SC stays Jet-Sahara arbitration

BY A CORRESPONDENT
July 24, 2006

Jet Airways' claim of Rs.1,500 crore lying in an ICICI escrow account may not be fulfilled for some time, after the Supreme Court stayed arbitration proceedings on the Jet-Sahara case in the Lucknow district court.

In addition, a bench headed by Chief Justice YK Sabharwal, and comprising of Justice C K Thakker and Justice R V Raveendran, has also stayed proceedings at the Bombay high court, where Jet Airways had moved arbitration proceedings. All parties have been issued notices to the effect that they will be heard after three weeks. Sahara and
others are to file counter in two weeks, and rejoinder a week thereafter.

According to counsel Harish Salve, arbitration proceedings would have to be taken to the Bombay high court, as the four agreements for the takeover contained clauses to the effect that arbitration would take place in Mumbai, disabling the Lucknow high court from hearing proceedings.

Salve argued that the Lucknow high court had heard proceedings without jurisdiction as the escrow agreement had specific mention to the effect that mediation was to be carried out only in Mumbai.

Earlier, on June 21, the Lucknow high court had passed an order that restrained Jet Airways from accessing the Rs.1,500 crore in the escrow account, and additionally, ordering ICICI bank to not release the amount to Jet.

Jet Airways, which has already filed a petition in the Bombay High Court under the Arbitration & Conciliation Act, had argued in the transfer petition that the Lucknow High Court did not have jurisdiction over the case as Jet had already initiated proceedings in Mumbai, and the balance of convenience lay in favour of the case being heard in Mumbai.

The extensive legislation comes in the wake of the fallout of the Rs.2,300 crore Sahara acquisition deal. Sahara is now seeking damages of Rs 2000 crore in a case that argues malafide intention on Jet's part to damage Sahara's credibility to its rivals.