SpiceJet vs Kalanithi Maran arbitration: SC asks airline to liquidate bank guarantee, pay Rs 270 cr

The direction was passed as SpiceJet informed the court that it has paid Rs 308 crore in cash against the pending amount of Rs 579 crore and has given a bank guarantee of Rs 270 crore to cover the rest of the amount.

In the long-drawn share dispute between SpiceJet's Ajay Singh and the airline's former promoter Kalanithi Maran, the Supreme Court on February 13 directed the airline to invoke a bank guarantee of Rs 270 crore to pay Kalanithi Maran towards the dues from the arbitral award of Rs 572 crore.

The court further directed SpiceJet to pay Rs 75 crore to Marans’ claims of Rs 362 crore in interest dues.

The direction was passed as SpiceJet informed the court that it has paid Rs 308 crore in cash against the pending amount of Rs 579 crore and has given a bank guarantee of Rs 270 crore to cover the rest of the amount.

The court further allowed Spicejet to approach the Delhi High Court and argue for a lower interest.

Moreover, in an interesting turn of events, SpiceJet's lawyer said that the Marans are free to reverse the transaction and take the airline back.

Commenting on the judgment, a SpiceJet spokesperson later today clarified that the overall amount in dispute is Rs 578 crore of which Rs 308 crore has already been deposited. The remaining amount of Rs 270 crore is reserved with the company in cash against which a bank guarantee has been given, the spokesperson further said, adding that this amount of Rs 270 crore "will be comfortably discharged as per the direction of the Hon’ble Supreme Court."

"Further, the additional amount of Rs 75 crore will be paid within the period of 3 months as per the directions of the SC. We hope this is a step towards achieving a final settlement in this matter," the spokesperson added.

Last year in August, the Marans had offered to settle the dispute through mediation, a proposal that SpiceJet accepted. However, after weeks of discussions a mediation a settlement could not be reached.

The dispute dates back to 2015 when Maran and his firm KAL Airways transferred 58.46 percent of the shares held by them to the present Chairman of SpiceJet, Ajay Singh, for Rs 2. Singh, who was the co-founder of the airline, had taken on the airline’s liabilities valuing at Rs 1,500 crore.

Through this share transfer agreement, Maran was to be issued warrants and preference shares and had paid Rs 679 crore towards the same.

In 2017, Maran moved the Delhi High Court saying that he was neither issued the preference shares as agreed on nor was the money paid by him refunded. The high court referred the case for arbitration.

The arbitration tribunal, in July 2018, awarded a refund to Maran to the tune of Rs 579 crore plus interest, but rejected his claim for Rs 1,323 crore in damages. When Maran challenged this arbitration award before the high court, the court favoured Maran and directed SpiceJet to deposit Rs 243 crore towards interest amount.

This order of the high court was stayed by the Supreme Court shortly thereafter and came up before the top court now with Maran seeking vacation of the stay.

Meanwhile, the airline has been recently struggling to raise and survive in the last few years. It is estimated that SpiceJet will need to raise around $ 250 million to pull the airline back from its present abyss of aircraft being grounded due to safety concerns, lessors seeking deregistration, and dues to vendors including lessors climbing to over Rs 2,000 crore.