Dismissing SpiceJet and its co-founder Ajay Singh’s petitions, the Delhi High Court on Monday directed the budget airline to pay Rs 250 crore as a cash deposit on or before August 31 in a share transfer dispute with its previous owner and South Indian media baron Kalanithi Maran. A division bench headed by justice S Ravindra Bhat also directed the carrier to furnish a bank guarantee of Rs 329 crore with the court towards satisfaction of the disputed amount. “Although we do not find merit in the appeal and have dismissed it, we have passed an order modifying the impugned order,” Bhat said, adding “there is nothing worthwhile” in the airline’s plea to show its finances were precarious or that its cash position was so stretched that it cannot comply with a single-judge order to deposit the amount. “There is neither reference to any figure or amount, nor reliance on any balance sheet, nor even the income and expenditure statement of the company, to say that compliance with the impugned order would irreparably injure it.
“The court notices that the nearly 18 month pendency of this appeal, and the non-compliance with the impugned order (of single judge), has aggrandised the appellant (SpiceJet), which was to have the benefit of the amounts. “If there were any difficulties, this interregnum period would have helped it considerably tide over its affairs and certainly afforded time to organise it better and in a more orderly fashion to comply with the order,” the bench said while dismissing the appeals of the airline and its co-founder Ajay Singh.
The court, however, said that the modification of the single judge’s order of July 29 last year was essential considering the unpredictable nature of likely injury that may be caused to the commercial operations of the company if entire amount is secured through a deposit. The single judge had 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 Sun Group chief Kalanithi Maran and his KAL Airways over share transfer within a year.
Sources said that SpiceJet will move the Supreme Court against the HC order. The court during hearings had considered various possibilities of resolution of dispute between the parties but nothing worked out. Under one such proposal, the court had considered the possibility of SpiceJet furnishing a bank guarantee of Rs 308 crore to the court by August 31, which was be substituted by cash by October 31. The remaining amount of Rs 270 crore would be paid in shares.
SpiceJet through senior counsel CA Sundaram has argued that the July ruling amounted to an interim order under the Arbitration Act, even when there was no pending arbitration between the two parties. The Monday’s order came on an appeal filed by SpiceJet and Singh against the single judge’s order. 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. The Securities and Exchange Board of India had also expressed its inability before the single judge to approve the board resolution passed by SpiceJet for issue of warrants in favour of Maran and his Kal Airways. The board resolution was passed on the court’s direction.
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 Ajay 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 BSE on September 18, 2014, and which had been approved by the company’s board on September 24, 2014.
SpiceJet had earlier told the court that the change of ownership was effected as a rehabilitative measure to address the liability of Rs 2,000 crore incurred by the airline when it was under the management of Maran. It had also claimed that every penny has been utilised towards operations and discharge of liabilities. Besides, the airlines had maintained that as per the sale and purchase agreement, Maran was to pay Rs 678 crore but it had so far received only Rs 579 crore.