New Delhi: Offering interim relief to Kalanithi Maran and his KAL Airways, the Delhi high court on Monday directed SpiceJet Ltd to pay Rs250 crore in a cash deposit on or before 31 August over a share transfer dispute arising out of a change in the airline’s ownership in 2015.
The money, which is to be deposited in the court registry, serves as a security and will be put to use at a later date, subject to the outcome of ongoing arbitration proceedings between the two parties.
A division bench headed by justice Ravindra Bhat also directed the airline to furnish Rs329 crore by way of a bank guarantee with the court towards the disputed amount on or before 31 July.
“Although we do not find merit in the appeal (by SpiceJet) and have dismissed it, we have passed an order modifying the impugned judgement," justice Bhat said.
He added that the bifurcation was essential considering the unpredictable nature of injury that may be caused to the commercial operation of the airline if the entire amount was secured through a cash deposit.
The case relates to a dispute arising out of non-issuance of warrants in favour of KAL Airways’s non-executive chairperson Kalanithi Maran, after transfer of ownership to Ajay Singh, the current controlling shareholder of SpiceJet.
Over the last few hearings, the court had considered various possibilities of resolution between the parties but the proposals were not acceptable to them.
Under one such proposal, the court had considered the possibility of SpiceJet furnishing a bank guarantee of Rs308 crore to the court by 31 August, which would be substituted by cash by 31 October. The remaining amount of Rs270 crore would be paid in shares.
“This is a good order for us. There is no dilution of stake to Marans nor any payment to them (money to be deposited with court). It gets rid of the warrants issue and will help company focus on the long-term strategy and conduct its business normally without any constraints. The company has the ability to generate these funds. Final decision will be taken by the arbitrator," said a SpiceJet official who did not want to be named.
On 29 July, justice Manmohan Singh had directed SpiceJet to deposit Rs579 crore in five equal monthly instalments with the court registry. The court also asked KAL Airways and SpiceJet to set up an arbitral tribunal to resolve the issue. SpiceJet had appealed against this order.
One of the main issues that SpiceJet has raised for appealing the order, the airline’s lawyer C.A. Sundaram told the court, was that the July ruling amounted to an interim order under the Arbitration Act, even when there was no pending arbitration between the two parties.
Maran and KAL Airways had transferred their entire 58.46% stake in SpiceJet, amounting to 350.4 million shares, to its co-founder Ajay Singh in February 2015, leading to a change in ownership of the airline.
Aviation consulting firm CAPA said it does not see any difficulty for SpiceJet in making the cash/bank guarantee deposits before the due date.
“Given the visible upside in SpiceJet, eventual outcome could possibly be out of the court settlement, which will be favourable for both parties," CAPA said.
Under the share purchase agreement, KAL Airways and Maran were to receive redeemable warrants in return for the Rs690 crore they spent on SpiceJet towards operating costs and debt payments.
Capital markets regulator Securities and Exchange Board of India (Sebi) had expressed its inability before the court to approve the board resolution passed by SpiceJet for issue of warrants in favour of Maran and Kal Airways.
Tarun Shukla contributed to the story