Mumbai: An arbitration tribunal has rejected the Rs 1,323-crore damages claim from Spicejet and a bid to take control of the airline by its previous owner Kalanithi Maran and his company Kal Airways, after a bitter share transfer dispute.
The Delhi-based low-cost carrier has informed the exchanges that on 20 July, an arbitration tribunal rejected Maran's claim of damages of Rs 1,323 crore for not issuing
convertible warrants and preference shares to him and Kal Airways.
The case dates back to January 2015, when Ajay Singh, who owned the airline earlier bought it back from Maran after being grounded for months.
The tribunal consisted of three retired judges from the Supreme Court, Arijit Pasayat, Hemant Laxman Gokhale and KSP Radhakrishnan. The arbitration proceedings were concluded in April 2018 and the arbitral award was unanimous.
While the tribunal asked Maran to pay Singh and the airline Rs 29 crore in penal interest, Singh was asked to refund Rs 579 crore plus interest to Maran.
The tribunal, created in end-2016 on the orders of the Delhi High Court to adjudicate the share transfer dispute, held that there was no breach of a share sale and purchase agreement reached between Maran and current promoter Singh in late January 2015.
While Maran could not be contacted for comments, Spicejet on Sunday said there is no monetary impact from the verdict as most of the refund of Rs 370 crore already deposited in an escrow account created by the Delhi HC. Additionally, the tribunal has allowed a counter claim of Rs 29 crore.
On the dispute related to issue of convertible warrants and preferential shares, the airline said, "the tribunal has held that the claimants were to bring in Rs 100 crore required for issuance of CRPS aggregating to Rs 370 crore, and the same has not been deposited by them in the manner provided under the agreement".
"The tribunal has advised the parties to explore the possibility of issuance of warrants and in the event such efforts do not fortify in two months' time, the company is required to thereafter refund the amount of about Rs 270 crore (after adjusting the counter claim of Rs 100 crore which has been allowed)".
On Friday, the tribunal rejected Maran's claim of damages of Rs 1,323 crore for not issuing warrants to him and Kal Airways, but awarded him a refund of Rs 579 crore plus 12 per cent interest.
"No further warrants or shares are required to be issued by the company to Maran and Kal Airways", Spicelet said quoting the award.
In February 2015, Maran of Sun Network and Kal Airways, his investment vehicle, had transferred their 58.46 per cent in Spicejet, to Singh for Rs 2 along with Rs 1,500
crore of debt after the airline was grounded due to severe cash crunch. Singh was the first co-founder of the airline and now the chairman and managing director.
As part of the agreement, Maran and Kal Airways had claimed to have paid Spicejet Rs 679 crore for issuing warrantsRs 18.91 crore at a conversion price of Rs 16.30and
But Maran said neither the convertible warrants nor preference shares were issued nor money returned, claiming to have cost him over Rs 1300 crore, forcing him to move the Delhi High Court.
"If there is no compensation coming," Maran argued that "he should be allowed to regain Spicejet ownership". The warrants, if converted into equity, would have given Maran and Kal Airways 24 percent ownership in the airline.
Singh and his family currently hold over 60 per cent in the airline, against under 2 per cent before Maran exited the airline.
An airline official said the verdict clearly establishes that Singh is the principal promoter and share-holder of the airline and there won't be any dilution of
"In so far as the matter of issuance of warrants was concerned, the tribunal has held that there was no breach by the company in pursuing the approval from relevant authority and since the same was not received for reasons not attributable to the company, and the company cannot be held to be in breach or be made liable for damages," the award said.
The tribunal has, however, held that since the warrants/shares cannot be issued any longer, the amount of about Rs 308 crore earlier received by the company as advance
towards subscription of warrants is to be refunded to the claimants along with interest of 12 percent for a period of 30 months, which works out to be over Rs 579 crore.
Updated Date: Jul 23, 2018 10:09 AM