Told to pay Rs 478 crore on disputed 2007 deal, instead of the Rs 2,000 crore Sahara wanted.
To Jet Airways’ relief on Wednesday, the high court here rejected Sahara Airlines Ltd's claim of Rs 2,000 crore from the former for alleged default in payment on the Air Sahara takeover.
However, the HC decided Jet had breached the contract terms and directed it to pay Sahara Rs 478 crore, including interest charges at nine per cent, within two weeks.
While Jet Airways’ stocks fell almost five per cent and closed at Rs 447 following the news flash of the court order, airline executives hailed the order as positive. "It’s a big relief,'' said Jet’s senior vice-president, M Shivkumar. He said the airline had deposited Rs 275 crore in the HC and had received a tax refund of Rs 87 crore; it now had to make provision for an extra Rs 106 crore to settle the dues.
The HC also said the undertaking given by Jet not to sell any of its assets pending the court verdict would end after the payment to Sahara. So, Jet would be able to go ahead with the proposed joint development of the 1.5-acre plot it purchased in the Bandra-Kurla complex in suburban Mumbai in 2008.
Jet had earlier said it expected Rs 500-550 crore upfront from the deal and was in talks with Godrej Properties to develop the land. Additionally it would get 2.5 lakh sq feet to sell or lease, the airline had said.
In 2007 Jet Airways struck a deal to take over Air Sahara for Rs 1,450 crore. It paid Rs 900 crore in two parts and the balance Rs 550 crore was to be paid in four installments of Rs 137.5 crore each till 2011. Since Jet did not pay the entire sum in the first two installments because of a dispute over income tax liabilities, Sahara held this a default and moved the court, claiming Rs 2,000 crore.
This was the original transaction price which both sides agreed upon in 2006 but the deal fell through that time. The matter went into arbitration and Jet agreed to purchase the airline at a reduced price of Rs 1,450 crore in 2007.
Under the 2007 agreement, Jet was to pay the balance Rs 550 crore by 2011. However, a problem began in March 2008, when Jet released only Rs 100.4 crore (instead of the agreed Rs 137.5 crore), after deducting the amount claimed by income tax authorities.
The agreement stipulated the concession in purchase price would automatically stand withdrawn and Jet would be liable to pay Rs 2,000 crore (Rs 550 crore in addition to Rs 1,450 crore) if it defaulted on paying the entire sum. However Jet argued that the liability to pay the additional Rs 550 crore would arise only if Sahara's owners performed their indemnity obligation to reimburse Jet for any undisclosed tax liability prior to the takeover of the airline.
