SpiceJet must pay Marans entire ₹380 crore, says SC

The Supreme court on Friday directed budget airline SpiceJet to pay the entire arbitral amount of ₹380 crore to former promoter Kalanithi Maran in their legal dispute, a development which may impact the debt-laden carrier further.

A bench presided over by Chief Justice D.Y. Chandrachud and comprising Justice P.S. Narasimha dismissed Spicejet’s plea seeking additional time to pay the ₹75 crore to Maran and Kal Airways, as directed by the apex court on 13 February. Besides, the bench said that a clear message should be sent to ensure the court’s orders are followed, especially in commercial matters.

Spicejet’s counsel Mukul Rohatgi requested the court to list the matter after 3-4 days so that he can present the airline’s case and explore potential resolutions, in view of the financial stress the airline is facing.

CJI Chandrachud said the argument presented in the application by the airline for an extension of time was unreasonable, aimed at delaying the execution of the award and evading payment despite its directives.

Subsequently, the apex court dismissed Spicejet’s plea and ordered it to settle the entire arbitral award immediately.

Legal experts said Spicejet does not have any option, but to pay the full amount to the Marans. “SpiceJet has no recourse against the SC order and will have to pay Kalanithi Maran. However, its ability to make this huge payment is in question,” said Dhiraj Mhetre, partner, Khaitan Legal Associates.

The airline is grappling with a severe financial crisis and has struggled to recover post-covid, despite India’s aviation sector witnessing remarkable growth in passenger traffic.

The airline incurred substantial losses in the wake of covid-19, reporting a consolidated net loss of ₹302 crore in FY19, followed by ₹937 crore in FY20, ₹1,030 crore in FY21, and ₹1,744 crore in FY22. In the first three quarters of FY23, SpiceJet’s consolidated net loss stood at ₹1,507 crore. The fourth quarter results are yet to be announced. Besides, the airline is entangled in legal disputes with lessors.

A SpiceJet spokesperson said the SC has maintained its stand in line with the February ruling. The main petition in the matter is still pending before the Delhi High Court, he added.

“The issue is about payment of interest on a principal amount of ₹579 crore, which has already been disbursed. SpiceJet is actively engaged in discussions with Mr. Maran and his firm KAL Airways, and remains committed to reach a mutually agreeable settlement,” he said, expressing confidence the matter will be resolved to the satisfaction of both sides through ongoing dialogues.

Spicejet and its promoter Ajay Singh were represented by former attorney general Mukul Rohatgi as well as senior counsel Malak Manish Bhatt.

Former additional solicitor general Maninder Singh, Nandini Gore, Sonia Nigam, Yash Dubey and Karanjawala & Co. appeared for the Marans.

In its order on 13 February, the apex court had directed SpiceJet to pay ₹75 crore towards interest on the arbitral award to Maran and Kal Airways within three months. It had also made it clear that in the event of failure to pay, it will have to settle the entire award amount.

“Considering that the time to make payment has expired and extension is refused, SpiceJet will have to forthwith make payment to Maran,” Mhetre said.

After the deadline expired on 13 May, the airline moved applications before the SC, seeking an extension of another two months.

On Friday, Maran’s counsel submitted that Spicejet has not been honouring orders passed by any court, including the Delhi High Court’s order of 4 November 2020 directing the airline to file an affidavit to disclose its assets.

Following the Supreme Court’s February order, the HC on 29 May directed the airline and Singh to pay the full amount under the award to Maran and Kal Airways. Since the judgment debtor failed to pay ₹75 crore to the decree holder, in terms of para 15(ii) of the apex court’s order on 13 February, there is no alternative but to call upon the judgment debtors to deposit the outstanding amount forthwith, the HC had said.

“If SpiceJet fails to pay, Maran can move for execution of the award before the high court, and request it to attach SpiceJet’s assets. A plea to attach shares of Ajay Singh has already been filed by Maran before the HC,” Mhetre said.