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Canadian aircraft maker De Havilland wins $43 million claim against SpiceJet

De Havilland had sought termination of purchase agreement and payment of damages worth $42.9 million on part of SpiceJet. Court ruled in favour of aircraft maker, saying SpiceJet failed to abide by pact

twitter-logoBusinessToday.In | March 7, 2021 | Updated 11:54 IST
Canadian aircraft maker De Havilland wins $43 million claim against SpiceJet
The UK court also dismissed SpiceJet's counterclaim for damages

A UK court has ruled that Canadian aircraft maker De Havilland is entitled to seek damages worth $42.9 million for a contractual dispute with Indian carrier SpiceJet. The Canadian company had dragged SpiceJet to court for failing to make pre-delivery payments for ordering 25 Dash 8-400 aircraft. The court also dismissed SpiceJet's counterclaim for damages, a statement from Brick Court Chambers, UK, said.

Seeking $42.9 million in liquidated damages, De Havilland had also requested the court to terminate the purchase agreement. The court ruled in favour of the aircraft maker, saying SpiceJet failed to abide by the agreement and was liable to pay the said damages.

The airline may also appeal against the UK court order within the timeframe provided by the court. Notably, a separate application has to be filed in Indian courts to implement the UK court order. A SpiceJet spokesperson said: "The same court has allowed appeal against the order and we shall be doing the same within the timeframe provided by the court".

Also read: Ajay Singh keen on Air India? SpiceJet promoter shows interest in carrier

Under the Purchase Agreement, SpiceJet was required to make advance pre-delivery payments for each aircraft a number of months before its scheduled delivery month. "If SpiceJet defaulted on the PDPs, De Havilland was entitled to terminate the relevant aircraft and claim liquidated damages under Article 15.4(c) ("Liquidated Damages Provision"). If De Havilland lawfully terminated a total of four or more Aircraft, it was entitled to terminate the entire purchase agreement," Brick Court Chambers, UK, stated.

In January 2020, De Havilland terminated two sets of aircraft upon SpiceJet's failure to pay the relevant pre-delivery payments. De Havilland terminated the entire purchase agreement in February 2020 and commenced proceedings for liquidated damages and declaratory relief.

SpiceJet relied on three defences -- a change order to the purchase agreement, which suspended the scheduled delivery months of 16 aircraft; a pact forming part of the purchase agreement contained an enforceable obligation on De Havilland to provide "finance assistance" to SpiceJet; and that the liquidated damages clause was an unenforceable penalty. After a two-day hearing before Sir Michael Burton GBE, the Commercial Court rejected each of SpiceJet's three defences.

SpiceJet has contended that it was inappropriate to decide whether the liquidated damages provision was penal on a summary basis, arguing that disclosure from De Havilland was necessary in relation to matters of factual matrix, evidence as to the loss in fact suffered by De Havilland, and evidence as to how it would quantify the maximum conceivable loss it might have suffered in relation to each aircraft.

Also read: SpiceJet to launch 24 new domestic flights this month

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