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SpiceJet seeks ₹450 cr refund from Kalanithi Maran after Delhi high court ruling

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New Delhi: Budget airline SpiceJet will seek a refund of ₹450 crore from its former promoter, Kalanithi Maran, and his firm, KAL Airways, the company said on Wednesday. 

This follows a Delhi high court order on 17 May that overturned an earlier judgment upholding an arbitral award in Maran’s favor.

SpiceJet said it will seek the return of ₹450 crores out of the ₹730 crores it paid to KAL Airways and Maran. This includes ₹580 crore in principal and ₹150 crore in interest.

“The Division Bench of the Delhi High Court ruled on May 17 in favor of SpiceJet and its promoter, Ajay Singh, in the long-standing share transfer case against former promoter Kalanithi Maran and his firm, KAL Airways,” SpiceJet said in a statement. “This ruling overturns a previous decision by a single-judge bench, positioning SpiceJet to claim a substantial refund based on legal advice.”

Relief for SpiceJet

Justices Yashwant Varma and Ravinder Dudeja passed the order on a plea filed by SpiceJet’s chairman and managing director (CMD), Ajay Singh, and the airline, challenging a single-judge order from July 2023 that had affirmed the arbitral award.

SpiceJet and Ajay Singh had challenged many portions of the award, including the direction to refund ₹270 crores to KAL Airways and Maran and the imposition of 12% interest on warrants and 18% interest on the awarded amount. They argued that these portions of the award were unjustified and sought their annulment.

The division bench found that the single judge had erred in dismissing the Section 34 petitions of Ajay Singh and SpiceJet without due consideration of claims of patent illegality and admitted breaches by KAL Airways and Kalanithi Maran. 

The court noted that penal interest had been charged despite SpiceJet not being in breach of the share purchase agreement. These aspects were not adequately considered by the single judge, leading to the allowance of the appeals by Ajay Singh and SpiceJet.

Although the high court did not stay the arbitral award, it permitted the appeal to be restored under Section 34 of the Arbitration and Reconciliation Act 1996. This means that while the previous decision has been nullified, there is now an opportunity for a fresh review of the case by the single bench, taking into account all aspects of the dispute.

The case is likely to be heard afresh by the single bench.

The dispute goes back to February 2015 when Maran transferred his entire shareholding in SpiceJet to Ajay Singh, the current chairman and managing director of the airline, after the carrier nearly went belly up in 2014-15 due to a severe cash crunch.

Singh, who paid ₹2 to take over the airline, also took over SpiceJet’s liabilities of ₹1,500 crore.

As part of the agreement, Maran and KAL Airways also made payments of ₹679 crore to SpiceJet, under Singh, for issuing warrants and preference shares. However, Maran approached the Delhi high court in 2017, alleging SpiceJet had not issued convertible warrants and preference shares or returned the money.

In July 2018, an arbitration panel rejected Maran’s claim of damages of ₹1,323 crore for not issuing warrants to him and KAL Airways but awarded him a refund of ₹579 crore plus interest.

In 2020, the high court ordered SpiceJet to deposit ₹243 crore as interest payment.

On 13 February 2023, the Supreme Court directed the immediate encashment of SpiceJet’s bank guarantee worth ₹270 crore, which was to be paid to Maran and KAL Airways as part of the arbitral award. The apex court also ordered SpiceJet to pay ₹75 crore to Maran and KAL Airways within three months as the interest.

On 7 July 2023, the SC denied any further extension to SpiceJet and directed the airline to pay the entire arbitral amount of ₹380 crore to former promoter Maran.

source by : Live Mint

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