New Delhi: Budget airline SpiceJet on Monday told the Delhi High Court that it risks insolvency if forced to pay more. ₹100 crore to former promoter Kalanithi Maran, and instead proposed a share issue to settle its dues. –
The court, hearing the matter, expressed skepticism over SpiceJet’s claims of insolvency, saying it was a common plea among debtors. It also noted that Maran cannot be forced to accept shares as a settlement.
The case was adjourned to 10 December, with SpiceJet managing director Ajay Singh asked to appear at the next hearing.
SpiceJet has been embroiled in a legal dispute over the enforcement of a 2018 arbitration award that ordered the airline to pay. ₹579 crore plus interest to Maran and KAL Airways. The company challenged the award in the division bench of the Supreme Court.
This is not the first time that Singh has been summoned in this case. Earlier, a single-judge bench of justice Yogesh Khanna summoned Singh in this case. The matter is now handed over to justice Manoj Kumar Ohri.
Maran claims that SpiceJet and Singh are in debt ₹440 crore in interest from the arbitration award, despite the airline’s claim that it has paid ₹100 crore following a court directive in August and owes only ₹194 crore more. SpiceJet also indicated that it expects Maran to return ₹400 crore if the arbitration challenge is successful.
Representing SpiceJet, senior lawyer Amit Sibal underlined the airline’s financial distress, citing operating losses, negative net worth, and obligations to employees that may topple it in insolvency. He urged the court to withhold judgment till the division bench rules on the arbitration dispute.
The court questioned the airline’s contingency plan if the division bench were to uphold the arbitration award.
Sibal attributed SpiceJet’s financial problems to several factors: the grounding of Boeing 737 Max aircraft, the impact of the pandemic, and fuel cost spikes due to the Ukraine conflict.
In a related development, SpiceJet on Friday alleged before the division bench that Maran breached a contractual obligation to settle ₹100 crore loan from City Union Bank in 2012, which the airline repaid in June. The failure to settle the loan, according to SpiceJet, resulted in a major financial loss to the airline. ₹29 crores.
The issue dates back to 2015 when Maran and KAL Airways offloaded their entire SpiceJet stake to Singh following a financial downturn. Singh, who paid a nominal sum of ₹2 for the investment, also assumed the large debt value of the airline ₹1,500 crores. In return, Maran paid ₹679 crore to SpiceJet for share warrants and preference shares which the airline did not issue.
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Updated: 20 Nov 2023, 19:15 IST
(tagsTo Translate)SpiceJet