An arbitration tribunal has ruled in SpiceJet's favour, in a share purchase dispute with ex-promoter Kalanithi Maran. And, has rejected the latter’s Rs 13-billion claim for loss on account of non-issuance of share warrants.
The tribunal has, however, held that Maran will be entitled to a refund of Rs 5.79 billion, the subscription amount he made for warrants and preference shares. Even so, this will not result in a new liability for the airline, since it has already deposited the amount with the high court in Delhi, said a source close to the airline.
Maran sold his 58.46 per cent stake in SpiceJet to Ajay Singh, its current chairman, for a nominal Rs 2 in 2015, after a financial crunch crippled its operation. The two sides have been locked in litigation since. Maran has accused SpiceJet of breach of agreement, for not issuing him 189 million share warrants and preference shares, despite his Rs 6.79 billion infusion.
The warrants, if converted into equity, would have given Maran and his Kal Airways a 24 per cent stake in the airline. SpiceJet contended these could not be issued as it did not ge the BSE exchange’s approval.
In its order on Friday, the tribunal upheld the airline's plea. In their order retired judges Arijit Pasayat, H L Gokhale and K S P Radhakrishnan said non issuance of warrants can not be treated as breach by SpiceJet and Ajay Singh.
Maran had sought Rs 13.23 billion toward loss due to non-issue of the share warrants. The tribunal did not accept this, as it had decided SpiceJet did not violate the agreement.
However, SpiceJet has been told to refund Rs 3.08 billion, treated as advance toward the warrant subscription.
It has also asked both sides to see if preference shares could be issued to Maran, subject to him fulfilling certain terms of the agreement. Maran will be entitled to refund of an additional Rs 2.7 billion if there is no agreement on issue of preference shares. The refund amount is lower as the tribunal allowed a counter claim by the airline.
S L Narayanan, chief financial officer of Maran’s Sun Group would not comment on the order.
A source close to the airline termed the judgment "extremely positive". “Almost all our appeals have been granted. The panel has accepted that there was no deliberate violation on SpiceJet's part to honour the commitments," he said.
The person added the judgment frees the airline to raise new capital from the market, as there is no dispute now on shareholding. Regarding the amount that is to be paid to the former promoters, the company had already deposited the amount with the Delhi high court (HC) registry. “That will take care of the payment."
In July 2016, Justice Manmohan Singh of the Delhi High Court had directed SpiceJet to deposit the Rs 5.79 bn in a fixed deposit, in response to a plea by Maran on the share warrants. The court had restrained SpiceJet from diluting its equity till the amount was paid.
Unravelling the legal battle
Jan 13: Maran-owned KAL Airways offers equity of 58.5% of SpiceJet to Ajay Singh
Jan 22 : Ministry of Civil Aviation approves the takeover as part of the revival scheme of SpiceJet
Mar 8: Maran moves Delhi high court against Ajay Singh over non-issuance of convertible warrants that formed part of the share transfer deal
Mar 18 : Court restrains Ajay Singh from transferring or issuing SpiceJet shares till a decision is arrived at
Jul 29: Delhi high court asks Kalanithi Maran and Ajay Singh to set up an arbitral tribunal to resolve the issue; orders SpiceJet to deposit Rs 2.50 billion as cash and another Rs 3.29 billion as bank guarantee
Jul 18: SpiceJet moves the Supreme Court against high court’s order
Jul 20: Arbitration panel dismisses Maran’s petition of Rs 13-billion claim for loss on account of non-issuance of share warrants