India’s Air Sahara and Jet Airways are preparing for arbitration over which side has the right to hundreds of millions of dollars related to Jet’s failed takeover of the smaller carrier.

Arbitration is to begin on 9 October before a tribunal of three retired justices. The tribunal will primarily be tasked with determining which side has the right to Rp15 billion ($327 million) deposited by Jet into an escrow account for the Air Sahara takeover. It will also determine whether Air Sahara’s parent, Sahara Group, should return an advance payment of Rp5 billion to Jet.

Jet says from Delhi that it is hoped arbitration will settle the dispute, although it notes that legal manoeuvring could continue long after any decision if either side appeals.

Jet, India’s largest domestic airline, agreed in January to buy rival Air Sahara from the Sahara Group conglomerate for $500 million, but the deal collapsed after government approval was not secured by midnight on 21 June and Jet opted not to extend the closing date.

Jet and Sahara immediately turned to the courts, seeking possession of the Rp15 billion deposited by Jet into an escrow account that was established for it to pay for the Air Sahara purchase.

Jet, which also wants Sahara to return the Rp5 billion it advanced it, asked that its case be heard by the Supreme Court and late last month that court handed it over to the Mumbai High Court to determine the arbitration forum. Sahara wanted a court in Lucknow to hear its case as that is where it said the original deal was signed between the two sides.

Mumbai-based Jet received positive news when the Mumbai High Court said it could withdraw the Rp15 billion from the escrow account, provided it furnishes a bank guarantee of the same amount. However, Sahara will have the right to the interest accrued.

Sahara has accused Jet of improperly walking away from the takeover, saying that in the days before the deadline Jet tried to renegotiate the purchase price, suggesting that it had no valid reason not to conclude the deal.

Source: Flight International