Saturday, 29 July 2017

Blow to SpiceJet: Supreme Court rejects carrier’s share transfer dispute plea with Kalanithi Maran

The Supreme Court yesterday dismissed the appeals of budget carrier SpiceJet challenging the Delhi High Court verdict asking it to deposit Rs 579 crore in connection with a share transfer dispute with its previous owner Kalanithi Maran. “We are rejecting (the appeals),” a bench comprising justices R F Nariman and S K Kaul said while upholding the July three judgement of the high court.

The appeals were filed in the apex court by the airline and its co-founder Ajay Singh. A division bench of the high court had asked SpiceJet to deposit the money, saying, “there is nothing worthwhile” in the petitions to show its finances were precarious or that its cash position was so stretched that it could not comply with its single judge order asking it to deposit the amount.

However, the division bench had provided it some relief by allowing it to deposit the amount in two parts. It had said that part of the amount could be secured by a cash deposit of Rs 250 crore and the balance by a bank guarantee of Rs 329 crore. SpiceJet and Singh had challenged before the division bench the July last year’s interim order passed by a single judge alleging that the court did not have the jurisdiction.

The single judge’s order had come on a civil suit by Sun TV group’s chief Kalanithi Maran and his Kal Airways. In their suit, Maran and his airline company had sought issuance of stock warrants in SpiceJet to them as per a sale purchase agreement (SPA) of 2015 which had led to the transfer of ownership of the budget carrier to Ajay Singh.

Maran and Kal Airways had alleged before the single judge that despite giving Rs 579 crore to SpiceJet, the carrier had failed to issue them the warrants or allot tranche one and two of convertible redeemable preference shares and that the amount was not utilised for paying statutory dues for which they were also facing prosecution.

Apart from ordering that the amount be deposited in the court, the single judge had also asked Spicejet and Maran to appoint an “arbitral tribunal” to decide the share transfer dispute between them in a year. The amount was to be deposited in five instalments with the first one in August 2016, the court had said.

Market regulator SEBI had earlier expressed its inability before the high court to approve the board resolution passed by SpiceJet for issue of warrants in favour of Maran and his Kal Airways. The board resolution was passed on the court’s direction.

Under the SPA, Maran and Kal Airways had transferred their entire 350,428,758 equity shares (58.46 per cent stake) in the airline to Ajay Singh. According to the SPA, Maran and Kal were to receive the redeemable warrants in return for the amount they were to give to the airline towards operating costs and debt payment, Maran had said in his plea.

SpiceJet had earlier told the high court that the change of ownership was effected as a rehabilitative measure to address the liability of Rs 2,000 crore incurred by the airline when it was under the management of Maran. It had also claimed that every penny had been utilised towards operations and discharge of liabilities.

Source of above information -

http://www.financialexpress.com/industry/blow-to-spicejet-supreme-court-rejects-carriers-share-transfer-dispute-plea-with-kalanithi-maran/784584/

With Regards
CS Prakash Verma