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In a new twist to their battle, Air Sahara on Wednesday informed a Lucknow court that Jet Airways has terminated the takeover agreement, while securing an interim order restraining Jet from withdrawing Rs 500 crore (Rs 5 billion) from the escrow account.
District and Session Judge Shiv Charan Singh also restrained ICICI Bank, where the account has been opened, not to make any payments to Jet.
The judge, in his interim order, said: "It has been alleged on behalf of the petitioner that the opposite party (Jet) has terminated the contract, hence there is a dispute and for which arbitrator is to be appointed in due course."
Meanwhile, Jet Airways filed an arbitration petition before the Bombay High Court seeking direction to stop Air Sahara and its seven directors from withdrawing Rs 500 crore transferred by it as part of the Rs 2,300 crore acquisition deal reached on January 19.
In its petition, Jet contended that Sahara and its seven directors should be restrained from issuing notices to escrow agents to the effect that the conditions agreed in the sale-purchase agreement had been fulfilled.
But Air Sahara was swift in moving a local court in Lucknow with a similar prayer and secured a direction restraining Jet from operating the account opened with ICICI Bank. After passing the order, District and Sessions Judge Shiv Charan Sharma posted the matter for further hearing on June 23.
The court also directed ICICI Bank not to permit Jet Airways to withdraw from the escrow account till June 23 - the next date of hearing.
The petition, filed under Section 9 of the Arbitration and Conciliation Act, 1996, was entertained by the court on grounds of "urgency", as it was vacation time in all local courts.
Sahara counsel Bulbul Godiyal had pleaded that under the terms of the contract, "Jet Airways would be at liberty to withdraw the amount from the Escrow Account after the midnight of June 23."
She therefore argued that under the circumstances if Jet Airways "succeeded in withdrawing the money, the petition would become infructuous."
Significantly, the Judge promptly agreed with Sahara's plea that a breach of contract had been committed by Jet Airways and it was therefore prima facie a fit case to be registered as a "dispute".
Investment banking sources said Air Sahara has initiated talks with potential buyers, who could be interested in the carrier, although Kingfisher Airlines chief Vijay Mallya ruled out reviving acquisition plans.
Jet contended that Sahara had not fulfilled conditions agreed upon, including transfer of infrastructure facilities like parking bays, arrival and departure slots, and hence the rival should not be allowed to access the escrow account, whereas Sahara said they have met all the conditions.
Naresh Goyal-promoted Jet also sought a direction from the high court that Sahara should not issue notices to ICICI Bank to the effect that it has met all the conditions. Jet Airways had paid Rs 500 crore on March 29 as advance payment to escrow agent for purchase of Air Sahara.
Under the agreement, Sahara was entitled to claim Rs 500 crore from the escrow agent only on completion of the takeover exercise. According to the deal, Jet said Sahara has to repay Rs 500 crore within seven days of termination of the agreement without any dispute.
In Lucknow, the Sahara counsel alleged that Jet Airways had terminated the contract and there was a dispute and for which the arbitrator is to be appointed in due course of time.
Jet Airways, which has been virtually running Air Sahara for the over two months, also claimed it was entitled to close the agreement without giving notice to any party if the conditions were not fulfilled by June 21.
With inputs from Sharat Pradhan in Lucknow