SpiceJet dues: SC stays Delhi HC order to pay Rs 243 cr as interest

The Supreme Court on Friday stayed a Delhi High Court order that had asked Ajay Singh and his low-cost airline SpiceJet to deposit Rs 243 crore towards interest in connection with a share transfer dispute with former promoter Kalanithi Maran and his company KAL Airways.

The interest amount was payable on Rs 579 crore that the HC had earlier asked SpiceJet to deposit pursuant to the 2018 arbitration award in the dispute.

A bench led by Chief Justice SA Bobde, while seeking a response from Maran and KAL, stayed the HC’s September 2 order granting SpiceJet six weeks to make the payment. When the deadline for the payment expired on October 14, Maran moved the HC seeking that Singh’s entire shareholding in SpiceJet be attached and the management be taken over.

The HC has already issued a notice to SpiceJet and Singh on KAL and Maran’s pleas seeking directions for appointment of an administrator/ officer to take over the management of the company with “the direction to apportion and pay to the decree holders the amount due till the date of actual payment by liquidating the shares of Singh”.

On Friday, the SC observed that it had not seen an order like the one passed by the Delhi HC before. “You cannot keep on passing such orders again and again … It is not the order for mere security. The security was very much alive,” the CJI told Maran. Senior counsel Maninder Singh, representing Maran, had argued that the HC order was on the basis of an audit report that concluded that SpiceJet’s financial situation was precarious.

SpiceJet, in its appeal before the apex court, questioned whether it was “just or equitable” for the HC to direct the airline to deposit an additional `243 crore to secure the interest component in the enforcement proceedings without deciding the challenge to the arbitration award, which has been pending since January 2019.

The airline said the HC should not have taken note of the audit report during the Covid-19 pandemic, when the global aviation industry is facing an “existential crisis,” and especially when the principal amount has already been paid or secured by bank guarantee. Of the awarded amount, Rs 308.21 crore was released to KAL and Maran in April and September 2019, while Rs 270.78 crore has been secured by way of a bank guarantee since 2017, the airline said.

SpiceJet was represented by senior counsel Harish Salve, who argued that the HC had revisited its earlier order.

According to the airline, the HC order had misinterpreted the financial data and “erred” in focusing on the wrong portion of the July audit report.

“…though the auditors in their report lay emphasis on the financial situation of the airline company, they agree with the view of the company … that it shall overcome the current global financial situation and continue as a going concern,” the appeal said.

Maran and KAL had moved the HC over a share transfer dispute with SpiceJet, demanding that 18 crore warrants redeemable as equity shares be transferred to them. The HC on July 29, 2016, had asked both parties to settle the dispute under arbitration. It had directed SpiceJet and Ajay Singh to deposit Rs 579 crore in the HC’s registry. While SpiceJet was permitted to furnish a bank guarantee for Rs 329 crore and make a cash deposit of the remaining sum of Rs 250 crore by the HC, the SC in July 2017 had dismissed SpiceJet’s appeal against the HC order.

On July 20, 2018, the arbitral tribunal had rejected Maran’s claim of damages of Rs 1,323 crore for not issuing warrants to him and KAL Airways, but had awarded him a refund of Rs 579 crore plus interest. Maran had then moved the HC against the arbitration award that had not only rejected his claim for damages, but also for regaining control of the airline.