SpiceJet To Seek Rs 450 Cr Of Refund Following Delhi High Court Ruling

SpiceJet, a budget airline, said on Wednesday that it will be seeking a refund of Rs 450 crore from its former promoter Kalanithi Maran and his firm, KAL Airways. This decision comes after a Delhi high court order on May 17 overturned a previous judgment that had favoured Maran in an arbitral award dispute.

According to SpiceJet, the airline will be pursuing the return of Rs 450 crore out of the Rs 730 crore it had paid to KAL Airways and Maran. This amount includes Rs 580 crore in principal and Rs 150 crore in interest.

In a statement, SpiceJet stated, "Court ruled on May 17 in favour of SpiceJet and its promoter, Ajay Singh, in the long-standing share transfer case against former promoter Kalanithi Maran and his firm, KAL Airways. This ruling overturns a previous decision by a single-judge bench, positioning SpiceJet to claim a substantial refund based on legal advice."

Justices Yashwant Varma and Ravinder Dudeja passed an order on a plea filed by Ajay Singh, chairman and managing director (CMD) of SpiceJet, and the airline itself. They were challenging a single-judge order from July 2023 that had confirmed an arbitral award.

SpiceJet and Ajay Singh had contested various aspects of the award, such as the directive to refund Rs 270 crores to KAL Airways and Maran, as well as the imposition of 12 per cent interest on warrants and 18 per cent interest on the awarded amount. They argued that these parts of the award were unjustified and sought to have them annulled.

The division bench found that the single judge had made an error in dismissing the Section 34 petitions of Ajay Singh and SpiceJet without properly considering the claims of patent illegality and admitted breaches by KAL Airways and Kalanithi Maran.

The court noted that penal interest had been charged despite SpiceJet not being in breach of the share purchase agreement. These aspects were not adequately considered by the single judge, leading to the appeals by Ajay Singh and SpiceJet being allowed.

Although the high court did not stay the arbitral award, it allowed the appeal to be reinstated under Section 34 of the Arbitration and Reconciliation Act 1996. This means that while the previous decision has been nullified, there is now an opportunity for a fresh review of the case by the single bench, taking into account all aspects of the dispute.

The case is likely to be reheard by a single bench. The dispute dates back to February 2015 when Maran transferred his entire shareholding in SpiceJet to Ajay Singh, the current chairman and managing director of the airline, after the carrier nearly went bankrupt in 2014-15 due to a severe cash crunch.

Singh, who paid Rs 2 to take over the airline, also assumed SpiceJet’s liabilities of Rs 1,500 crore.
As part of the agreement, Maran and KAL Airways also made payments of Rs 679 crore to SpiceJet, under Singh, for issuing warrants and preference shares.

However, Maran approached the Delhi High Court in 2017, alleging SpiceJet had not issued convertible warrants and preference shares or returned the money.
In July 2018, an arbitration panel 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 Rs579 crore plus interest.

In 2020, the High Court ordered SpiceJet to deposit Rs 243 crore as interest payment.
On 13 February 2023, the Supreme Court directed the immediate encashment of SpiceJet’s bank guarantee worth Rs 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 Rs 75 crore to Maran and KAL Airways within three months as interest.
On 7 July 2023, the Supreme Court denied any further extension to SpiceJet and directed the airline to pay the entire arbitral amount of Rs 380 crore to former promoter Maran.