The Ireland-based lessor earlier this month sought to initiate bankruptcy proceedings against SpiceJet over non payment of lease rentals and other dues. The airline owes Aircastle around 500 million rupees ($6 million), a lawyer present at the hearing told Reuters.

The company's settlement offer was not good enough and talks had not reached anywhere, the lessor told the tribunal which will next hear the case on May 25.

SpiceJet, which sought time from the tribunal to respond to Aircastle's bankruptcy plea, did not immediately reply to a request for comment.

The Indian carrier has been scrambling to raise funds amid a string of quarterly losses and as local competition heats up. Last week it said it had begun to revive 25 of its grounded fleet using its own money and a $50 million line of credit through an Indian government scheme.

But rival Go First's recent bankruptcy proceedings have spooked international lessors who are staring at a long legal battle to pull their planes out of the country.

Following this, Spicejet's lessors, including SMBC Aviation, have in recent weeks submitted over half a dozen requests to India's aviation regulator to de-register their planes and fly them out as dues remain pending.

The airline said last week it had no plans to take similar action and file for insolvency.

"Our lessors have supported us through the thick and thin and continue to do so and we are grateful for their support and confidence," it said.

($1 = 81.7800 Indian rupees)

(Reporting by Arpan Chaturvedi in New Delhi, writing by Sakshi Dayal; Editing by Savio D'Souza and Louise Heavens)

By Arpan Chaturvedi