Ex-partner spurns $80mn settlement offer of India’s SpiceJet
Media mogul Kalanithi Maran and his conglomerate Sun Group have rejected a INR6 billion rupee (USD80 million) one-time settlement offer from SpiceJet (SG, Delhi Int’l) to end a protracted share transfer dispute between the two.
The Supreme Court of India had appealed on February 10 to Maran and his company KAL Airways, which held a controlling stake in SpiceJet between June 2010 and January 2015, to finally settle their dispute with the cash-strapped carrier. The airline had said that the payout could be a “full and final settlement of all disputes between the parties.”
However, Maninder Singh, a lawyer appearing for Maran, dismissed the proposal before the court on February 14 alleging that SpiceJet owed INR9.2 billion (USD122 million), a sum far exceeding what was offered. The judge then adjourned the case until March 2.
The dispute dates back to the transfer of ownership of the airline in 2015 to co-founder and current owner Ajay Singh, in which shares and warrants were supposed to be allotted in two tranches. The airline had been on the brink of bankruptcy since the previous year.
The High Court of Delhi ordered the carrier in 2016 to deposit INR5.79 billion (USD77 million) into a court-registered escrow account. The carrier paid Maran INR3.08 billion (USD41 million) and agreed a bank guarantee worth the remaining INR2.71 billion (USD36 million). However, in the succeeding years Maran has demanded that SpiceJet also pay compensation and interest on the sum.
Most recently, in November 2020, the Supreme Court halted a high court ruling the previous month ordering SpiceJet to transfer INR2.43 billion (USD32.3 million) as an arbitral award to Maran. It ordered a stay of legal proceedings “until further orders”, providing temporary relief for the low-cost carrier.
In a comment, legal expert Angad Sandhu told the Indian financial daily Mint: “Since the one-time settlement offer has been denied by Kalanithi Maran, there are no second thoughts about the fact that he is looking to claim the entire amount without accepting any haircut whatsoever. This might prove troublesome for SpiceJet, which despite making a fair offer is now in a difficult spot. Moreover, the Supreme Court has made it clear that following the rejection of the one-time settlement, it will hear the case on merits.”
In its consolidated financial results for the quarter and nine months ending December 31, 2021, which its board of directors approved on February 15, SpiceJet summarised the details of the Maran case but said that as these “challenges at the court” are still pending “it is not possible to determine the effects of any such obligations and rights.”
In a note attached to the report, New Delhi-based auditor Walker Chandiok & Co warned that SpiceJet’s accumulated losses of more than INR54.53 billion (USD725 million), “which have resulted in complete erosion of its net worth,” along with uncertainties related to the impact of the ongoing pandemic, “indicate the existence of a material uncertainty that may cast significant doubt about the company’s ability to continue as a going concern.”