Cash-strapped SpiceJet was dealt a blow by the Delhi High Court on Monday after it ordered the airline to deposit an additional Rs 243 crore within six weeks, in relation to the share transfer dispute with former promoter Kalanithi Maran, owner of the Sun group.
If the amount is not deposited within the deadline, Maran has the right to seek status-quo on SpiceJet’s shareholding, meaning the company will not be able raise capital from the market by issuing fresh shares or through a stake sale.
“Judgement Debtor (in this case SpiceJet and promoter Ajay Singh) is directed to deposit Rs 242.93 crore as post-award interest sum within a period of six weeks. If the amount is not deposited, the decree holder (in this case Kalanithi Maran and KAL Airways) shall be at liberty to seek directions to maintain status quo with respect to shareholding of SpiceJet and Ajay Singh,” the order read.
The amount is the interest payable on the Rs 579 crore that the court asked SpiceJet to deposit in 2017 as part of the dispute. The airline had deposited the entire amount through a bank guarantee of Rs 329 crore and a deposit of Rs 250 crore.
With the pandemic challenging revenue flow, SpiceJet will find it tough to comply with the order. Its net worth at the end of March stood at Rs 1,580 crore and cash balance was a mere Rs 42 crore, while liabilities like lease rentals, payment to suppliers are accumulating. The company’s stock fell by 2.52 per cent on the BSE Sensex on Monday.
A SpiceJet spokesperson said the firm was reviewing the order while a second executive said they will seek more time for depositing the amount.
The dispute arose over non-issuance of warrants in favour of Maran, after ownership was transferred to Singh, the current controlling shareholder of SpiceJet. Maran sold his entire 58.46 per cent stake, amounting to 350.4 million shares for a nominal price of Rs 2 in 2015, after a financial crunch crippled its operations.
The two sides have been locked in litigation ever since with Maran accusing SpiceJet and Singh of breach of agreement for not issuing him 189 million share warrants and preference shares, despite his Rs 579 crore infusion. He claimed Rs 1,300 crore from SpiceJet and Singh. The warrants, if converted into equity, would have given Maran and his KAL Airways a 24 per cent stake.
SpiceJet said these could not be issued as it did not get the exchange’s approval. In July 2018, an arbitration tribunal ruled in SpiceJet’s favour, rejecting Maran’s claim. However, the tribunal had said Maran will be entitled to a refund of Rs 579 crore.