Tribunal rules in Spice Jet’ s favour, rejects Maran’s ~13-billion claim

An arbitration tribunal has ruled in SpiceJet’s favour in a share purchase dispute with ex-promoter Kalanithi Maran, and rejected the latter’s ~13-billion claim for loss on account of non-issuance of share warrants.

The tribunal has, however, held that Maran will be entitled to a refund of ~5.79 billion, the subscription amount he made for warrants and preference shares. Even so, this will not result in a new liability for the airline and there will be no dilution of stake of promoter Ajay Singh, since it has already deposited the amount with the high court in Delhi, said a source close to the airline.

Maran sold his 58.46 per cent stake in SpiceJet to Ajay Singh, its current chairman, for a nominal ~2 in 2015, after a financial crunch crippled its operation, resulting in a debt and liabilities of ~32 billion.

The two sides have been locked in litigation since. Maran has accused SpiceJet of breach of agreement, for not issuing him 189 million share warrants and preference shares, despite his ~6.79 billion infusion. The warrants, if converted into equity, would have given

Maran and his Kal Airways a 24 per cent stake in the airline.

SpiceJet contended these could not be issued as it did not ge the BSE exchange’s approval.

In its order on Friday, the tribunal upheld the airline’s plea. In their order retired judges Arijit Pasayat, H L Gokhale and KSP Radhakrishnan said non issuance of warrants could not be

treated as breach by SpiceJet and Ajay Singh. Maran had sought ~13.23 billion toward loss due to non-issue of the share warrants. The tribunal did not accept this, as it had decided SpiceJet did not violate the agreement.

However, SpiceJet has been told to refund ~3.08 billion, treated as advance toward the warrant subscription.

It has also asked both sides to see if preference shares could be issued to Maran, subject to him fulfilling certain terms of the agreement.

Maran will be entitled to refund of an additional ~2.7 billion if there is no agreement on issue of preference shares.The refund amount is lower as the tribunal allowed a counter claim by the airline.

S L Narayanan, chief financial officer of Maran's Sun Group would not comment on the order.

A source close to the airline termed the judgment "extremely positive". "Almost all our appeals have been granted. The panel has accepted that there was no deliberate violation on SpiceJet's part to honour the commitments," he said.

The person added the judgment frees the airline to raise new capital from the market, as there is no dispute now on shareholding. Regarding the amount that is to be paid to the former promoters, the company had already deposited the amount with the Delhi high court (HC) registry. "That will take care of the payment."

In July 2016, judge Manmohan Singh of the HC had directed SpiceJet to deposit the ~5.79 billion in a fixed deposit, in response to a plea by Maran on the share warrants. The court had restrained SpiceJet from diluting its equity till the amount was paid.