Delhi HC Quashes Arbitral Award Ordering SpiceJet & Its Promoter To Payback Rs 579 Crore To Kalanithi Maran

A bench of Justice Yashwant Varma and Justice Ravinder Dudeja allowed the appeals filed by Singh and SpiceJet challenging the single judge’s July 31, 2023 order and remanded the matter back to the court concerned to consider the petitions challenging the arbitral award afresh.

“We are consequently compelled to dispose of these appeals in terms which follow principally since the single judge has erred in dismissing the Section 34 petitions without according due consideration to the challenge which was raised and an apparent absence of reasoning in support of the decision arrived at. The appeals shall consequently stand allowed.

“The impugned judgment dated July 31, 2023 is hereby set aside. The Section 34 petitions shall in consequence stand restored upon the Board of the appropriate court for being considered afresh and bearing in mind the observations rendered hereinabove,” the bench said.

Section 34 of the Arbitration and Conciliation Act deals with applications for setting aside arbitral awards.

The division bench had earlier refused to stay the single judge’s order and asked Maran and his company Kal Airways to respond to the appeal.

SpiceJet and Singh’s counsel had earlier argued that the challenge was on the issue of 18 per cent interest which the tribunal had directed SpiceJet to pay.

On July 31, 2023, the single judge had upheld the award announced by the arbitral tribunal on July 20, 2018 in favour of Maran and Kal Airways.

It had said the court was barred from entering into the merits of an award unless there was an error that was apparent on the face of the record or an illegality that goes to the root of the matter.

Singh had approached the single judge bench of the high court challenging the arbitral award.

The case dates to January 2015, when Singh, who owned the airline earlier, bought it back from Maran after it was grounded for months due to resource crunch.

While the tribunal had asked Maran to pay Singh and the airline Rs 29 crore in penal interest, Singh was asked to refund Rs 579 crore plus interest to Maran.

The tribunal, created in 2016 on the orders of the Delhi High Court to adjudicate the share transfer dispute, had held that there was no breach of a share sale and purchase agreement reached between Maran and current promoter Singh in late January 2015.

In a relief to Singh, the tribunal had, however, rejected Maran's appeal for damages of Rs 1,323 crore from the Gurugram-based carrier.

In February 2015, Maran of the Sun Network and Kal Airways, his investment vehicle, had transferred 58.46 per cent stake in SpiceJet to Singh for Rs 2 (Rs two only) along with Rs 1,500 crore debt liability, after the airline was grounded due to a severe cash crunch.

Singh was the co-founder of the airline and is now its chairman and managing director.

As part of the agreement, Maran and Kal Airways had claimed to have paid Spicejet Rs 679 crore for issuing warrants and preference shares.

However, Maran approached the Delhi High Court in 2017, alleging SpiceJet had neither issued convertible warrants and preference shares nor returned the money.

Cause Title: Ajay Singh v. KAL Airways Private Limited & Anr., [2024:DHC:3990-DB]

Appearance:

Appellant: Senior Advocate Amit Sibal, Advocates K.R. Sasiprabhu, Goutham Shivshankar, Tushar Bhardwaj, Vinayak Maini, Kartikeya Asthana, Vishnu Sharma, Manan Sishodia and Md. Ilyas

Respondents: Senior Advocate Maninder Singh, Advocates Nandini Gore, Sonia Nigam, Prabhas Bajaj, Ajay Sabharwal, Rajat Dasgupta & Akarsh Sharma