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Business News/ Companies / News/  SpiceJet seeks damages from Maran
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SpiceJet seeks damages from Maran

The airline said that Maran was supposed to settle a ₹100 crore loan taken from City Union Bank in 2012.

 Sun Group chairman Kalanithi Maran.Premium
Sun Group chairman Kalanithi Maran.

SpiceJet on Friday moved a division bench of the Delhi high court seeking damages from Sun Group chairman Kalanithi Maran alleging a breach of contract by the latter. The airline said that Maran was supposed to settle a 100 crore loan taken from City Union Bank in 2012 when the airline was under Maran’s control, but the payment was never made, resulting in losses.

SpiceJet repaid the loan completely in June this year.

It also sought to overturn a single bench order in July that upheld the validity of an 2018 arbitration award in favour of the Marans.

SpiceJet also informed the court that it is “struggling to stay in the air" and facing financial losses.

In July, the Delhi high court upheld a July 2018 arbitration order awarding Maran and Kal Airways a refund of 579 crore plus interest.

According to SpiceJet, Maran’s failure to settle the 100 crore loan incurred a loss of 23.77 crore, which escalated to 29 crore by the time the arbitral award was rendered.

Maran’s side argued that the case should be deferred until the single bench decided on the execution of the arbitral award. The single bench is hearing the execution of the arbitral award and is yet to decide on the payment schedule by the airline to Maran.

Marans reiterated that current promoter Ajay Singh and SpiceJet owe 579 crore and have only paid 100 crore after the order. In September, SpiceJet paid 100 crore to Maran as per the order, instructing the payment be made by 10 September.

In earlier proceedings, Maran had claimed SpiceJet had forfeited its right to be heard in court by wilfully disobeying orders. They requested the court to seize the entire profit of 204 crore that SpiceJet made during the first quarter of the current fiscal, along with future profits if the debt is not paid.

In response, SpiceJet argued that demanding immediate payment could push the airline into insolvency, which would not benefit the Marans, as they would become operational creditors.

SpiceJet also said its financial difficulties arose from various factors, including the purchase of Boeing 737 Max aircraft which was disallowed from flying by regulators, losses due to the covid-19 pandemic, and increased fuel prices due to the Ukraine conflict.

The issue dates back to February 2015, when Marans and Kal Airways transferred their entire shareholding in SpiceJet to Ajay Singh, the current chairman and managing director of the airline, after the carrier nearly went belly up in 2014-15 due to a severe cash crunch. Singh, who paid 2 to take over the airline, also took over SpiceJet’s liabilities of 1,500 crore.

As part of the agreement, Marans also made payments of 679 crore to SpiceJet, under Singh, for issuing warrants and preference shares. SpiceJet, under Singh, never issues these warrants.

Maran then approached the Delhi high court in 2017, alleging SpiceJet had not issued convertible warrants and preference shares or returned the money. In 2020, the high court ordered SpiceJet to deposit 243 crore as interest payment, the airline did not comply with the order leading to Marans moving the Supreme Court.

On 13 February, the Supreme Court directed the immediate encashment of SpiceJet’s bank guarantee worth 270 crore, which was to be paid to Maran and Kal Airways as part of the arbitral award. The apex court also ordered SpiceJet to pay 75 crore to Maran and Kal Airways within three months as the interest. On 7 July, the SC denied any further extension to SpiceJet.

 

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ABOUT THE AUTHOR
Krishna Yadav
Krishna, a lawyer turned journalist, is a key member of Mint's corporate team. He covers major legal battles in Delhi's courtrooms, with a focus on finance, markets, and policy. Additionally, he crafts easy-to-understand explainers for complex stories and holds a PG Diploma from the renowned Asian College of Journalism.
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Published: 17 Nov 2023, 11:08 PM IST
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