Delhi High Court upholds arbitral award against SpiceJet
Delhi High Court upholds arbitral award against SpiceJet
Rejects challenge to invalidate the portion that included the interest on the amount for non-issuance of compulsory redeemable preference shares
The Delhi High Court has refused to set aside the arbitral award in favor of Kalanithi Maran and against SpiceJet Airlines. This enables Maran to press for the award’s enforcement.
Spicejet and Ajay Singh, the current Chairman and Managing Director (CMD) and founder of the low-cost airline, had sought to set aside the portion of the award, which directed them to refund Rs.270 crores to Maran and Kal Airways, his investment vehicle. They also hoped to waive the 12 percent interest on warrants and set aside the 18 percent interest granted in the award.
Kal Airways and Maran also requested to invalidate the portion of the award that included the interest on Rs.270 crores for the non-issuance of compulsory redeemable preference shares.
However, both challenges were rejected by the court. While the execution proceedings are pending before another bench of the Delhi High Court, it’s likely to come up for a hearing on 5 September.
The developments came up after the Supreme Court held on 7 July that the arbitral award was executable. It happened because SpiceJet did not adhere to the timeline it laid down in February to make certain payments to Maran.
Early this year, the top court disposed of the case directing that SpiceJet’s Rs.270-crore bank guarantee be encashed. It directed the airline to pay Rs.75 crore towards interest within three months.
In 2015, Maran and Kal Airways transferred 58.46 percent in SpiceJet to Singh, who took on the airline’s liabilities of around Rs.1,500 crore.
As part of the agreement, Maran and Kal Airways said they paid SpiceJet Rs.679 crores for issuing warrants and preference shares. However, allegedly, those were not allotted. Thereafter, Maran initiated arbitration proceedings against SpiceJet and Singh.
In 2018, an arbitration panel rejected Maran’s Rs.1,323 crores damages claim for not issuing warrants to him and Kal Airways. But he was awarded Rs.579 crores refund, plus interest. SpiceJet was permitted to furnish a bank guarantee of Rs.329 crores and make a cash deposit of the remaining sum of Rs.250 crores.
Accordingly, SpiceJet was to pay Rs.308 crores in cash together with a 12 percent interest for 30 months, as well as Rs.270 crores either in the form of compulsory redeemable preference shares or by the return of money in terms of a Share Purchase Agreement. Maran was entitled to an interest of 18 percent, if the company failed to adhere to the timeline.
Maran was represented by senior advocate Maninder Singh, who was briefed by Nandini Gore, senior partner at law firm Karanjawala and Co.
