SpiceJet sale deal null & void: Maran camp
In the latest of their ongoing legal dispute, people close to KAL Airways and Kalanithi Maran, erstwhile promoters of SpiceJet, have said their share-purchase agreement (SPA) of February 2015 to sell the airline to Ajay Singh, the present chairman, has become null and void.
The airline, they said, had not allotted them the agreed 23 per cent of fully diluted equity capital in the airline, citing lack of regulatory approvals. SpiceJet, however, denied the existence of such an agreement.
The erstwhile promoters say if the airline is not able to allot warrants or shares equivalent to 23 per cent of the expanded capital, they are eligible for compensation of ~2,2002,500 crore. A SpiceJet spokesperson denied the claims, saying: “Spicejet and Singh have honoured all the commitments. The company has paid all the statutory liabilities and discharged Maran from all personal liabilities and guarantees and has got his personal asset released immediately upon transfer of ownership, management and control to Singh.”
The dispute arose after SpiceJet allegedly failed to issue 189.1 million warrants equivalent to around 23 per cent of the company to the erstwhile promoters, pointing to “legal impossibility”, considering an issue raised by the BSE exchange.
Sources close to Maran said if the Airline reneged on the earlier agreement, the SPA was not valid under Section 65 in the Indian Contract Act.
S L Narayanan, finance head and spokesperson of Maran’s Sun Group, said he would not comment on an ongoing arbitration but added: “We were compelled to move the Delhi High Court to protect our interests and we stand vindicated by successive orders of the court.”
Narayanan said the erstwhile promoter infused ~450 crore into the airline since he didn’t want SpiceJet to go the Kingfisher way, to assist the new promoter to settle the statutory liabilities and protect the interests of all stakeholders.
Maran and KAL Airways had transferred their entire 350.4 million equity shares, equivalent to 58.46 per cent, to Singh for a nominal ~2. As the airline allegedly refused to allocate warrants to Maran and KAL, the matter went to the Delhi HC, which asked SpiceJet to deposit ~579 crore in the form of bank guarantees and cash deposits by August 31. The HC also constituted an arbitral tribunal of three retired Supreme Court judges, to hear the dispute.
SpiceJet stated that even after Singh’s takeover, the company followed up with regulators for approval of issue of warrants.
FTI Consulting, a global agency was hired by Maran to estimate damages, filed a report (seen by Business Standard) that estimated the claim at ~2,200-2,500 crore. This includes the worth of the 189.1 mn warrants, which need to converted as equity shares at around ~100 a share and ~370 crore to subscribe to 3,708,699 non-convertible cumulative redeemable preference shares with an 18 per cent interest rate for two years, which comes to around ~500 crore.
Airline and Ajay Singh, now in charge, say deal particulars were subject to regulatory approval, so no question of having reneged