Bidding for Air India and expanding into Covid testing weighed against SpiceJet in the British court

SpiceJet and DHC had entered into a Purchase Agreement on September 8, 2017, relating to 25 Q-400 series aircraft. SpiceJet paid for and took delivery of the first five aircraft. According to DHC, SpiceJet failed to make pre-delivery payments for subsequent aircraft, following which it terminated the entire purchase agreement in February 2020.

DHC then approached the high court in London seeking damages and after a two-day hearing, Sir Michael Burton of the high court ruled in its favour. Sir Michael did not agree on any of the major arguments put forth by SpiceJet, and a particular defence by the airline - that the award sought by DHC was in the form of a penalty and not a genuine pre-estimate of damages - came under intense argument.

SpiceJet’s contention was that to arrive at a proper and legitimate figure for damages, DHC needed to, but had not, provided enough details. In the absence of details, SpiceJet argued, the award should be characterised as unenforceable penalty. However, Sir Michael shot down that argument and stated that the amount arrived at was realistic and not an “irrecoverable penalty”.  By March 9, 2021, SpiceJet was to pay DHC US $42,950,000 as damages, US $ 1,149,649.61 interest and US$ 330,000 as legal costs.

SpiceJet was, however, given permission to appeal on one technical ground relating to the interpretation of the contractual agreement which was characterised by the judge as “just a squeaker of an argument”. Despite requests that the airline was in a difficult financial situation, the judge refused to stay the execution of the order pending appeal. Interestingly, DHC did not press upon the payment of the judgment sum as a condition to grant permission to appeal. The airline had paid only the legal costs by March 9, but no part of the judgment sum.

The ‘unless’ order

In March 2021 itself, DHC made an application to the high court in London seeking that SpiceJet’s appeal must be struck out unless it paid the US$ 43 million judgment sum and provided security for costs of the appeal. In June 2021, DHC also approached the Delhi High Court seeking to enforce the judgment against SpiceJet.

On the basis of non-compliance of previous court direction, a party can seek an ‘unless’ order to ensure the performance of certain acts is made conditional to further proceedings. In this case DHC was seeking an unless order, while it had chosen to not put the condition of payment when the permission to appeal was granted. It was clear during the proceedings before Sir Michael that SpiceJet could not pay the judgment sum. But what came to the aid of DHC was the proceedings in the Delhi High Court.

Lord Justice Phillips and Lord Justice Nugee, who heard DHC’s application for an ‘unless’ order in July 2021, took into consideration SpiceJet’s conduct in the Delhi High Court. In its bid to counter DHC, SpiceJet submitted to the Delhi High Court that Sir Michael’s order was unenforceable in India because the judgment sum was arrived at without a proper investigation of the loss suffered by DHC. But this point (damages or penalty) was fully argued before Sir Michael and had gone against SpiceJet, which had also not sought to make it a ground to appeal.

“As far as this court is concerned, taking that point, even in foreign proceedings, must be regarded as abusive and cannot be countenanced. SpiceJet is not merely requiring De Havilland to go through proper processes to enforce the judgment, but is seeking to obstruct and prevent by improper means,” noted Justice Philipps. In fact, Justice Philipps said that if SpiceJet had not made such a submission in the Delhi High Court, DHC’s application for an unless order would not have succeeded.

After agreeing that an unless order would be made, the court had to decide the terms of the order – that is, the amount that SpiceJet should pay so that its appeal (against Sir Michael Burton ruling) could be heard. All through the proceedings, both before Sir Michael Burton and before Justice Philipps and Justice Nugee, Chandan Sand, senior vice president (legal) and company secretary, SpiceJet, maintained that Ajay Singh was not in a position to invest more in SpiceJet.

But counsels for DHC pointed out that Ajay Singh had invested into his daughter’s medical science business (Sand countered that the investment was meagre compared to the damages awarded), and that SpiceJet had benefited financially from Covid testing and genome sequencing. The court’s attention was also drawn to the fact that a consortium led by Ajay Singh had bid for Air India which would have involved taking over a US$ 3.3 billion debt.

Lord Justice Phillips noted that Ajay Singh himself did not produce a witness statement or provide details as to why he would not or cannot assist SpiceJet. The court held that Ajay Singh “has very significant personal wealth, with the ability to raise large sums” and ordered that SpiceJet should pay into the court US$ 5 million for its appeal to be heard.

But just a few days after the written judgment was issued, a settlement agreement between SpiceJet and DHC was announced. “The terms of De Havilland Canada’s settlement with SpiceJet are confidential,” said Philippa King, lead, events and communications, DHC, when I asked specifically what happens to the US$ 43 million judgment sum.

Big conglomerates routinely mount multi-jurisdiction proceedings, which have now become a necessity. The SpiceJet-De Havilland case is a reminder why it is prudent to maintain a consistent stand in courts across continents.