Delhi HC Reverses Rs 270 Crore Refund Order, Backs SpiceJet In Maran Dispute

The Delhi High Court's Division Bench has overturned an order that directed SpiceJet to refund over Rs 270 crore to Kalanithi Maran, the promoter of the Sun Group.The earlier order was passed by a single-judge bench and had been contested by SpiceJet and its Chairman and Managing Director, Ajay Singh.

The Division Bench, comprising Justices Yashwant Varma and Ravinder Dudeja, ruled in favour of SpiceJet on Friday. "Appeal stands allowed. Consequently, the July 31, 2023, order is set aside," the court stated, providing relief to the low-cost airline.

"There is nothing in the impugned award to suggest that it suffers from patent illegality, and the findings therein are perverse and will shock the conscience of this Court. In the instant case, the petitioners have not been able to prove that the impugned arbitral award is patently illegal, against the public policy of India or fundamental policy of law, and thus have failed to make out a case for the award to be set aside," the High Court said.

Background of the Dispute

The legal tussle between Kalanithi Maran and SpiceJet traces back to January 2015, when Ajay Singh reacquired the airline from Maran, who had been the majority stakeholder.

Maran had transferred his 58.46% stake in SpiceJet to Singh under an agreement that promised redeemable warrants in return for Maran's investment during his tenure.

Maran was to receive 18 crore warrants, translating to a 26% shareholding in SpiceJet.

However, Maran alleged that neither the convertible warrants nor the preference shares were issued to him, and he did not receive any monetary compensation. Claiming damages of approximately Rs 1,323 crore, Maran took the matter to the Delhi High Court, which subsequently referred the case to arbitration.

Arbitral Tribunal's Decision

In July 2018, the arbitral tribunal ordered SpiceJet to refund Rs 270 crore to Maran, also stipulating an interest rate of 12% per annum on amounts paid towards warrants and 18% per annum on the sums awarded if not paid on time.

However, the tribunal did not find SpiceJet in breach of the share sale and purchase agreement, thus denying Maran's claims for restitution of his shareholding and additional damages.

Both parties, including Maran's company, KAL Airways, SpiceJet, and Ajay Singh, filed petitions challenging the tribunal's order.

Single-Judge Bench's Order

On July 31, 2023, Justice Chandra Dhari Singh upheld the arbitral tribunal's directive for SpiceJet to refund the Rs 270 crore to Maran. Justice Singh dismissed SpiceJet's argument that the tribunal's decision was flawed, asserting that the airline had not demonstrated any illegality in the tribunal's findings. At the same time, Justice Singh rejected Maran's appeal against the tribunal's decision, denying his demands for restitution of his 58.46% shareholding in SpiceJet and his claim for additional damages.

Division Bench's Ruling

SpiceJet then filed an appeal before the Division Bench of the Delhi High Court. The Division Bench not only heard the appeal but also granted it, effectively setting aside the single-judge order. This ruling provides substantial relief to SpiceJet, which would have otherwise faced significant financial liabilities.

The Division Bench had earlier denied SpiceJet's request for a stay on the single-judge's order, emphasising the complexities and substantial financial implications involved.

The Division Bench's decision marks a crucial juncture in the long-standing legal battle between Kalanithi Maran and SpiceJet.

This ruling not only relieves SpiceJet of immediate financial burdens but also underscores the ongoing complexities of legal disputes in corporate transactions.

Both parties had invested significant resources into this legal battle, which continues to evolve with each judicial pronouncement. As it stands, the Division Bench's decision has temporarily shifted the balance in favour of SpiceJet, pending any further appeals or legal manoeuvres by Maran and his legal team.