Aircraft

AWAS 36698 Ireland

AWAS 36694 Ireland

AWAS 36695

Other names are –  Shannon Engine Support Limited, Engine Lease Finance B.V., Raymach Technologies Pvt. Ltd., and software solutions startup Techjockey Infotech Pvt. Ltd. have also filed cases against SpiceJet.

While NCTL did not consider the plea of Wilmington Trust SP and Willis Lease Finance, SpiceJet settled with Celestial Aviation, Alterna Aircraft, Raymach Technologies Pvt. Ltd. and Engine Lease Finance B.V.

SpiceJet’s Response In The PF Case – 

In response to these grave allegations, SpiceJet was swift enough in coming out with its side of the story. The airline issued a statement to put the matter into perspective and pointed out the steps the company has taken for solving the problem. It clarified that the case had been filed before fresh funds were raised by the company through Qualified Institutional Placement or QIP. Since then, the spokesperson asserted that the airline has cleared all pending salary and GST dues and made a good headway by depositing ten months of PF dues.

The response of the company shows that SpiceJet was working on fixing the issue-set perhaps as part of a larger financial restructuring exercise. However, this case arrives at a challenging time for the Indian aviation sector, which has been facing the successive setbacks-in the form of the debilitating shock delivered by the COVID-19 pandemic, fluctuating fuel prices, and intense competition. The case sparks significant questions on the overall financial health and management practices of aviation company and raises more concerns about corporate governance and regulatory oversight in the aviation sector. 

There are myriad of developments that would be worth watching closely over the coming investigation. For example, when the case progresses further in the Indian judicial system, how will SpiceJet make efforts to clear the remaining dues, and the response from the aviation regulators and labor authorities. What the market would make of this piece of news and the change in company’s approach towards its employee benefits.

Such a case attracts for proper financial management and labor law compliance, especially in an industry, like aviation sector, that faces pressure on the economic front. The consequence will be far-reaching in impacting not only SpiceJet but also the aviation industry in India, probably to have stringent supervision and reforms in place in managing the benefits of employees and financial obligations.

As both these case solves further, it will probably be a wake-up call for the rest of the airlines to have a re-check on their practices and ensure that they are in full compliance with labor laws and regulations.