Over 12 Kingfisher Airlines flights were grounded at the country's four major airports for two hours after Hindustan Petroleum Corporation Ltd refused to supply fuel due to non-payment of dues.
HPCL is the largest supplier of jet fuel to Kingfisher.
The airline is supposed to make payments to the oil marketing company every 60 days. The deadline expired last week.
The flights resumed from Delhi, Mumbai, Kolkata and Chennai airports after the airline made a part-payment, said sources close to the development.
An HPCL official said Kingfisher's dues had touched Rs 650 crore (Rs 6.5 billion), of which Rs 170 crore (Rs 1.7 billion) was not covered by guarantees.
"We resumed supply after the airline made a partial repayment," said an HPCL official, who did not want to be identified.
Member of Parliament (Rajya Sabha) Bharat Kumar Raut said he boarded the IT 318 Delhi-Bombay flight which was supposed to depart at 18.05.
The passengers were asked to disembark just minutes before the departure, he said.
"There was chaos at the Delhi airport as several other flights were also delayed," he said. A Kingfisher spokesperson said, "After office hours on Monday, due to a misunderstanding with one of our vendors, 12 flights out of 370 flights daily were delayed.
The issue has been resolved
Indian Oil Corporation has put the airline on a cash and carry system. BPCL does not supply fuel to the airline.
BPCL withdrew supplies to the airline after it had to move the Bombay High Court to get its Rs 300 crore (Rs 3 billion) dues.
Later, in an out-of-court settlement, BPCL gave the airline one year to pay the dues, including interest.
As of on Monday, Kingfisher owes BPCL Rs 35 crore (Rs 350 million).
In case of a default by the airline, BPCL has a bank guarantee worth Rs 40 crore (Rs 400 million).
The UB Group-controlled Kingfisher Airlines is in a financial crisis.
It was recently threatened by GMR, which operates Delhi and Hyderabad airports, that it will be put on a cash and carry system after the airline's dues touched Rs 90 crore (Rs 900 million) -- Rs 68 crore (Rs 680 million) for Delhi and Rs 22 crore (Rs 220 million) for Hyderabad.
The airline is the only listed carrier to have not turned profitable.
It reported a net loss in the last financial year. It ended the 2010-11 financial year with a loss of Rs 1,027 crore (Rs 10.27 billion).
With approval from banks, Kingfisher Airlines in December restructured its over Rs 7,000 crore debt (Rs 70 billion).
The package included conversion of about 30 per cent debt by banks into capital and a loan of Rs 735 crore (Rs 7.35 billion) from parent company UB Holdings into equity.
