Air Sahara files claim against Jet Airways

After months of acrimony following a failed acquisition deal, Air Sahara has filed a Rs 2,000-crore claim against Jet Airways for non-completion of the agreement entered into by the two in January. The claim was filed in London on Monday with the three-member arbitration panel. The panel, headed by British judge Lord Stein, will come out with an order binding on both parties by March ’07. The Air Sahara claim is based on the cash loss it has incurred and the depreciation in its value because of the $200-m buyout deal falling through. Sources said the Air Sahara lawyers will argue that Jet Airways can either complete the transaction or pay the damages. Arguments will be based on the specific performance of Jet Airways, they said.

The Air Sahara line is that the transaction should have been completed because the conditions precedent were either fulfilled or capable of being fulfilled by Air Sahara. While Jet has named former India chief justice SP Bharucha as its arbitrator, Sahara has brought in Justice BP Jeevan Reddy, also a Supreme Court judge. The break-up came about after the Jet Airways management had virtually taken over operations of Air Sahara. Jet Airways walked out of the deal in June, saying the “conditions precedent” to the deal were not met. The final sticking point was the government’s delay in approving Jet chairman Naresh Goyal’s appointment to the Air Sahara board. Air Sahara countered that Jet had engineered this impasse by delaying request for the approval as a way of extricating itself from the deal.

After a three-month freeze on the Rs 1,500 crore deposited by Jet in an escrow account, the airline won a reprieve in September when the Bombay High Court allowed it to withdraw the money. The court had ruled that Jet could withdraw the money against a bank guarantee of the same amount. The Mumbai-based airline has been badly hit on the bourses since it announced its plans to buy Air Sahara. The Jet share closed at Rs 706 on BSE on Thursday, about 2% below the previous close and way below its IPO price of Rs 1,100. Jet had advanced Rs 500 crore to Air Sahara shareholders against a pledge of 100% of the airline’s shares and a personal guarantee by Sahara chief Subrata Roy, while leaving Rs 1,500 crore in the escrow account. Between January and June, Jet had also provided financial support worth Rs 180 crore to meet the airline’s operational requirements.

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