Ajay Singh v. Kal Airways Private Limited & Ors

order.

¶30During the hearings, the petitioners had alluded to press reports (in the Hindu and Business Times, both 21st April 2016 edition) to say that the appellant had announced capacity expansion of the company's aircraft fleet through wet lease by close to 20-25 % and that the company would also place orders for new aircrafts. The appellants' counsel did not deny that, but countered the argument by saying that the wet lease arrangement payments were not through bank or own funding, but rather based on projected increased earnings. The petitioners had urged that the profit before tax for the year ending 31.03.2016 reported by the company was ` 579.04 crore.

¶31In the opinion of the court, the absence of material to establish that it would be irreparably prejudiced or that balance of convenience would be against it can only mean that it failed to substantiate its contentions. A contrary finding, that they would not be prejudiced in any manner, sans documentary materials on the record, but only based on press reports and interpretation of balance sheet for a given year available in the public domain, would be fraught with difficulty. At the same time, the court is aware that there is a possibility that compliance with the impugned directions can result in strapping the company severely and impairing its commercial operations. In these circumstances, while upholding the substantive reasoning of the learned single judge, the court is of the view that a modification of the order is necessary to meet the overall ends of justice.

¶32Given the fact that the amount paid by the petitioners is a specific one, ends of justice would be met with by securing it in the form of cash deposit to the extent of ` 250 crores and securing the balance ` 329 crores through a bank guarantee to the satisfaction of the Registrar of this court. The said amount of ` 250 crores shall be deposited by the appellant on or before 31stAugust, 2017; the bank guarantee for ` 329 crores shall be furnished to the satisfaction of the Registrar on or before 31st July, 2017. This court is of the opinion that this modification is essential, not because the petitioners were unable to establish a strong prima facie case, but because of the unpredictable nature of the likely injury that may be caused to the commercial operations of the company and the appellants, if the entire amounts were secured through deposit in court.

¶33The appeals are bereft of merit; however, the impugned order is modified to the extent indicated above. Parties are directed to be present before the Registrar General for compliance with the directions in the preceding paragraph, on 10th July, 2017. The appeals are dismissed, but subject to the modification in the impugned order, to the extent indicated. In the circumstances, there shall be no order as to costs.

S. RAVINDRA BHAT (JUDGE)

YOGESH KHANNA (JUDGE)

JULY03, 2017

* IN THE HIGH COURT OF DELHI AT NEW DELHI Reserved on: 16.05.2017 Pronounced on: 03.07.2017 + FAO(OS)(COMM) 61/2016, C.M. APPL.28195/2016 AJAY SINGH ..... Appellant Versus KAL AIRWAYS PRIVATE LIMITED AND ORS....... Respondents + FAO(OS)(COMM) 62/2016, C.M. APPL.28197/2016 SPICEJET LIMITED ..... Appellant Versus KAL AIRWAYS PRIVATE LIMITED AND ORS....... Respondents Through: Sh. Atul Sharma, Sh. Anand Srivastava, Sh. Abhishek Sharma, Sh. Abhinav Sharma and Sh. Kashish Arora, Advocates, for appellants. Dr. Abhishek Manu Singhvi, Sr. Advocate with Sh. Rajiv Nayyar, Sr. Advocate, Sh. Anirban Bhattacharya, Sh. Bharat Chugh, Sh. Shikhar Deep Agarwal, Sh. Aditya Vikram, Sh. Chahat Chawla and Sh. Abhishek Gupta, Advocates, for respondents. CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE YOGESH KHANNA MR. JUSTICE S. RAVINDRA BHAT % 1. The appellants, under Section 37 of the Arbitration and Conciliation Act, question the order of a learned single judge under Section 9, directing them to deposit `579 crores in court. The respondents to this appeal moved the applications (hereafter referred to as "the petitioners"). 2. The petitioners were the shareholders of SpiceJet, the original first respondent (hereafter called "the company" or "SpiceJet") owning 35,04,28, 758 equity shares, constituting 58.46% of the share capital of which 26,73,70,826 Equity Shares were free from all encumbrances and 8,30,57,932 equity shares were encumbered with different lenders. In 2013- 2015, SpiceJet faced acute financial crisis that caused it difficulties in maintenance of its fleet, staff and operational integrity. The petitioners wished to revive the company and bring it back to the path of financial health. By a Loan Agreement dated 18.12.2013 (hereinafter "First Agreement"), ` 75,00,00,000/- (Rupees Seventy Five Crores only) was given by the petitioner to the company. This amount was later reduced by another agreement (dated 07.11.2014) by which parties agreed to reduce the amount of ` 10,40,83,830/- (Rupees ten crore forty lakh eighty three thousand eight hundred and thirty only) from the loan amount provided under the First Agreement and utilize that sum towards the payment of exercise of option attached to 1,91,69,000 warrants issued on preferential basis to the Petitioner by the company. Accordingly, the outstanding loan amount under the First Agreement stood at `64,59,16,170/- (Sixty Four Crore Fifty Nine Lakh Sixteen Thousand One Hundred and Seventy only). Later, another loan of ` 1,14,00,00,000/- (Rupees One Hundred and Fourteen Crores only) was given by the petitioner to the company by loan Agreement dated 21.11.2014 (hereinafter "Second Agreement"). 3. Through a Board of Directors resolution of the company on 21.08.2014 the warrants were to be issued "in accordance with Regulation 76 of the SEBI (Issue of Capital & Disclosure Requirements) Regulations, 2009 ..." (hereafter "SEBI Disclosure Regulations"). As a result, the company applied to the Bombay Stock Exchange (BSE). The company was still under the control and management of the Petitioner and KAL Airways Private Limited. The general meeting of the company had approved the issuance of the warrants at a conversion price of ` 16.30 per Equity Share. The resolution also recorded that the issuance of Warrants would be in accordance with the SEBI Disclosure regulations. On 15.01.2015 the company presented a scheme to the Ministry of Civil Aviation for transferring of shares from the Petitioner and KAL Airways Private Ltd.(hereinafter "KAL") to the appellant. On 22.01.2015 the Civil Aviation ministry approved the scheme of reconstruction and revival for takeover of the ownership, management and control of SpiceJet Ltd (hereafter "the Scheme"). 4. After discussions and with a view to restore operations and regain the company's market position, the petitioners had agreed to transfer their shares and the appellant agreed to acquire them. The Sale Purchase Agreement ("SPA") was executed