Kalanithi Maran Vs SpiceJet: Court orders Ajay Singh, company to pay Rs 100 cr to Maran by Sep 10

The developments in the case come after Supreme Court held that the arbitral award is executable as SpiceJet did not adhere to the timeline it had laid down in February to make payments to Maran.

Delhi High Court on August 24 directed SpiceJet's chairman and managing director (CMD) Ajay Singh to pay Rs 100 crore to Marans by September 10 as bona fide subject to their rights and contention. The failure to do so could also lead to the court attaching the company's profits for the last quarter, the court orally warned.

The low cost airline's CMD appeared in person before Justice Yogesh Khanna of Delhi HC pursuant to being ordered to be present for non-compliance of its order. The case will now come up for hearing again on September 11.

During the hearing of the proceedings, Maran's lawyer Maninder Singh, told the court that the airline and Singh owed them Rs. 397 crore now. He further informed the court that while the company and Singh have filed an affidavit of assets and liabilities, they are not in the format prescribed by law.

After taking the court through an affidavit filed by SpiceJet detailing company's profit and loss statement for the last quarters, Singh sought for an attachment of the entire profit of Rs. 204 crore towards the company's liability to Maran.

Represented by senior advocate Amit Sibal, SpiceJet and Singh argued that the company is now struggling to stay afloat owing to certain 'black swan' events such as the pandemic and the grounding of Boeing 737 Max aircrafts. He further argued that if the company goes into the insolvency proceedings it would not benefit anybody.

The court however made it clear that it was only concerned with how they are going to pay their liabilities toward Maran. The court further said, it will give one more opportunity to Singh and the company to show their bonafide towards settling their dues and thus directed that an amount of Rs . 100 crore be paid by September 10.

Senior Advocate Maninder Singh was briefed by Nandini Gore, senior partner at Karanjawala and Company.

The above transpired in Sun Group's chairman Kalanithi Maran's application for execution of arbitral award in his favor and against SpiceJet. Singh was summoned to the court after Maran filed an application stating that SpiceJet had not filed an affidavit of assets and liabilities despite being asked to do so in 2020. Thus the court on July 24, asked him to appear in person.

According to Maran, SpiceJet owes him Rs 393 crore as of August 3.  On August 9, Maran had sought for attachment of 50 percent of SpiceJet's daily revenues towards paying his dues. The court issued notice in the same.

Validity of the arbitral award

The validity of the arbitral award, which is the bone of contention in the case, was upheld by a single judge of Delhi High Court on July 31.  SpiceJet and its promoter Ajay Singh have challenged the order before a division bench of the Delhi High Court.

The developments in the case come after Supreme Court on July 7 held that the arbitral award is executable as SpiceJet did not adhere to the timeline it had laid down in February to make certain payments to Maran.

In February, the top court disposed of the case directing that SpiceJet’s Rs 270-crore bank guarantee be encashed and asked the airline to pay Rs 75 crore towards interest within three months.

Arbitral award

In February 2015, Maran and KAL Airways, his investment vehicle, transferred their 58.46 percent in SpiceJet to Singh, who 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.