People familiar with the development said the creditors’ committee approved the deal under which Burford will pay $20 million in the first tranche.
Go First, formerly owned by the Wadia Group, closed its business last year and is now embroiled in a legal battle with International Aero Engines, the maker of Pratt & Whitney engines. In the Singapore Arbitration Court, the airline has claimed around $1.5 billion in compensation, blaming its bankruptcy the failure of the P&W engines which forced many to be grounded Airbus A320 aircraft.
The concept of litigation funding is widespread in Australia, the UK and the US, where funders pay legal fees and other costs of commercial lawsuits, arbitrations or shareholder disputes and in return get a share of the award in case of settlement or victory. However, in India it has so far been a little-known concept, with few and far between cases.
Earlier this month, the creditors’ committee unanimously decided in favour of liquidating the company as bids from potential resolution applicants were below expectations. The committee consists of Central Bank of India, Bank of Barodaand IDBI Bank The airline is owed around Rs 4,000 crore. Apart from the compensation in the case, the bankers can cover their loss with a 94-acre plot of land in Thane that was a collateral with the lenders. Shailendra Ajmera of consultancy firm EY is handling the process.
“The creditors’ committee decided to protect itself from rising litigation costs and so appointed the firm. This is an expensive litigation to pursue, but with a favourable outcome, the profits will be greater than what Go First owes to the banks,” said a person familiar with the situation.
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