SpiceJet (SG, Delhi International) must pay two service providers INR317 million rupees (USD3.77 million) plus interest following a ruling by a High Court judge that ends an eight-year compensation claim.

The Delhi High Court’s Justice Neena Bansal Krishna released her judgement on September 30, awarding the sum to plaintiffs Aerocare Aviation Services Pvt. Ltd. et al. She said SpiceJet had “fraudulently and illegally terminated the services of the plaintiffs.”

SpiceJet cancels Hajj agreement

The lawsuit stemmed from an agreement between the parties for the plaintiffs to organise and manage SpiceJet’s Hajj flights in 2016. However, in July that year, shortly before the Hajj season got underway, SpiceJet ended the agreement.

The plaintiffs, a family business overseeing and managing Hajj operations at various airports in India on behalf of airlines, had by that point, expended considerable time, money, and effort in organising SpiceJet’s Hajj operation. They sued for costs and damages.

The plaintiff’s counsel, Bhuvan Mishra, said the long-awaited judgement “marks a significant reaffirmation of the need for fairness and accountability in corporate partnerships.”

India’s Ministry of Civil Aviation (MOCA) allocates and manages annual Hajj capacity, which it awards to applicant airlines that have previously successfully conducted resource-intensive Hajj operations. The Hajj Committee of India (HCoI), a Ministry of Minority Affairs statutory body, also plays a role, being responsible for pilgrimage arrangements.

In 2012, SpiceJet attempted to secure a slice of the market but was unsuccessful due to its lack of experience conducting Hajj operations. In 2016, SpiceJet recruited the plaintiffs to assist in another bid, which was successful and saw the carrier awarded the rights to fly pilgrims between Gaya and Indore and Saudi Arabia during Hajj that year.

In March 2016, the parties signed a letter of intent to work together. However, before this time, the plaintiffs had already swung into action, mobilising manpower, money, expertise and their networks in India, Saudi Arabia, and the UAE to set the flights up. Among other things, they worked on technical and financial bids for SpiceJet.

The plaintiff also set about appointing and coordinating with the agents based in Saudi Arabia, sourcing suitable aircraft and crews, and negotiating and executing ground handling agreements.

“The plaintiffs kept the defendant informed of each and every step that was being undertaken,” the September 30 ruling reads. “The officials of (the) defendant consistently acknowledged each step that was taken by the plaintiffs for and on behalf of and in consent with the defendant.”

Reasons for agreement cancellation

A formal engagement agreement was signed in early May that outlined each side's obligations and agreed-upon 75/25 profit split in favour of SpiceJet. However, on July 22, SpiceJet moved to terminate the agreement.

The airline told the court there were two reasons for this. Firstly, they said the Hajj Committee of India (HCoI) has designated the plaintiffs as sub-contractors, and the Hajj flight approval disallows the use of subcontractors. However, it emerged during court proceedings that the plaintiffs had swiftly confirmed to HCoI that they were "service providers," a distinction accepted by the committee.

Secondly, SpiceJet alleged that HCoI had deemed one of the plaintiffs unsuitable for Hajj operations because of involvement with US carrier Dynamic Airways (since rebranded as Eastern Airlines), which had a poor record involving Hajj flights, specifically Air India (AI, Delhi International) Hajj operations in 2014. Again, the plaintiffs immediately met with the chairman of HCoI to refute the allegation. The chairman accepted the rebuttal. Nonetheless, SpiceJet persisted with the cancellation, citing regulatory advice.

"(SpiceJet was) riding piggy back on efforts of the plaintiffs," Krishna's ruling reads. "The defendant availed the plaintiffs' manpower, time, expertise, goodwill, reputation and network in India, Saudi Arabia and UAE to garner all possible benefits by conducting Hajj charter operations in an area where the defendant had not been able to achieve any success."

Counsel for the airline told the court that the agreements entered into earlier in the year were not legally binding. They said that the plaintiffs had grossly misrepresented their credibility and acted dishonestly to induce them into signing the letter of agreement and engagement agreement.

Court finds in favour of Aerocare

In her ruling, Krishna said she had to determine several matters, including whether a legally binding contract had come into existence. If so, did the purported HCoI advice nullify the contract? Did the plaintiffs provide services to SpiceJet? Were the plaintiffs able to fulfil the engagement agreements' terms, and if so, are damages and interest due?

"Not only from the language of the letter of intent, but from the acts of the parties, there is not an iota of doubt that the parties had entered into a binding contract," the judge ruled, detailing a sequential list of events, interactions, and outcomes between the start of 2016 and SpiceJet cancelling the agreement.

"It has to be held that letter of intent was not merely intent but in fact was a contract under which the services were provided by the plaintiff to which it is entitled to be reimbursed or paid," Krishna said.

The judge was equally dismissive of claims concerning subcontracting and unfitness to participate in Hajj operations. "(SpiceJet) chose not to enter into the agreements despite there being no legal or contractual impediment," and the claims were "used as a ploy to avoid entering into the agreements with the sole intent to avoid payment to the plaintiffs for the services rendered by them."

In addition to the payout of INR317 million damages, the judge ordered SpiceJet to pay 8% per annum interest from the date of the claim (August 2016) until the damages award payment date.