Former promoter Kalanithi Maran seeks over Rs 2,000 crore compensation from SpiceJet

NEW DELHI: SpiceJet’s former promoter, Kalanithi Maran of Sun Group, has sought over Rs 2,000 crore compensation from current promoter Ajay Singh and the airline for allegedly causing losses by failing to honour contractual obligations. SpiceJet told ET “the question of damages does not arise”.

The claim for compensation has been filed before an arbitral tribunal comprising retired Supreme Court judges Arijit Pasayat, Hemant Laxman Gokhale and KSP Radhakrishnan. The tribunal was created in end 2016 under orders of the Delhi High Court and is adjudicating on a share transfer dispute between Maran and Singh. Hearings before the tribunal are ongoing and are expected to conclude in two months.

Maran’s Rs 2,000-plus crore compensation claim, people close to him said, is based on losses incurred because of SpiceJet’s alleged failure to issue convertible warrants and preference shares to him and his KAL Airways. They said if compensation was not forthcoming, Maran will seek restoration of the status quo ante on SpiceJet’s ownership.

A SpiceJet spokesman, responding to ET’s questions, said: “We can’t comment on the specifics due to the ongoing arbitration… (but) the question of damages does not arise”. “The entire issue was subject to approval of regulatory bodies… this permission was also denied when the previous promoter was in control and had applied for the same permission,” he said.

Maran, who owns the Sun TV network in Chennai, has hired Washington DC-based FTI Consulting, which specialises in estimating financial damages due to breach of contract, for the arbitration. FTI personnel are expected to testify before the tribunal later this week.

One of the persons quoted above told ET the loss to Maran is calculable on the basis of 18.91 crore warrants issued at a conversion price of Rs 16.30, and SpiceJet’s current share price of around Rs 125. This person also said the airline was paid Rs 679 crore for the warrants and preference shares. “Neither has SpiceJet issued the warrants or preference shares nor returned the money,” he said. Sun Group chief financial officer SL Narayanan did not answer calls and text messages.

In a July 3 order, the Delhi High Court asked SpiceJet to deposit a total of Rs 579 crore – Rs 329 crore in the form of “bank guarantee” by July 31, and Rs 250 crore in cash deposit by August 31 – in connection with the share transfer dispute. The court ruled that Rs 100 crore (Maran has claimed Rs 679 crore was given to SpiceJet) was not paid directly to the airline but was used as bank collateral.

The persons close to Maran, who had moved the Delhi High Court last March over the share transfer dispute, said the Rs 679 crore was used to stave off closure of SpiceJet and pay off statutory liabilities. SpiceJet was forced to stop operations for a day in December 2014 due to a severe cash crunch.

The SpiceJet spokesman told ET: “This amount was utilised to discharge statutory liabilities and discharge and release the previous promoters from personal guarantees/assets.”

The February 2015 deal that saw Singh becoming SpiceJet’s promoter had Maran and KAL Airways, his investment vehicle, transferring their entire chunk of Rs 35.04 crore equity shares, equivalent to 58.46%, to Singh for Rs 2. Singh, a co-founder of SpiceJet, assumed the airline’s liabilities of around Rs 1,500 crore.

NO CAPITAL INFUSION
SpiceJet’s filings with the Bombay Stock Exchange (BSE) show there has been no capital infusion as of March 2017. SpiceJet responded by saying its operations have been “carried out efficiently and hence the company did not see any requirement for further funding”. Singh and his family currently hold 60.25% in SpiceJet; his shareholding was around 2% before Maran exited.

SpiceJet had told the Delhi High Court too that lack of regulatory approval was the reason for not issuing warrants. BSE and capital markets regulator Sebi, the airline had said, had refused to grant approval on the ground that promoters of the company had changed.

The court’s July 3 order, however, observed SpiceJet did not initiate any action to challenge the stand taken by Sebi and BSE. Spice-Jet’s plea is “feeble and ineffective”, the court had ruled.

SpiceJet told ET that while it did not wish to comment on the court’s opinion, the “company actively followed up with BSE and Sebi on multiple occasions post Ajay Singh’s takeover”.