KAL Airways Pvt Ltd and Kalanithi Maran, former promoters of low-cost carrier SpiceJet, have said their share purchase agreement (SPA) executed two years ago with Ajay Singh, now chairman of the airline, to sell Spicejet for Rs 2, has become void. The reason, they said, was the airline's failure to allot the agreed 23 per cent of fully diluted equity capital die to regulatory approvals.
The erstwhile promoters further contended tht if the airline was not able to allot warrants/shares equivalent to 23 per cent, of the expanded capital, they would be eligible for a compensation of Rs 2,200-2,500 crore as damages.
In response, a SpiceJet spokesperson said "no such agreement exists. This is completely baseless and false".
The dispute emerged after Spicejet allegedly failed to issue 189.1 million warrants, equivalent to around 23 per cent of the company, to the erstwhile promoters pointing on "legal impossibility", considering an issue raised by the Bombay Stock Exchange.
Sources close to Maran said that if the Airline didn't issue warrants and shares as agreed, the SPA is not valid as per Section 65 in The Indian Contract Act, 1872.
While Sun Group's CFO and spokesperson S L Narayanan refused to comment on the ongoing arbitration saying that the matter is sub judice, he added, "We were compelled to move the Delhi High Court to protect our interests and we stand vindicated by successive orders of the court".
However, sources in the Group said that Maran decided to knock legal doors as he feels that the Airline has failed to honour the terms and conditions in the agreement, which was signed in February 2015.
Narayanan said that the promoter infused Rs 450 crore into the Airline since he don't want Spicejet to go the Kingfisher way and it was to assist the new promoter to settle statutory liabilities and protect the interests of all the stakeholders.
Maran and KAL Airways have transferred their entire 35.04 crore equity shares, equivalent to 58.46 per cent, to Ajay Singh for Rs 2. As the Airline allegedly refused to allocate warrants to Maran and KAL, the matter went to Delhi HC. The court has asked SpiceJet to deposit a total of Rs 579 crore, in the form of bank guarantees and cash deposits by August 31.
Responding to this, Spicejet spokespersons said, "We can't comment on the specifics due to ongoing Arbitration". However, the question of damage does not arise as the entire issue was subject to approval of regulatory bodies.
Spicejet did not appeal against the BSE's decision to withhold permissions to allot the warrants. The Airline however managed to get exemption from making an open offer from SEBI, few months earlier, when the deal closed with Maran, notes sources close to Maran.
The Airline's spokesperson refuted saying, "While in control, the previous promoters had sought approval to convert this amount into warrants and this approval was refused by the stock exchange". The matter is presently being adjudicated by the Arbitral Tribunal to determine what amounts are payable to the previous promoters amongst other issues.
Upon transfer of ownership, management and control of the Company to Ajay Singh, it was decided to issue warrants subject to receipt of necessary approval from the stock exchange. However, the said permission was refused by BSE and SEBI, said the Spicejet spokesperson.
Spicejet and Ajay Singh has honoured all the commitments as per the transactions contemplated under the SPA. The Company has paid all the statutory liabilities and discharged Maran from all personal liabilities and guarantees and has got his personal asset released immediately upon transfer of ownership, management and control to Singh, added the spokesperson.