INDIA BUSINESS WORLD - JUNE 2006
THE MONTH THAT WAS...

SAHARA FILES CAVEAT, JET TRANSFER PLEA

   The legal battle between Jet Airways and the Sahara Group gathered momentum with both parties approaching the Supreme Court. While Air Sahara filed a caveat in the apex court to prevent Jet Airways from getting any ex-parte order, the Naresh Goyalowned airline filed a transfer petition. Jet wants all ongoing cases relating to the failed Rs 2,300-crore deal to go to the Bombay High Court.

Jet has contended that as per the arbitration agreement in the Jet-Sahara deal, the seat of arbitration would be Mumbai. Jet also sought a direction to stay all proceedings on the petition filed by Air Sahara in the Lucknow court.

Alleging that Jet had terminated the contract, Sahara had moved the district court in Lucknow on June 21 and sought an interim stay on operation of the escrow account and followed it up with another injunction on the sale of shares pledged by it to Jet for an advance of Rs 500 crore. The issue is slated to come up for hearing on June 30.

The airline also clarified that it did not blame the government for failure of the deal to take off and had no complaints about any government policy. Jet had described the collapse of its Rs 2,300 crore deal to acquire Air Sahara as "unfortunate" and said its decision not to salvage the pact was based purely on ‘commercial considerations'. Both parties have lined up legal luminaries as the deal moved from boardroom to courtroom over the last one week.

Meanwhile, the Sahara group continued to pick up the pieces to run the airline with depleted resources. Several of its aircraft continue to remain grounded due to want of spares, engineers and pilots. The airline is now planning special incentive packages for travel agents to improve its marketing efforts.

With the lean season setting in from July, most industry players feel that the going for Sahara would get tougher. The biggest challenge would be to win back customer confidence.

The government is not to be blamed for the failure of the Rs 2,300-crore deal by Jet Airways to take over Air Sahara, civil aviation minister Praful Patel. The merger and acquisition policy of the civil aviation sector was not tailor-made to suit any airline but based on the best international practices, he said while speaking to mediapersons here. The remarks have to be seen in the backdrop of allegations that delay in security clearance for Jet Airways chairman Naresh Goyal gave the airline an excuse to wriggle out of the deal with the Sahara Group. The M&A policy on airlines was also a subject of debate since Jet was keen to take over landing slots, parking bays and hangars of Air Sahara. “The policy cannot be tailor-made to suit any particular airline. Government is very clear on this issue. The policy that is broadly in place is based on best international models and practices,” Mr Patel said. The comment comes close on the heels of a statement issued by Jet, saying that the deal did not work out since all clearances were not available before the deadline. “If someone had any grievances, they are free to approach the government for clarifications. But the government is not answerable to anyone,” Mr Patel said. “Policies are not made to suit any particular airline. If someone is dissatisfied, we cannot be held responsible,” he emphasised. The civil aviation minister added that policies were made for the entire aviation sector. Jet Airways had said though reform and liberalisation in the aviation sector had been fast-paced, “the policy changes in such key sectors have their own time frame”.