| Etihad sets terms to lower strength on Jet board |
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New Delhi, 25 August Abu Dhabi- based Etihad Airways would continue to have two directors on the board of Jet Airways, even if it decided to dilute its stake in the Indian carrier to up to 15 per cent. This has been provided for in the revised shareholders' agreement ( SHA) filed by the airlines with the Foreign Investment Promotion Board ( FIPB) last month — a copy of which has been reviewed by Business Standard. Overall, the Jet Airways board will have 12 members — four directors representing it, two from Etihad and six independent ones. Etihad will nominate the board's vice- chairman, who will preside over board meetings, as well as general meetings, in the chairman's absence. Additionally, as long as it holds up to 20 per cent of Jet's share capital, Etihad will have the right to nominate one of its directors as a member of Jet's audit committee. Besides the six independent directors, two of the four promoter- nominated directors will have to be Indian nationals. One of the promoter board members will be nominated as the board's chairman, who will preside over board and general meetings and have the casting vote on matters, diluting Etihad Airways' powers. Industry experts, however, hold that the West Asian carrier will continue to enjoy substantial control over the Indian airline, despite structural changes in the SHA. Centre for Asia Pacific Aviation CEO ( Indian Subcontinent & West Asia) Kapil Kaul says: "Etihad has inked a $ 900- million deal with Jet, which includes $ 379- million investment for a 24 per cent stake. The airline is not to stay as a passive investor. It will strategically drive Jet's plans to suit its own global game plan. It will be naïve to expect Etihad will play an insignificant role after agreeing to the deal." Turn to Page 7 > To have 2 directors even if it dilutes stake to 15% CONTROL CONCERNS |Nomination: Etihad will have the right to nominate two directors on Jet's board, even if it dilutes stake to up to 15% |Vice- chairman: Etihad will nominate the vice- chairman, who will preside over board meetings in the chairman's absence |Audit committee: As long as Etihad owns up to 20% of Jet's share capital, it can nominate one of its directors as member of the audit committee |Control: According to experts, Etihad will have substantial control over Jet, despite structural changes in the revised shareholders' agreement DEAL DYNAMICS $749 million Overall cash infusion, through debt and equity, as part of the deal What Jet gets under various heads ( in $ mn) Debton Jet's books which it intends to lower to $ 1.5 billion Equity 379 Sale and lease- back of Heathrow slots 70 Assistance in securing loan 150 Investment in frequent- flyer programme 150 $2.1 billion |
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| Etihad sets terms to lower strength on Jet board |
|
New Delhi, 25 August Abu Dhabi- based Etihad Airways would continue to have two directors on the board of Jet Airways, even if it decided to dilute its stake in the Indian carrier to up to 15 per cent. This has been provided for in the revised shareholders' agreement ( SHA) filed by the airlines with the Foreign Investment Promotion Board ( FIPB) last month — a copy of which has been reviewed by Business Standard. Overall, the Jet Airways board will have 12 members — four directors representing it, two from Etihad and six independent ones. Etihad will nominate the board's vice- chairman, who will preside over board meetings, as well as general meetings, in the chairman's absence. Additionally, as long as it holds up to 20 per cent of Jet's share capital, Etihad will have the right to nominate one of its directors as a member of Jet's audit committee. Besides the six independent directors, two of the four promoter- nominated directors will have to be Indian nationals. One of the promoter board members will be nominated as the board's chairman, who will preside over board and general meetings and have the casting vote on matters, diluting Etihad Airways' powers. Industry experts, however, hold that the West Asian carrier will continue to enjoy substantial control over the Indian airline, despite structural changes in the SHA. Centre for Asia Pacific Aviation CEO ( Indian Subcontinent & West Asia) Kapil Kaul says: "Etihad has inked a $ 900- million deal with Jet, which includes $ 379- million investment for a 24 per cent stake. The airline is not to stay as a passive investor. It will strategically drive Jet's plans to suit its own global game plan. It will be naïve to expect Etihad will play an insignificant role after agreeing to the deal." Turn to Page 7 > To have 2 directors even if it dilutes stake to 15% CONTROL CONCERNS |Nomination: Etihad will have the right to nominate two directors on Jet's board, even if it dilutes stake to up to 15% |Vice- chairman: Etihad will nominate the vice- chairman, who will preside over board meetings in the chairman's absence |Audit committee: As long as Etihad owns up to 20% of Jet's share capital, it can nominate one of its directors as member of the audit committee |Control: According to experts, Etihad will have substantial control over Jet, despite structural changes in the revised shareholders' agreement DEAL DYNAMICS $749 million Overall cash infusion, through debt and equity, as part of the deal What Jet gets under various heads ( in $ mn) Debton Jet's books which it intends to lower to $ 1.5 billion Equity 379 Sale and lease- back of Heathrow slots 70 Assistance in securing loan 150 Investment in frequent- flyer programme 150 $2.1 billion |
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| >LEGAL DIGEST |
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A secured creditor has two options when the borrower or the guarantor defaults in repaying the loan. Under Section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act ( Sarfaesi), the creditor can either take possession of the asset on his own or employ Section 14 and seek the help of the magistrate to get possession. It is not necessary that the first course should be adopted and having failed, the second course should be resorted to. This was stated by the Supreme Court last week while allowing the appeals of Standard Chartered Bank and State Bank of India in two appeals against the Madras High Court judgment. The Supreme Court stated that the high court view was wrong and observed: " No doubt that a secured creditor may initially resort to Section 13 and on facing resistance he may still approach the magistrate under Section 14. But it is not mandatory for the creditor to make attempt to obtain possession on his own before approaching the magistrate." The argument that bypassing Section 13 would deprive the borrower of a right to appeal is a misconception of the law, the judgment said. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Lapse of arbitration clause The Supreme Court ruled last week that an arbitration clause in an agreement lapsed if it was superseded by a later agreement. In a trademark suit between Young Achievers and IMS Learning Resources Ltd over the trademark IMS, the latter moved the Delhi High Court for a permanent injunction restraining infringement of the registered trademark and copyright. Young Achievers sought arbitration under Section 5 of the Arbitration and Conciliation Act. The high court stated that the arbitration agreement in the original agreement stood superseded by a contract arrived at by mutual consent later. The appeal against that ruling was dismissed by the Supreme Court. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Running unit can't be acquired The Supreme Court has held that acquisition of a running industrial unit in the land acquisition proceedings cannot be sustained. The court stated so while allowing the appeal case, V K M Kattha Industries vs state of Haryana, against acquisition of the land containing the industrial unit in Sonepat district. The small- scale industry was into tobacco manufacturing. The government issued notification for acquisition of land including the unit in 2005 for developing an industrial estate. The owners moved the high court but it dismissed the petition. On appeal, the Supreme Court stated that the acquisition of the land including the unit was illegal and quashed the acquisition proceedings with regard to its property. The court stated that "the company itself was running an industry on the date of the notification, therefore, there was no justification in acquiring a running industrial unit for industrialisation of the area". Some other industries in the area, like Natraj Stationery Products, Moja Shoes and Haryana Coir, have been exempted from the acquisition. However, V K M Kattha was not able to participate in the enquiry, leading to the illegality, the court said. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Insurer can't challenge quantum The Supreme Court has criticised United India Insurance for raising " untenable" grounds to deprive the mother of a road accident victim challenging the award of compensation. In motor vehicle accident claims, the insurer cannot contest the computation of the compensation, except in limited cases. But in this appeal, Josephine James vs United India Insurance, it appealed against the award of the tribunal, alleging that the award of ₹ 13 lakh was excessive for the loss of life of a 21- year- old sole earning member of the family. The Delhi High Court then reduced the quantum further from ₹ 13 lakh to ₹ 4.2 lakh. The court stated that the high court was also wrong while applying the principles of law in the Motor Vehicles Act and earlier Supreme Court decisions. The high court committed error again while allowing the insurance company to challenge the amount of compensation, which could not be done in this case. " In the absence of permission obtained by the insurance company from the tribunal to assail the defence of the insured, it is not permitted to contest the case on merits," the judgement said. The rate of interest applied at six per cent was also low. The Supreme Court raised it to nine per cent, based on precedents. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> 'Encumbrances' defined The Supreme Court, recently, set aside the judgment of the Allahabad High Court and ruled that the buyer of an industrial unit in auction "free from all encumbrances" is not bound to pay the excise duty arrears of the previous owner. The sale deed in this case included a clause which said that " all these statutory liabilities arising out of the land shall be borne by purchaser". The Supreme Court stated that it was only that statutory liability arising out of the land, building and machinery which is to be discharged by the purchaser. Excise dues are not statutory liabilities that arise from the land. Statutory liabilities arising from the land and building could be in the form of the property tax or other types of cess relating to property, etc. Likewise, statutory liability arising out of the plant and machinery could be sales tax, etc, payable on the said machinery. As far as dues of the central excise are concerned, they were not related to the property, the court said in the case, Rana Industries vs Union of India. MJ ANTONY |
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