The legal battle between the erstwhile promoters and the current owners of budget airline SpiceJet Ltd—which has been making quarterly profits after being almost grounded in December 2014—over the issuance of convertible warrants and compensation has intensified.
Previous promoters of SpiceJet, Kalanithi Maran of Sun Group and his firm KAL Airways have sought compensation worth over Rs 2,000 crore from current promoter Ajay Singh and the airline for allegedly causing losses by failing to honour contractual obligations, The Economic Times reported.
Singh—who originally founded SpiceJet in 2005 and exited it in 2010—came back in December 2014 to save the airline which was on its deathbed.
Under the share purchase agreement (SPA), previous promoters of SpiceJet, Kalanithi Maran of Sun Group and his firm KAL Airways transferred their entire chunk of 350.4 million equity shares, equivalent to a 58.46% stake, to Singh. As per the SPA, Maran and KAL Airways were to be allotted 189 million convertible warrants in return for Rs 330 crore handed to the airline for payment of taxes and dues.
However, according to the current promoters, the airline actively sought approval from the Securities and Exchange Board of India (SEBI) and BSE to issue the warrants. But both the market regulator and the bourse denied the approval to do so.
Subsequently, Maran and KAL Airways dragged Singh and the airline to the Delhi High Court, seeking issuance of warrants by the new promoters as it was agreed under the SPA.
In July, the court ordered Singh and SpiceJet to deposit Rs 579 crore—Rs 329 crore in the form of a bank guarantee and Rs 250 crore as cash—as a security since the arbitration is pending between the patties.
Later, the court had transferred the case to an arbitration tribunal—comprising retired Supreme Court judges Justice Arijit Pasayat, Hemant Lakshman Gokhale and KSP Radhakrishnan—which is expected to come up with its order in September.
Maran and KAL Airways are now seeking around Rs 2,000 crore as compensation from Singh and SpiceJet for not honouring the agreement to issue convertible warrants and preference shares.
According to the report by The Economic Times, the former owners have also engaged FTI Consulting to estimate the damages due to the breach of contract by the new promoters.
“An aggregate amount of Rs 350 crore was received by the company jointly from Maran and KAL Airways to pay statutory liabilities that had accrued during the management and control of previous promoter and this amount was to be returned by SpiceJet after eight years,†said a SpiceJet spokesperson.
According to the airline, prior to the takeover of the company by Singh, the firm had immediate payables of over Rs 2,200 crore and the amount which was received was merely 15% (Rs 350 crore) of the amount required by it. “This amount was used to discharge statutory liabilities and discharge and release the previous promoters from personal guarantees/assets,†said the firm’s spokesperson.
“Upon transfer of ownership, management and control of the company to Ajay Singh, it was decided to issue warrants subject to receipt of necessary approval from the stock exchange. However, the permission was refused by SEBI and BSE,†the spokesperson added.
An email query sent to Sun Group did not elicit any response.
Law firm Luthra & Luthra Law Offices is advising Marans in the dispute.
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