Jet-Etihad Airways deal challenged in Supreme Court
A petition has been filed before the Supreme Court to quash the
approval of multi-crore Jet-Etihad deal. The basis for filing the
petition is that it has been approved by bestowing assets in favour
of foreign airline resulting in undue enrichment and pecuniary
advantage. Secondly, the petition seeks CBI probe into the role of
Ministry of Civil Aviation and Ministry of External Affairs in
amending the bilateral Air Service Agreement which grants
unprecedented increase in capacity entitlement to Etihad. On
September 15, 2012, the Government of India permitted foreign
airlines to invest in domestic airlines. Jet-Etihad was the
most important deal in the pipeline, since the relaxation of FDI
norms. In this transaction, Etihad airways will own 24% stake in
Jet airlines but the effective control of the deal was to remain
with the Indian entity. On July 29, 2013, FIPB gave its nod
to the deal, but placed three riders (a) Indian
law must prevail in case of any dispute between the two airlines;
(b) Jet and Etihad must amend the Articles of
Association to bring it in sync with the revised shareholders'
agreement; and (c) Jet will seek Government
approval before making any changes to the shareholders'
agreement with Etihad or any change in the shareholding of the
company. Jet's stake sale is approved by FIPB and all
regulatory clearance was expected to be in place by September 20,
2013. The present petition has caused the deal to miss its
September 20, 2013 deadline.
The Jet-Etihad deal has been chaotic for its Article of
Association, equity structure, NRI status of Naresh Goel
etc. The deal was a life saver for Jet Airways with huge
debt of Rs.13,282 crore in March 2012. Further, the entry of Etihad
in India will transform Jet Airways into an international carrier.
The much needed cash flow to the aviation sector will depend on the
outcome of the petition. If progressed, deal will be a precedent
for future transactions and remove road blocks to facilitate such
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Nishith Desai Associates is a research-based Indian law firm with offices in Mumbai, Silicon Valley, Bangalore, Singapore, Mumbai BKC, Delhi and Munich that aims at providing strategic, legal and tax...
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).