In a major relief to SpiceJet, the Supreme Court on July 26 upheld the Delhi High Court's recent decision to overturn a single-judge order that had directed the airline to refund ₹270 crores to Sun Group promoter Kalanithi Maran [Kal Airways Private Limited v. Spicejet Limited].
A Bench of Chief Justice DY Chandrachud, Justice JB Pardiwala and Justice Manoj Mishra on Friday also strongly criticized the Delhi High Court single-judge's elaborate ruling in the matter.
“All that we can say about a single judge filling up 250 pages is not writing a judgment under Section 34 (of the Arbitration Act). This is atrocious. Just numbers of SC judgments saying interference is limited. Let us not make any observations about this single judge. Where has he even applied his mind?" the CJI observed during the hearing.
Single-judge Justice Chandra Dhari Singh of Delhi High Court had delivered two judgments in July 2023 to uphold an arbitral tribunal's 2018 award directing SpiceJet to refund ₹270 crores to Maran in a 2015 dispute.
By the 2023 ruling, the single-judge had also rejected appeals by SpiceJet as well as by Maran and his company KAL Airways challenging certain aspects of the arbitral award.
SpiceJet and its Chairman and Managing Director (CMD) Ajay Singh filed an appeal against this ruling before a Division Bench of the High Court.
In May 2024, a Division Bench of the High Court comprising Justices Yashwant Varma and Ravinder Dudeja allowed the appeal and set aside the single-judge ruling.
The Division Bench also ordered that the challenge to the arbitral award under Section 34 of the Arbitration Act be decided afresh.
In effect, the ₹270 crore refund ordered in favour of Maran was also put on hold by the High Court's Division Bench.
Maran challenged this move before the Supreme Court, arguing that the Division Bench exceeded its jurisdiction.
The Supreme Court has now dismissed Maran's plea and agreed with the High Court's Division Bench.
"We are in agreement with the reasoning of the Division Bench sending it back to a single judge for order again under section 34. The order has to be carefully articulated ... The judge must apply mind to grounds of challenge and then deduce if interference (with the arbitral award) is warranted," CJI Chandrachud said on Friday.
The top court also clarified that the matter should be reheard by a different single-judge, not the judge who had passed the July 2023 ruling.
“Reading the single judge order, it does not seem there is any application of mind. The Delhi High Court should now assign the case to a judge other than the single-judge who was assigned the case,” the Supreme Court said.
The dispute between Maran and SpiceJet dates back to January 2015 when Ajay Singh, who used to own SpiceJet before Maran bought it back from him.
According to reports, Maran transferred his 58.46% stake in the airline to Singh. As per the deal, Maran was supposed to get redeemable warrants in return for the money invested by him while he was a promoter of the airline.
Maran was liable to get 18 crore warrants which translated to 26% shareholding in SpiceJet.
It was Maran's case that neither the convertible warrants nor the preference shares were issued to him and that he did not get any money.
Maran claimed that he suffered damages of nearly ₹1,323 crore. He approached the Delhi High Court which referred the matter to arbitration.
The arbitral tribunal gave its order in July 2018 and ordered SpiceJet to refund ₹270 crore to Maran.
The tribunal also ordered the airline to pay interest of 12% per annum on the amounts paid towards warrants and to pay 18% per annum on the sums awarded to Maran if the money is not paid on time.
However, the tribunal also held that there was no breach of the share sale and purchase agreement between Maran and SpiceJet and Ajay Singh. Therefore, it rejected Maran's demands for restitution of his shareholding and his claim for damages.
Maran, his company KAL Airways as well SpiceJet and Ajay Singh then filed petitions before the High Court against the arbitral tribunal's order.
These petitions would now have to be decided afresh by a single-judge of the Delhi High Court in view of the Supreme Court's July 26 order.
Karanjawala & Co. represented KAL Airways and Kalanithi Maran before the Supreme Court.
Senior Advocate Amit Sibal and advocate KR Sasiprabhu appeared for SpiceJet.