Delhi High Court Upholds Arbitral Award Passed Against Spicejet In Favour Of Its Former Promoter Kalanithi Maran

The bench of Justice Chandra Dhari Singh has also dismissed Maran’s challenge to the award where his claim for damages and restitution of 58.46% shareholding in SpiceJet was rejected by the Tribunal.

The dispute between the parties had arisen under a ‘Share Sale and Purchase Agreement’ (SSPA) executed between them in 2015, where Maran and his firm had sold their entire 58.46 per cent stake in SpiceJet to its co-founder, Singh.

Maran sued SpiceJet in 2017 claiming that the airline had breached the share transfer agreement by not issuing share warrants and preference shares to him and his firm, Kal Airways. He claimed that for the said purpose, he had deposited Rs. 679 Crores with SpiceJet.

In 2018, an Arbitral Tribunal awarded a refund of Rs. 579.08 Crores plus interest to Maran and his firm (claimants). The Tribunal awarded Rs. 308.21 Crores for refund of the amount paid towards issue of warrants and Rs. 270.86 Crores towards the amount paid for issue of Non-Convertible Cumulative Redeemable Preference Shares (CRPS).

In the petition filed before the Delhi High Court under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act) for setting aside the award, SpiceJet claimed that the Tribunal had erred in awarding the refund of Rs. 270.86 Crores towards CRPS. SpiceJet argued that the said refund was awarded in favour of Maran and his firm despite the finding that they were in breach of the ‘Share Sale and Purchase Agreement’ after they failed to infuse an amount of Rs. 100 Crores in the airline, in terms of the said Agreement.

The airline pointed out to the court that its counter claim to the extent of Rs. 129 Crores was allowed on account of such breach. It further claimed that the interest of 12% imposed by the Arbitral Tribunal on the amounts refunded towards warrants, and 18% in case of non-payment within the stipulated time, was exorbitant and unreasonable.

At the outset, the bench remarked that the court’s jurisdiction under Section 34 of the A&C Act cannot be assimilated with the revisional jurisdiction under Section 115 of the Code of Civil Procedure, 1908 (CPC). It further observed that even when there are more than one plausible views and the Arbitrator, in his wisdom, adopts one of them after giving reasons for his findings, the courts shall not interfere with such an award. It added that the courts cannot re-appreciate the evidence and the material present before the Arbitrator.

Perusing the arbitral award, the court noted that the Tribunal had found that the issuance of warrants was conditional upon the approval by the Bombay Stock Exchange (BSE), but the same could not be granted as it would have resulted in breach of the ICDR Regulations. “However, the Tribunal also observed that the parties were to act in accordance with Section 65 of the Contract Act, which the petitioners failed to, and accordingly, the petitioners were to pay back and refund the consideration of Warrants to the respondent,” the court said. Section 65 of the Indian Contract Act, 1872 recognizes the principle of Restitution.

While dealing with the plea that the Tribunal had erred in awarding refund of Rs. 270.86 Crores towards CRPS, the court observed: “The learned Tribunal, while referring to the claims of the respondents herein, observed that the respondents were required to make the payment of Rs. 220,02,93,039/-, which stood paid. While coming to conclusion the Arbitral Tribunal also noted that out of the total consideration of Rs. 220,02,93,093/- to be paid by the respondents towards the Tranche-I CRPS amount, the respondents had made a total payment of Rs. 120,02,83,038/-, leaving Rs. 100 Crores to be payable. The Arbitral Tribunal was of the view that since, the payment towards Tranche-I was made by the respondents herein, but the supplementary obligation of issuance of the CRPS was not fulfilled by the petitioners, the petitioners were liable to pay back and refund the sum so deposited by the respondent after deducting the sum of the amount which remained uncredited, i.e., Rs. 100 Crores.”

The bench concluded that the Tribunal had provided adequate reasoning while awarding the refund towards CRPS.

On the issue of the interest awarded on the refund amount, the bench remarked that since there existed no prior agreement between the parties pertaining to such interest, the Arbitral Tribunal had the jurisdiction and the power to grant interest while passing the award. Along with such power and jurisdiction, the Tribunal also had a vast degree of discretion, the court said. “In the instant case, the discretionary power of awarding interest was exercised by the Arbitral Tribunal and the award of interest was made while keeping in view that there was a default on the part of the petitioners herein,” the bench concluded.

Upholding the award, the court said the conclusions arrived at by the Arbitral Tribunal were plausible. It added: “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 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 court thus dismissed the petition.

The bench of Justice Chandra Dhari Singh also dismissed the Section 34 petition filed by Maran where he challenged the award for rejecting his claim for restitution of 58.46% shareholding in the airlines. Maran also challenged the award to the extent it allowed SpiceJet’s counter-claims to the tune of Rs. 100 Crores and dismissed Maran’s claim for damages for non-issuance of warrants and CRPS.

The court took note that the Tribunal had found that SpiceJet and its promotor, Ajay Singh, were entitled to a sum Rs. 100 Crores after Maran and his firm, Kal Airways, had failed to deposit the said sum in terms of the ‘Share Sale and Purchase Agreement’. It thus concluded that the Tribunal had provided adequate reasoning for allowing the counter-claims and deducting the same from the award amount.

“There is also 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 show that the impugned Arbitral Award is patently illegal, against public policy of India or fundamental policy of law and have, thus, failed to make out a case for the award to be set aside,” the court ruled while dismissing Maran’s Section 34 petition.

Case Title: SpiceJet Limited vs Kal Airways Pvt Ltd & Ors.

Citation: 2023 LiveLaw (Del) 643

Dated: 31.07.2023

Counsel for the Petitioner: Mr. Abhinav Vashisht, Sr. Advocate with Mr. Atul Sharma, Mr. Abhinav Sharma, Mr. Gaurav Arora and Ms. Akshita Sachdeva, Advocates

Counsel for the Respondent: Mr. Maninder Singh and Mr. Sathanarayanan, Sr. Advocates with Ms. Nandini Gore, Ms. Sonia Nigam, Mr. Yash Dubey, Mr. Yashwant Gaggar, Mr. Vimal and Ms. Indira, Advocates

Click Here To Read/Download Order

Click Here To Read/Download  Order