The present case arises from a dispute between SpiceJet Limited (hereinafter "SpiceJet") and its France-based lessors, Team France 01 S.A.S, and Sunbird France 02 S.A.S (hereinafter "Lessors"). The controversy primarily pertains to SpiceJet’s default in rental payments for leased aircraft engines, amounting to $4.8 million. The contractual agreements between the parties stipulated the right of the Lessors to repossess the engines upon SpiceJet’s failure to meet its financial obligations.
The Single Judge of the Delhi High Court directed SpiceJet to ground the three engines and return them to the Lessors. This directive was based on the contract’s specific performance clause and the airline’s admitted default. The Division Bench of the Delhi High Court upheld the Single Judge’s order, rejecting SpiceJet’s jurisdictional objections and affirming the Lessors’ contractual rights. The High Court emphasized that allowing SpiceJet to continue the use of the engines without payment would cause irreparable harm to the Lessors. SpiceJet subsequently filed a Special Leave Petition (SLP) challenging the High Court’s decision. The Supreme Court, declined to interfere, dismissing the SLP under Article 136 of the Constitution.
It must be noted that the lease agreements explicitly provided that upon default, the Lessors had the right to reclaim the engines. SpiceJet, having failed to honor its financial commitments, was bound by its contractual obligations. The courts held that specific performance was warranted as the contractual terms were clear and enforceable. SpiceJet argued that the dispute fell under the jurisdiction of English courts as per the lease agreements. The Delhi High Court, interpreting Clause 20.1(a) of the lease agreements, found that Indian courts had jurisdiction as the leased engines were located in India. The Supreme Court did not overturn this finding, effectively affirming that Indian courts had the authority to adjudicate the matter.
The High Court’s decision to grant an injunction preventing SpiceJet from further using the engines was deemed necessary to prevent ongoing contractual breaches. The Supreme Court, concurring with this approach, emphasized that an admitted defaulter could not claim the right to continued possession. The ruling reinforces the rights of lessors in the Indian aviation sector, ensuring that lessees comply with financial obligations. It provides reassurance to global aircraft lessors about the enforceability of lease agreements in India. The decision strengthens the doctrine of specific performance in lease agreements, particularly in cases of admitted default. It affirms that Indian courts can exercise jurisdiction over leased assets located in India, even if the agreements stipulate foreign jurisdiction.
The airline is now compelled to return the engines and settle outstanding dues. Failure to comply with the order may result in contempt proceedings or further financial liabilities. The Supreme Court’s decision underscores the principle that contractual obligations must be honored and that courts will uphold the rights of lessors against defaulting lessees. By refusing to entertain the SLP, the apex court has reinforced the need for financial discipline within the aviation industry while clarifying jurisdictional and contractual enforcement norms under Indian law.