The Delhi High Court, which is hearing a lawsuit filed by SpiceJet’s former promoter, Kalanithi Maran of Sun Group, and his KAL Airways, against the low-cost airline, has ordered it to deposit nearly Rs 243 crore within six weeks.
The amount is essentially an interest payout of the sum Maran and KAL Airways won as refund from an arbitration panel in 2018. SpiceJet had unsuccessfully challenged the panel’s decision in the Supreme Court.
Failure to deposit the sum will mean Maran and his company can revive their plea seeking status quo on SpiceJet shareholding, the court ruled. In other words, Ajay Singh and family, the current promoters of SpiceJet, cannot dilute stake in the airline through an IPO or any other means if they fail to deposit Rs 243 crore with the court.
Moneycontrol has reviewed a copy of the order.
“We are reviewing the court order,” said a SpiceJet spokesman.
Reacting to the verdict, SL Narayanan, Group CFO, Sun Group, said, “SpiceJet breached its contractual obligations and therefore we were compelled to seek legal remedies to secure our interests. The order passed by the hon’ble Delhi HC only vindicates our consistent stand that we ought to be compensated for the losses we have sustained.”
Three-year-old case
The root of the three-year-old case is a bitter share transfer dispute. A final decision on the matter is expected on November 4, 2020, said a person familiar with the case, asking not to be named.
In February 2015, Maran and KAL Airways, his investment vehicle, transferred their 58.46 percent in SpiceJet, to Singh, the current chairman and managing director, for Rs 2 after the airline’s operations were upended by a severe cash shortage. Singh, a co-founder of SpiceJet, took on the airline’s liabilities of around Rs 1,500 crore.
As part of the agreement, Maran and KAL Airways said they paid SpiceJet Rs 679 crore for issuing warrants and preference shares. Maran launched litigation in the Delhi High Court in 2017 against Singh and SpiceJet after he said neither the convertible warrants and preference shares were issued nor the money was returned.
In July 2018, an arbitration panel rejected Maran’s claim of damages of Rs 1,323 crore for not issuing warrants to him and KAL Airways, but awarded him a refund of Rs 579 crore plus interest. SpiceJet was permitted to furnish a bank guarantee for Rs 329 crore and make a cash deposit of the remaining sum of Rs 250 crore.
Soon after Maran contested the ruling of the arbitration panel that had not only rejected his claim of damages but also regaining control of the airline. The Delhi High Court was ruling on this case on Monday.
Interest Payout
The court sided with the Marans’ plea to ask the airline to cough up the “up-to-date interest”. Of the Rs 579 crore payable, the Marans have received a total of Rs 308 crore, said the person cited above. This includes the Rs 250 crore cash deposit and Rs 58 crore from the bank guarantee, he said.
Singh and his family hold 59.93 percent in SpiceJet as on June 20. He owned around 2 percent before Maran exited the airline.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
