Supreme Court Asks SpiceJet & Kal Airways To Reconsider Settling Share Transfer Dispute

A Bench headed by CJI Ramana asked SpiceJet to consider Kal Airways' proposal and pay the amount of interest it owes to Kal Airways.

The Bench asked both Senior Advocate Mukul Rohatgi appearing for SpiceJet and Senior Advocate Dushyant Dave appearing for Kal Airways to talk to each other and their clients and reach a settlement.

During the hearing, Senior Advocate Mukul Rohatgi appearing for SpiceJet reiterated his earlier offer, that SpiceJet is proposing a final settlement, where entire amount of 300 crores can be paid to the respondents. This amount of 300 crores will be in addition to the 308 crores already paid by Spice Jet. Further, a sum of 100 crores can be released from the bank guarantee of 270 crores deposited before the Delhi High Court and the proceedings of the Section 34 petition before Single Judge can be ordered to be heard.

Senior Advocate Dushyant Dave appearing for Kal Airways however did not agree with the offer. He later proposed that SpiceJet may pay some amount out of the interest that it owes to the respondent now and the remaining amount may be paid in the next three years, at the rate of interest decided by the Court.

Mr Rohatgi at the outset explained the dispute between the parties. He submitted that "The matter started award in 2016 where court directed deposit of 579 crores in cash. This was modified by division bench to 250 in cash and 359 in bank guarantee. The Tribunal delivered an award against me for 579 crores which single judge had ordered. It added pre award and post award interest which was a high figure and a high rate and is a major part of the dispute"

He added that when the first execution was filed 250 crores were released to other side and 58 crores were released in the second execution. He added that an amount of 308 crores which has already been paid is lying in cash with other side, and there's a bank guarantee of 270 crores in the High Court.

"The next date of hearing in High Court of the 34 petition is 19th April. The current SLP is against third execution, you can't have an execution everyday!", Mr Rohatgi said.

Mr Rohatgi submitted that the SpiceJet airline was given to his client for 2 rupees as it had huge debts of 2000 crores and to incentivise his client to buy the airlines he was given 300 odd crores.

"I've been running this airlines for last years and I'm trying to settle this. The pandemic has finished my business in two years. I persuaded the client to settle the winding up," Mr Rohatgi said.

The Bench then asked Mr Dave's response to Mr Rohatgi's offer of settlement.

Mr Dave submitted that there are two different figures of 308 crores and 270 crores involved in the case with 308 crores released to the respondent and 270 crores being in a bank guarantee.

However according to Mr Dave this amount was given by the respondent to SpiceJet in the first place, hence it is the respondent's money which is coming back to the respondent .

"The Question is if on that money, the interest is payable or not. The Act says the amount shall carry interest at rate of 2% above the bank rate" Mr Dave said.

The Bench however observed that if it directs the payment of interest to the respondent, nothing will remain to be adjudicated in the Section 34 petition before the High Court.

"If he gives 300 crore interest above 600 crores there's no difficulty. 600 is the principal amount," Mr Dave said.

"What will remain in 34 if everything is paid," Mr Rohatgi remarked.

The Bench then asked Mr Rohatgi to consider paying some amount of interest and finish the dispute.

While reiterating that their approach is to settle the dispute, Mr Rohatgi agreed to get instructions from his client in this regard.

On last occasion, the Supreme Court was informed by Kal Airways that it has refused to accept SpiceJet's following offer for full settlement of the share transfer dispute:

• Spicejet will give 300 Crores, but there will be final settlement of the dispute and there would be no further litigation.
  

Or

• Out of the Bank Guarantee of 270 Crores deposited by Spicejet with the High Court it will give 100 Crore and the Court may pass direction regarding expeditious hearing of the Section 34 petitions pending before the Delhi High Court.

Senior Advocate Maninder Singh appearing for Kal Airways had informed the Bench that after considering SpiceJet's offer they have decided to not accept it as the total amount owed by them is more than 920 crores.

Senior Advocate Mukul Rohatgi for SpiceJet had submitted that the court may hear the case in two weeks or direct the High Court to hear the Section 34 petition expeditiously.

The Bench was hearing an application filed by KAL Airways seeking vacation of stay granted by Supreme Court on Delhi High Court's order directing SpiceJet to deposit Rs 243 crore in their dispute.

The application has been filed in SpiceJet's special leave petition challenging orders passed by the Delhi high court in 2020 in a share transfer dispute between Kalanithi Maran and the airlines.

The High Court through impugned orders had directed the airlines and its promoter, Ajay Singh, to deposit Rs 243 crore as interest payable on Rs 579 crore, which Delhi High Court had directed them to pay in 2017 under the 2018 arbitration award in the share transfer dispute.

The Court had directed SpiceJet Ltd to deposit the amount with court registry in the arbitration case with its former owner Kalanithi Maran and his company, KAL Airways.

The High Court in that order had also directed the airlines to make the payment within six weeks, failing which Maran was granted liberty to approach the court to seek status quo on SpiceJet's shareholding.

The amount of 243 crores is over and above the ₹579 crore that SpiceJet has already deposited with court.

The Delhi High Court had in 2017 directed SpiceJet to deposit Rs 579 crore in connection with the share transfer dispute. Justices S Ravindra Bhat and Yogesh Khanna dismissed SpiceJet's Ajay Singh's appeal against the July 2016 order of the single judge asking the budget carrier to deposit the amount.

The Division Bench, however, provided some relief to SpiceJet by allowing it to deposit Rs 579 crore in two tranches whereas the single judge had directed the same be deposited in 12 months time.

Singh had challenged the single judge order passed on a civil suit initiated by Sun Group chief Kalanithi Maran and his Kal Airways.

In their suit, Maran and his airline company had sought the issuance of stock warrants in SpiceJet to them as per a sale purchase agreement (SPA) of 2015 which had led to the transfer of ownership of the budget carrier to Ajay Singh.

Maran and Kal Airways had alleged that despite giving Rs 579 crore to SpiceJet, the carrier had failed to issue them the warrants or allot tranche one and two of Convertible Redeemable Preference Shares and that the amount was not utilised for paying statutory dues due to which they were also facing prosecution.

Case Title: SpiceJet Limited & Anr vs Kalanithi Maran, SpiceJet Limited & Anr vs Kal Airways , SLP (C) 12882-83/2020