New Delhi: The Rs. 2,300-crore deal for the takeover of Air Sahara by India's largest private airline Jet Airways fell through late on Wednesday.

This follows the failure of Jet Chairman and Managing Director Naresh Goyal to secure clearance from the Directorate-General of Civil Aviation required for joining the Board of Air Sahara.

Despite Sahara's offer to extend the deadline for the deal by 15 days, Jet failed to respond. As a result, management control of Air Sahara will be restored to the Sahara group. — PTI

New Delhi Special Correspondent reports:

Earlier, addressing a hurriedly convened press conference here, Air Sahara president Alok Sharma said: "From Thursday, we are going to run our airline as if there had not been any deal. It is our firm belief that we will be able to run the airline as we have been doing over the past 13 years," he said.

Record turnover

Mr. Sharma expressed confidence that Air Sahara would be revived by its own management with impressive passenger load factors. Maintaining that the private carrier never faced any financial problem, he said it posted profits over the past three years, recording a turnover of around Rs. 1,700 crore each year. The market share of Sahara was 12 per cent in January this year, growing by six per cent.

In his first public comments, Mr. Sharma said Air Sahara was not ready to reconsider its evaluation pegged at Rs. 2,300 crore as Jet Airways reportedly wanted to reduce it by 20 per cent. However, he refused to comment on legal matters.

"We had made an offer for a possible extension of deadline, which is still available with Jet. Our offer of four members on the Board is also available," Mr. Sharma told reporters.

Jet had demanded the appointment of five members on the Air Sahara Board. While four secured official clearance, that of its Chairman Naresh Goyal is still pending with the Government. Mr. Sharma, however, said Sahara had not heard from Jet. Asked what was the reason for the delay, he said regulatory approvals held back the completion of the deal. "If there is no choice, then we will terminate it on technical grounds," he added.

"We have moved the Lucknow court, seeking to restrain Jet Airways from operating the escrow account, which currently has Rs. 1,500 crore," Mr. Sharma said.

Restraint on Jet

Earlier in the day, each of the private carriers took recourse to legal action. Developments took a surprising turn when Air Sahara moved a Lucknow court and got an interim order restraining Jet from withdrawing Rs. 500 crore from the escrow account. The freeze on the account is till June 23.

Jet moved the Bombay High Court seeking a similar restraint on Air Sahara, saying the conditions agreed upon such as transfer of infrastructure by June 21 had not been met. Hence, Air Sahara should not be allowed to operate the escrow account.

Air Sahara petitioned the Lucknow court, saying that Jet Airways terminated the takeover agreement and secured an interim stay on operation of escrow account till June 23. District and Sessions Judge Shiv Charan Singh also restrained ICICI Bank, where the account has been opened, not to make any payment to Jet Airways.

In his interim order Mr. Singh said: "It has been alleged on behalf of the petitioner that the opposite party [Jet] has terminated the contract, hence there is a dispute, for which arbitrator is to be appointed in due course." The court gave Jet time till June 23 to file objections to Sahara's contention on the deal.

The order came on a petition filed by Sahara India Commercial Corporation Ltd, holding company of Air Sahara, under Section 9 of the Arbitration and Conciliation Act.

While parking the entire money for the deal in the account, Jet had paid Rs. 500 crore against guarantees to Air Sahara in March and given an advance of Rs. 100 crore to Sahara without guarantees. Under the agreement, Air Sahara was entitled to claim Rs. 500 crore from the escrow agent only on completion of the takeover.

According to the deal, Jet maintained that Sahara had to repay Rs. 500 crore within seven days of termination of the agreement without any dispute.

Security clearance from the Union Home Ministry to Jet Airways chairman to head the board of the new corporate entity after Jet's acquisition of Sahara was yet to come. .

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