By Aditi Shah and Aditya Kalra

NEW DELHI The fate of India's fourth-largest carrier Go Airlines (India) Ltd and its 7,000 employees is set to be decided on Wednesday, in a bankruptcy plea ruling that will also have major implications for foreign lessors trying to repossess planes.

The low-cost carrier, recently rebranded as Go First, has said its financial crisis was sparked by "faulty" Pratt & Whitney engines that grounded about half its 54 Airbus A320neos. The U.S. engine maker, part of Raytheon Technologies, has called the claims without evidence.

If the Indian tribunal admits Go First's plea, it will lead to appointment of a new resolution professional who will take over management to revive the airline run by India's Wadia Group. A decision is expected at 10:30 a.m. (0500 GMT), with Go First widely expected to succeed.

This is the first time an Indian airline has voluntarily sought bankruptcy protection to renegotiate its contracts and debts.

The unprecedented move could complicate repossession efforts by lessors, which have in recent days filed requests with India's aviation regulator for the return of about 40 Go First planes over missed rental payments.

They now face a major roadblock, as Indian law prohibits any such recoveries once bankruptcy proceedings are initiated for a company, lawyers and industry sources said.

India has made it easier for lessors to take back planes if airlines default on payments after joining an international treaty known as the Cape Town Convention.

But lack of a proper legislation to enforce the treaty means India's bankruptcy law will supersede lessors' repossession requests, lawyers said.

"Lessors must be very, very concerned right now. The repossession requests will be of no consequence if the insolvency and bankruptcy process kicks in," said Abhirup Dasgupta, a partner at HSA Advocates who specialises in insolvency law but is not involved in the Go First matter.

Two industry sources advising some lessors said there were major concerns that Go First's bankruptcy could force them to trigger drawn-out litigation to assert their rights to repossess planes.

The lessors are nervous about getting their assets stuck in the country with no clarity on repossession, one of the sources said, adding it could lead to higher lease rates for Indian airlines in the future given the risks.

The industry sources could not be named because they were not authorised to speak publicly about the matter.

Go First's lessors include major global names such as Jackson Square Aviation, SMBC Aviation Capital and CDB Aviation's GY Aviation Leasing.

The grounding of Go First, which had a near 8% market share in the world's third-largest aviation market, comes as Indian Prime Minister Narendra Modi has been touting the country's emergence as an aviation powerhouse.

Bigger rivals IndiGo and Tata Group's Air India are charting major expansion plans with hundreds of new planes on order as domestic air travel in India surpasses pre-pandemic levels.

Some of the lessors have initiated talks with IndiGo and Air India to take over Go First's planes, the two industry sources said, even though it is unclear how the tribunal's decision on Wednesday could impact such negotiations.

IndiGo declined to comment. Air India did not immediately respond.

If Go First collapses, it would follow other Indian carriers Jet Airways, which went under in 2019 and Kingfisher, which failed in 2012.

(Reporting by Aditi Shah and Aditya Kalra; additional reporting by Arpan Chaturvedi; Editing by Jamie Freed)