An arbitration tribunal has rejected the Rs 1,323-crore damages claim from SpiceJet by its previous owner Kalanithi Maran in a share transfer dispute, the airline said on Saturday.
An arbitration tribunal has rejected the Rs 1,323-crore damages claim from SpiceJet by its previous owner Kalanithi Maran in a share transfer dispute, the airline said on Saturday. Maran and his KAL Airways had sought compensation from SpiceJet and its chairman and managing director Ajay Singh for failing to transfer warrants in his name when the airline changed hands in 2015.
The tribunal, comprising Supreme Court judges Arijit Pasayat, Hemant Laxman Gokhale and KSP Radhakrishnan, upheld SpiceJet’s defense that it failed to issue convertible warrants due to lack regulatory approvals. Sun TV promoter Maran will now have to settle for Rs 579 crore — a claim quantified by the Delhi High Court and deposited with its registry in 2016. The tribunal has asked Maran to pay Singh and the airline Rs 29 crore in penal interest.
“In so far as the matter of issuance of warrants was concerned, the Tribunal has held that there was no breach by the company in pursuing the approval from A relevant authority and since the same was not received for reasons not attributable to the Company, the company cannot be held to be in breach or be made liable for damages,” SpiceJet said in a BSE filing. “There wouldn’t be any dilution of stake and no impact on the balance sheet of the company. The amount (entitled to Maran) is already in an escrow account,” a SpiceJet official said.
The dispute started after former promoter Singh took back control of the airline in February 2015 amidst financial crisis. Maran and his KAL Airways transferred their 350.4 million equity shares, equivalent to a 58.46% stake, in SpiceJet to Singh for just Rs 2. The airline’s total debt at the time of acquisition was over Rs 1,400 crore. The budget carrier was forced to shut operations for a day in December 2014 due to a severe cash crunch.
Under the share purchase agreement, Maran was to receive redeemable warrants in return for the Rs 679 crore he spent on SpiceJet towards operating costs and debt payments. A total of 189.1 million warrants (convertible into equivalent number of equity shares) were issued to Maran at a conversion price of Rs 16.30. Maran sought compensation at the arbitral tribunal based on the basis of conversion price, and current share price of SpiceJet. Besides he sought restoration of ownership in the Gurugram-based airline if the compensation is not paid.
SpiceJet had argued that it approached market regulator Sebi with a request to issue warrants to Maran but the request was rejected on the grounds that promoters of the company had changed. The Delhi HC, in its July 29, 2016, order, asked both parties to settle the share transfer dispute under arbitration. It directed SpiceJet and Ajay Singh to deposit Rs 579 crore in the HC’s registry. The court ruled that Rs 100 crore was not paid directly to the airline but was used as a bank collateral. Singh and his family currently hold a 60.25% stake in SpiceJet.