Link Legal recently represented SpiceJet Limited and its promoter-Mr. Ajay Singh in a headline making arbitration dispute with its former promoter group comprising of KAL Airways and Mr. Kalanithi Maran.

KAL Airways and Mr. Kalanithi Maran initiated arbitration proceedings against SpiceJet and Mr. Ajay Singh (the current promoter) of SpiceJet and cited various purported breaches / non-compliances with the terms of the Share Sale & Purchase Agreement dated January 29, 2015 (“SSPA”).

The Arbitral Tribunal was comprised of three former judges of the Hon’ble Supreme Court namely Dr. Justice Arijit Pasayat (Presiding Arbitrator), Justice Hemant Laxman Gokhale (Co-Arbitrator) and Justice KSP Radhakrishna (Co-Arbitrator).

KAL Airways and Mr. Kalanithi Maran claimed an amount of Rs. 1323 crores as damages on account of alleged breached by SpiceJet and Mr. Ajay Singh on account of (i) non issuance of warrants, (ii) non issuance of Cumulative Redeemable Non-convertible Preference Shares (“CRPS”). KAL Airways and Mr. Kalanithi Maran also sought to be indemnified by SpiceJet and Mr. Ajay Singh and sought compounding of certain offences initiated against Mr. Kalanithi Maran due to default in deposit of TDS while Mr. Kalanithi Maran was still in control and management of SpiceJet.

The arbitration proceedings were concluded in the month of April 2018 and the Arbitral Tribunal (the “Tribunal”) has on July 20, 2018 pronounced its final award, inter-alia, concluding as under:

a.   In so far as the matter of issuance of warrants was concerned, the Tribunal has held there was no breach by the SpiceJet and Mr. Ajay Singh in pursuing the approval from relevant authority (BSE and SEBI) and since the same was not forthcoming, the SpiceJet and Mr. Ajay Singh cannot be held to be in breach or be made liable for damages. The Tribunal has however held that the amount of about Rs.308 crore earlier received by SpiceJet as advance towards subscription of warrants is to be refunded to KAL Airways and Mr. Ajay Singh alongwith interest of 12% p.a for a period of 30 months   

b. In view of the fact that the Tribunal did not find SpiceJet and Mr. Ajay Singh to be in breach of any terms of the SSPA, the Tribunal held that the question of damages does not arise and accordingly rejected the claim of damages quantified at Rs. 1323 crores made by KAL Airways and Mr. Kalanithi Maran.

d.      The Tribunal has held KAL Airways and Mr. Kalanithi Maran to be in breach of the SSPA and allowed a counter claim of Rs.29 crore in favour of SpiceJet Limited in addition to setting of a sum of Rs. 100 crore not brought in by the Claimants.

e.      The Tribunal has further concluded that Spicejet was not in breach of its obligations under the SSPA to defend and hold the Claimants harmless from any penal action/liability resulting from purported non-payment of tax dues (i.e. the prosecution for non-deposit of TDS).