MC Explains: What are the key litigations SpiceJet is fighting in Delhi courts?

SpiceJet

On May 29, the Delhi High Court ordered domestic budget carrier SpiceJet to pay Rs 380 crore to Kalanithi Maran, the former promoter of the airline and the founder of media giant Sun Group.

The direction comes as it was informed to the HC that the airline has not complied with the Supreme Court’s direction of February 2023 asking it to pay Rs 75 crore to Maran.

While this might be a substantial sum, the airline is fighting two other litigations which have a substantial financial bearing on it. Moneycontrol explains three such litigations that SpiceJet is fighting. Losing any of these litigations will have serious consequences on the airline’s finances.

The arbitration case

In February 2015, Maran and KAL Airways, his investment vehicle, transferred their 58.46 percent 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.

Maran moved Delhi HC to enforce the arbitral award. The HC, in September 2020, ruled in favour of Maran and directed SpiceJet to deposit Rs 243 crore. However, the apex court stayed the order in November 2020.

Finally, in February 2023, SC disposed of the case directing that SpiceJet’s Rs 270-crore bank guarantee be encashed and asking the airline to pay Rs 75 crore towards interest within three months. Maran’s lawyers further alleged that the company owed Rs 380 crore towards interest payment.

The case reached the high court on May 29 after Maran alleged that the airline had not yet paid Rs 75 crore. The court thus directed SpiceJet to pay the entire amount of interest to Maran as they had not complied with the SC’s order, despite SpiceJet saying they had moved a petition seeking an extension of the three-month period.

Current status

The case will now come up for a hearing in September 2023.

The contempt in Supreme Court

In April 2023, Credit Suisse, a Swiss bank, initiated contempt of court against SpiceJet in the Supreme Court after its failure to comply with a court-approved settlement plan for the payment of dues.

SpiceJet and Credit Suisse entered into a settlement agreement in May 2022 to resolve a payment dispute that arose from SpiceJet's non-payment of dues to SR Technics, a Switzerland-based company that provides aircraft maintenance services. SpiceJet had defaulted on dues amounting to $20 million.

Owing to this dispute, the Madras High Court ordered SpiceJet to be wound up. However, the SC stayed Madras HC’s order and ensured that the parties enter into a settlement.

Current status

In May 2023, SpiceJet was granted one last opportunity by the SC to show its bona fide intentions.

Credit Suisse informed the court that while SpiceJet made some payments, it is still in contempt of court as there is an outstanding amount of over $4 million.

SpiceJet assured the court that it will continue to make payments of $500,000 to Credit Suisse on the 15th of every month, and by August, it would have paid $1.5 million.

The case will now come up for a hearing on July 18.

The insolvency cases

Three aircraft lessors took SpiceJet to the insolvency court in 2023 for non-payment of dues. The lessors, Aircastle Ireland Ltd, Willis Lease Corporation and Acres Buildwell Pvt Ltd filed petitions asking the tribunal to admit SpiceJet to the insolvency process so that they could recover their dues.

Aircastle has alleged that SpiceJet has not paid dues of over Rs 40 crore and has also told the National Company Law Tribunal (NCLT) that settlement talks have fallen through.

Willis and Acres are yet to make detailed submissions in court.

Current status

NCLT will hear the pleas of Willis and Aircastle on June 5 and 6 respectively. Both the airline and the lessor are expected to argue at length.