Ajay Singh led Spicejet suffers major setback in tussle with Kalanithi Maran; SC orders it to deposit Rs 579 cr

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Published: July 29, 2017 6:20:22 AM

In a major setback to the Ajay Singh-controlled SpiceJet, the Supreme Court on Friday dismissed the budget airlines’ appeal against a Delhi High Court order asking it to deposit about Rs 579 crore over a share transfer dispute with its former promoter and South Indian media baron Kalanithi Maran.

Ajay Singh, Spicejet, setback for Spicejet, Kalanithi Maran, Delhi High Court, KAL Airways, Sun TV Network, SpiceJet caseUpholds Delhi HC order that it pay Rs 250 crore as a cash deposit and furnish a bank guarantee of Rs 329 crore. (Image: Reuters)

In a major setback to the Ajay Singh-controlled SpiceJet, the Supreme Court on Friday dismissed the budget airlines’ appeal against a Delhi High Court order asking it to deposit about Rs 579 crore over a share transfer dispute with its former promoter and South Indian media baron Kalanithi Maran. A bench led by justice Rohinton Nariman upheld the high court’s July 3 order that asked the carrier to deposit Rs 250 crore as a cash deposit
on or before August 31 and furnish a bank guarantee of Rs 329 crore for the balance disputed amount. Senior counsel Harish Salve, appearing for Singh, argued that Singh had helped to bring the airline back as “it couldn’t survive the onslaught of competition then… You have created the mess before I stepped in… We had no problem in giving shares but the BSE took objection to the 2014 resolution.” He further said that arbitration proceedings between the parties are on and it will be decided within six months. Senior counsel Mukul Rohatgi, also appearing for Singh, also argued that the airline before take over had liabilities of around Rs 2,200 crore and it was Singh who had bailed out the low-cost carrier.

Senior counsel AM Singhvi, appearing for Maran and KAL Airways, argued that it was virtually a consent order passed by the high court. Maran “gave the airline for betterment to its co-founder Singh and that too at just Rs 2. I am without a penny from the last two years. They have shown the amount as payable to me in their balance sheet,” he said.

SpiceJet in its appeal stated that HC had imposed “an extremely harsh financial obligation amounts to infliction of ‘civil death’ on the company. The amounts which were purportedly brought into the SpiceJet were “utilised strictly for the limited purposes of settling/paying of the liabilities” of the airline including its statutory dues. The impugned order has the effect of undoing all efforts of the new management and saddles the company with huge liabilities which will again put the company back into severe financial distress and possibly into liquidation and shut down of operations due to withdrawal of aircraft leased by various owners and lessors, it said.

Maran, who owns Chennai-based Sun TV Network, and KAL had moved the HC over a share transfer dispute with SpiceJet, demanding that 18 crore warrants redeemable as equity shares be transferred to them. Maran and his airline company had alleged that despite giving Rs 579 crore to SpiceJet, the carrier had failed to issue them the warrants or allot tranche one and two of convertible redeemable preference shares and that the amount was not utilised for paying statutory dues due to which they were also facing prosecution.

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Maran and KAL had transferred their entire 350.4 million equity shares in SpiceJet, amounting to a 58.46% stake in the airline, to its co-founder Singh in February 2015. Under the deal, Maran and KAL were to receive the redeemable warrants in return for the Rs 700 crore they spent on SpiceJet towards operating costs and debt payment. Maran had sought that the warrants be issued in terms of an application made to the BSE on September 18, 2014, and which had been approved by company’s board on September 24, 2014.

The single judge of the HC had earlier asked the airline to deposit Rs 579 crore within five months with the first one in August 2016 before its registry and also asked it to consider arbitration proceedings to resolve the dispute with the Sun Group chief and his KAL Airways over share transfer within a year.

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