HC asks SpiceJet to deposit Rs 579 cr

A SpiceJet passenger aircraft prepares to land at Sardar Vallabhbhai Patel international airport in Ahmedabad
The Delhi High Court on Friday directed budget airline SpiceJet to deposit Rs 579 crore and resolve a share purchase dispute with its former owner Kalanithi Maran through arbitration over the next 12 months.

On Friday, judge Manmohan Singh directed SpiceJet to deposit Rs 579 crore in a fixed deposit in the name of the registrar of the Delhi High Court for 12 months. The amount was to be deposited in five instalments with the first one in August, the court said.

The court restrained SpiceJet from diluting its equity till the amount was deposited.

In March, Maran moved the Delhi High Court alleging though he gave the company Rs 679 crore, the current management under Ajay Singh was not issuing 189 million convertible warrants as promised. These warrants would give Maran a 20 per cent stake in the airline from which he walked away for a consideration of Rs 2 a year ago.  In his plea, Maran said he had lent the airline Rs 579 crore and the amount was to be adjusted towards issue of warrants.

The airline’s management has said the warrants can be issued if approvals are granted.

The Securities and Exchange Board of India (Sebi) expressed its inability in May to approve SpiceJet’s board resolution for issue of warrants in favour of Maran and his firm Kal Airways.

The board resolution for issue of 189 million warrants convertible to equity shares at Rs 16.30 was passed in September 2014, when Maran was in charge of the airline.

Also, the BSE submitted it could not allow the issue, citing Sebi regulations that did not permit the transfer in the current circumstances. The stock exchange pointed out the change in the price of SpiceJet’s shares since 2014 and said the transfer could only be made on a fresh resolution issued by the company.

The court has directed both sides to appoint an arbitral tribunal to resolve the dispute. “The tribunal will also decide on the compensation payable to Maran due to the non-issue of warrants and shares,” said Anirban Bhattacharya, partner, Luthra & Luthra, which represented Maran in the case.

Maran was also entitled to seek a release from the amount deposited by the airline in court, he added. Both parties have been given liberty to file applications under Secttion 17 of the Arbitration and Conciliation Act, 1996, before the tribunal

SpiceJet underwent a change in ownership last January with founder promoter Ajay Singh taking over the airline from Sun TV promoter Maran.

The Spicejet stock closed at Rs 68 today, gaining 2 per cent over the previous close.

A company source said raising funds for the airline would not be an issue and the court order could actually benefit  the airline as it may no longer have to issue any shares to Maran.  “It is actually a blessing in disguise for us,” he said.

In a note to its investors Edelweiss Securities said the airline's expansion plans could be delayed because it would not be able to raise funds through issue of shares. This could also affect fleet expension because Spicejet would need to make payments to equipment makers to block assembly slots.

Aviation consultant Mark Martin, however, said  with improved passenger loads and lower fuel prices the airline would be able to raise the cash it was required to deposit in court.

SpiceJet which has scripted a remarkable turnaround after Singh took control of the airline. It had a 90 per cent load factor for 14 consecutive months. The airline is in discussions with Boeing and Airbus and plans to place an order for 100-150 narrow body planes.


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