Mumbai: India’s second-biggest domestic airline by passengers flown in the March quarter, Jet Airways (India) Ltd, and Sahara India Commercial Corp. Ltd, or SICCL, are engaged in last-minute negotiations to reach an out-of-court settlement, even as the Bombay high court on Wednesday postponed a final judgement to Friday.
Buyout agreement: SCCL’s demanding the original price of Rs2,000 crore for the airline it had sold to Jet, instead of the re-negotiated price of Rs1,450 crore. Jet Airways bought Sahara Airline Ltd in April 2007. Ramesh Pathania / Mint
On 26 March, SICCL filed an application with the high court claiming that Jet Airways had defaulted on payments towards the purchase of Air Sahara, and had sought permission to seize Jet’s assets.
SCCL’s was demanding the original price of Rs2,000 crore for the airline it had sold to Jet, instead of the re-negotiated price of Rs1,450 crore. Jet Airways bought Sahara Airline Ltd, which operated Air Sahara, in April 2007 and later rebranded it JetLite.
Jet said it had paid SICCL money in instalments after making deductions for liabilities from before the completion of the acquisition.
The court on Wednesday asked both the parties to try and reach such a settlement and give their written submissions, if any, by Thursday.
The Press Trust of India reported on Wednesday that Fali S. Nariman, counsel for SICCL, ruled out an out-of-court settlement between the two sides. However, a senior SCCL executive said the company was still open to such a settlement.
“We are willing to opt for an out-of-court settlement but for that (Naresh) Goyal (founder chairman of Jet Airways) will have to come with a concrete proposal,” he said on condition of anonymity.
Jet Airways and SCCL are bringing in legal counsel to settle the dispute, a person close to the development said. “Since the court has reserved its judgement for 8 May, both parties have less time to sort it out,” he added, requesting anonymity.
Jet Airways executive director Saroj K. Datta and chief commercial officer Sudheer Raghavan are scheduled to address the media on Thursday. However, a Jet Airways executive said it was unrelated to the Jet-Sahara case.
On 31 March, the high court had restrained Jet Airways from creating any third party interest on their assets, which include 40 aircraft, until the dispute with Sahara was settled.
In its buyout agreement dated 17 April 2007, Jet Airways had agreed to pay Rs550 crore spread over four equal instalments beginning March 2008 through March 2011. Jet bought Sahara Airlines for Rs1,450 crore, of which it paid Rs900 crore by 20 April 2008.
In March 2008, the income-tax department demanded pending taxes of Rs107 crore from Sahara Airlines. Jet Airways argued that since the amount was due from before the acquisition, it was not responsible for the liability. Jet Airways then deducted Rs37 crore from its March 2008 instalment.
In a 31 March statement this year, Jet Airways said: “It is the position of Jet Airways that this liability is to be borne by SICCL and since arrangements for payment of this liability were not made by SICCL, these amounts deposited by Jet Lite were deducted from the instalments payable under the award... Since the matter is sub-judice, we have been advised not to make any comments on the merits of the matter.”
Jet Airways declined to comment as the issue is in court.
“We have a strong case. That is primary reason for arguing for Rs2,000 crore. I cannot disclose the details of negotiations, but we are also bargaining. But Goyal is yet to come up with a concrete proposal,” the Sahara executive quoted earlier said.
Jet Airways shares fell 0.37% on the Bombay Stock Exchange to close at Rs214.55 a share. The benchmark Sensex index fell 1.47% to 11,952.75 points.
PTI contributed to this story.