Kalanithi Maran seeks attachment of 50 percent of SpiceJet's daily revenue

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.

Sun Group chairman Kalanithi Maran has filed an application in the Delhi High Court and has sought for attachment of 50 percent of SpiceJet's  daily revenues towards payment of Rs. 393 crore that the low cost airline owes him.

Maran sought for the money to be paid on a weekly basis.

The Delhi High Court on August 9 issued a notice to SpiceJet in Maran's application and asked the airline to file their statement of accounts along with the affidavit of assets and liabilities in a week's time. The court has also asked SpiceJet's Chairman and Managing Director Ajay Singh to be personally present in the court on August 24.

Deliberate design

Maran's lawyer Mainider Singh informed the Delhi High Court on August 9 that SpiceJet is yet to file their affidavit of assets and liabilities in addition to not complying with any order of both the High Court and Supreme Court. Singh alleged that SpiceJet has orchestrated a deliberate design to defy the orders of the court. According to Maran, SpiceJet's liability towards him has now increased to Rs. 393 crore as of August 3 owing to its non-compliance of court's orders. Maran also told the court that SpiceJet will neither file the requisite documents nor will it pay the amount it owes to Maran unless the court takes a drastic step.

Appearing for the airline, senior advocate Sandeep Sethi argued that the court had given them time till the September 5 to comply with its orders. He told the court that any drastic order will affect thousands of employees working for the airline and passengers who have booked tickets with them. Sethi told the court that the margin for profit in an airline business is just one percent.

The court, however, refused to listen to SpiceJet's justifications noting that it had not complied with any of its previous orders and proceeded to issue notice in the application.

Maninder Singh was briefed by Nandini Gore, senior partner at law firm Karanjawala and Co.

On July 31, the Delhi High Court upheld the validity of the arbitral award against SpiceJet making way for Maran to press for the enforcement of the award. While the Delhi High Court asked the airline to file an affidavit of assets and liabilities in 2020, the airline has not done so to date. Owing to this failure of action by SpiceJet, the court on July 24 summoned the airline's CMD to be personally present for non-compliance.

SpiceJet in Supreme Court:

The airline had challenged Delhi HC's 2020 order asking it to deposit Rs. 242 crore in six weeks. While the court had initially stayed the HC order, it eventually permitted Maran to encash Rs. 250 crore bank guarantee and asked SpiceJet to pay Maran Rs. 75 crore in three months.

However, SpiceJet did not comply with the apex court's order and sought for an extension of time. On July 7, SC juked its application and permitted the arbitral award to be executed.

Arbitral award

In February 2015, Maran and KAL Airways, his investment vehicle, transferred their 58.46-percent stake in SpiceJet to Ajay Singh, the current Chairman and Managing Director (CMD). 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. However, Maran alleged that the warrants and preference shares were not allotted and initiated arbitration proceedings against SpiceJet and Ajay Singh.

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.

According to the award, SpiceJet had to pay Rs 308 crore in cash together with 12 percent interest for 30 months, as well as Rs 270 crore, either in the form of compulsory redeemable preference shares or by the return of money in terms of a Share Purchase Agreement. If the company fails to adhere to this timeline, Maran is entitled to an interest of 18 percent.