Sunday, December 19, 2021

Bidding for Air India and expanding into Covid testing weighed against SpiceJet in the British court

On December 15, 2021, SpiceJet issued a statement announcing a settlement with De Havilland Aircraft of Canada (DHC). DHC has been pursuing the low-cost carrier in UK and Indian courts over a dispute relating to orders for Q-400 aircraft. In February 2021, the high court in London had given a summary judgment against Spice Jet on the application of DHC ordering the airline to pay $43 million as liquidated damages.

A week before the announcement of the settlement, DHC had secured a small, but significant, victory in the high court in London. That victory was made possible due to what the court termed as SpiceJet using “improper means” in the proceedings at the Delhi High Court, where DHC had gone in June 2021 to enforce the US $43 million judgment.

One key takeaway from SpiceJet-DHC legal battle is that the UK courts are very likely to take into consideration the stance and arguments put forth by parties pursuing related cases in foreign proceedings. While legitimate objections to delay or prevent enforcement are expected, an attempt to re-litigate an already adjudicated point could have adverse effects, as SpiceJet discovered.

SpiceJet and DHC had entered into a Purchase Agreement on September 8, 2017, relating to 25 Q-400 series aircraft. SpiceJet paid for and took delivery of the first five aircraft. According to DHC, SpiceJet failed to make pre-delivery payments for subsequent aircraft, following which it terminated the entire purchase agreement in February 2020.

DHC then approached the high court in London seeking damages and after a two-day hearing, Sir Michael Burton of the high court ruled in its favour. Sir Michael did not agree on any of the major arguments put forth by SpiceJet, and a particular defence by the airline - that the award sought by DHC was in the form of a penalty and not a genuine pre-estimate of damages - came under intense argument.

SpiceJet’s contention was that to arrive at a proper and legitimate figure for damages, DHC needed to, but had not, provided enough details. In the absence of details, SpiceJet argued, the award should be characterised as unenforceable penalty. However, Sir Michael shot down that argument and stated that the amount arrived at was realistic and not an “irrecoverable penalty”.  By March 9, 2021, SpiceJet was to pay DHC US $42,950,000 as damages, US $ 1,149,649.61 interest and US$ 330,000 as legal costs.

SpiceJet was, however, given permission to appeal on one technical ground relating to the interpretation of the contractual agreement which was characterised by the judge as “just a squeaker of an argument”. Despite requests that the airline was in a difficult financial situation, the judge refused to stay the execution of the order pending appeal. Interestingly, DHC did not press upon the payment of the judgment sum as a condition to grant permission to appeal. The airline had paid only the legal costs by March 9, but no part of the judgment sum.

In March 2021 itself, DHC made an application to the high court in London seeking that SpiceJet’s appeal must be struck out unless it paid the US$ 43 million judgment sum and provided security for costs of the appeal. In June 2021, DHC also approached the Delhi High Court seeking to enforce the judgment against SpiceJet.

On the basis of non-compliance of previous court direction, a party can seek an ‘unless’ order to ensure the performance of certain acts is made conditional to further proceedings. In this case DHC was seeking an unless order, while it had chosen to not put the condition of payment when the permission to appeal was granted. It was clear during the proceedings before Sir Michael that SpiceJet could not pay the judgment sum. But what came to the aid of DHC was the proceedings in the Delhi High Court.

Lord Justice Phillips and Lord Justice Nugee, who heard DHC’s application for an ‘unless’ order in July 2021, took into consideration SpiceJet’s conduct in the Delhi High Court. In its bid to counter DHC, SpiceJet submitted to the Delhi High Court that Sir Michael’s order was unenforceable in India because the judgment sum was arrived at without a proper investigation of the loss suffered by DHC. But this point (damages or penalty) was fully argued before Sir Michael and had gone against SpiceJet, which had also not sought to make it a ground to appeal.

“As far as this court is concerned, taking that point, even in foreign proceedings, must be regarded as abusive and cannot be countenanced. SpiceJet is not merely requiring De Havilland to go through proper processes to enforce the judgment, but is seeking to obstruct and prevent by improper means,” noted Justice Philipps. In fact, Justice Philipps said that if SpiceJet had not made such a submission in the Delhi High Court, DHC’s application for an unless order would not have succeeded.

After agreeing that an unless order would be made, the court had to decide the terms of the order – that is, the amount that SpiceJet should pay so that its appeal (against Sir Michael Burton ruling) could be heard. All through the proceedings, both before Sir Michael Burton and before Justice Philipps and Justice Nugee, Chandan Sand, senior vice president (legal) and company secretary, SpiceJet, maintained that Ajay Singh was not in a position to invest more in SpiceJet.

But counsels for DHC pointed out that Ajay Singh had invested into his daughter’s medical science business (Sand countered that the investment was meagre compared to the damages awarded), and that SpiceJet had benefited financially from Covid testing and genome sequencing. The court’s attention was also drawn to the fact that a consortium led by Ajay Singh had bid for Air India which would have involved taking over a US$ 3.3 billion debt.

Lord Justice Phillips noted that Ajay Singh himself did not produce a witness statement or provide details as to why he would not or cannot assist SpiceJet. The court held that Ajay Singh “has very significant personal wealth, with the ability to raise large sums” and ordered that SpiceJet should pay into the court US$ 5 million for its appeal to be heard.

19/12/21 Danish Khan/

To Read the News in full at Source, Click the Headline


Post a Comment