Sky One Airways Pvt. Ltd. v. Nayan Arun Jagjivan & Ors.

What happened

On 4 April 2026 Sky One Airways Private Limited, the petitioner, signed a term sheet with the selling shareholders (the first to third respondents) and Heligo Charters (the fourth respondent) at an enterprise value of ₹25 crore, and on 9 April 2026 it signed an Inter-Corporate Loan Agreement with Heligo for a facility of up to ₹50 crore, which has no arbitration clause and gives exclusive jurisdiction to the courts at New Delhi. The term sheet was restructured on 9 May 2026: the price for 100% of Heligo's share capital was ₹5 crore, payable as ₹47.50 lakh on signing against 9.5% of the shares, ₹52.50 lakh on completion of due diligence or the thirtieth day, whichever is earlier, against another 10.5%, and ₹4 crore within seven working days after completion of the pre-conditions, with Mumbai as the seat of arbitration. An addendum of the same date recorded Heligo's liabilities at ₹197.07 crore, including trade payables of ₹88.82 crore, required the petitioner to infuse ₹20 crore in stages (the last ₹16 crore after DGCA and Ministry of Civil Aviation approval) and another ₹20 crore within 30 business days subject to the pre-conditions in clause 3(e), and required creditor confirmations from the sellers. The petitioner took 58,81,051 shares (9.5%) for ₹47.50 lakh under a share transfer agreement of 7 May 2026, and the sellers deposited 4,00,12,182 equity shares in an escrow account, while other shares were not deposited. The petitioner paid ₹5.67 crore on 10 April, ₹10 crore on 21 May, ₹2.92 crore on 5 June and ₹4.86 crore on 21 July 2026, ₹23,45,28,000 in all, which it said was performance of the acquisition and which the respondents said was loan drawdowns. On 16 August 2026 Heligo issued a notice of material breach, repudiatory non-performance and termination, citing the petitioner's failure to fund, and demanded release of the escrowed shares; on 20 August 2026 it asked the escrow agent to maintain the status quo; and on 25 August 2026 the petitioner refused to accept the termination and said it was ready to perform. The petitioner sought, under section 9, ad-interim and interim orders restraining dealings in the shares and in Heligo's share capital, board, aircraft, permits, contracts and borrowings, and a direction to deposit the balance shares in escrow, pending arbitration to seek specific performance.

Questions before the court

• Is a buyer under a binding but conditional term sheet entitled under section 9 to restrain the sellers and the target company from dealing with the shares and the company's assets pending arbitration, when its own instalment is unpaid and the advances it relies on are disputed?

Why the court ruled this way

The Court held that the term sheet was binding, because clause 3(l) calls it the final, complete and binding understanding, but that completion of the acquisition still depended on due diligence, regulatory approvals, escrow and other pre-conditions and on definitive agreements that were never signed (paragraphs 27–28). It rejected the buyer's case that its contribution was limited to ₹20 crore, as the addendum separately required another ₹20 crore, and equally rejected the sellers' case that all of ₹40 crore or ₹88 crore was unconditionally payable, since the documents list specified infusions and stages and make the second ₹20 crore subject to the pre-conditions (paragraphs 29–31). The ₹23.45 crore was not shown to be purchase consideration: the first payment of ₹5.67 crore was made the day after the loan agreement and a month before the May term sheet, the petitioner's e-mail of 20 July 2026 called ₹5 crore another tranche under the loan agreement, and its own draft of 8 August 2026 described the sum as a loan, although clause 3(f) shows that the documents were connected (paragraphs 32–36). The ₹52.50 lakh instalment fell due on the earlier alternative date, the thirtieth day, was not shown to have been paid before the termination notice, and could not be replaced by amounts paid under another contract, and a later offer to deposit it did not show readiness and willingness (paragraphs 37–38 and 50–51). The sellers' alleged failures on due diligence, regulatory steps, creditor confirmations and operational transition are disputed facts, but do not answer the unpaid instalment (paragraphs 39–43 and 57). Clause 3(m) has no unilateral termination right, and the Court did not decide whether the notice of 16 August 2026 validly ended the transaction, but "loss of confidence" alone is not a ground (paragraphs 41 and 54–55). A draft agreement circulated by the buyer is not an admission by the target (paragraph 44). The prayers were far wider than preserving the escrowed shares and would give the buyer control over Heligo's operations and have the court manage its affairs, and the right to immediate completion had not reached that stage (paragraphs 46, 52, 56 and 59). The demand of 16 August 2026 for release of the shares had given rise to a genuine apprehension, but Heligo's request of 20 August 2026 to the escrow agent to keep the shares unchanged and its readiness to return ₹23.45 crore and ₹47.50 lakh meant there was no immediate threat that justified the restraints, and a mandatory direction on shares whose status was disputed was not warranted (paragraphs 45, 47–48 and 59).

Controlling point

Interim protection under section 9 to preserve a share acquisition is not available where the applicant has not shown performance of its own payment obligations, the advances relied on are loans under a separate agreement, the immediate threat to the escrowed shares has receded, and the reliefs would put the target company's affairs under the court's control.

Order and next steps

The Court dismissed the petition under section 9, clarified that its observations are confined to the consideration of that petition, left the parties free to seek interim or protective relief from the arbitral tribunal under the applicable arbitration agreements, kept all contentions open, disposed of the petition and made no order as to costs.

Practical implications

A buyer under a term sheet that is binding but conditional should pay each instalment by its stated date, keep loan advances distinct from purchase consideration in the documents and correspondence, and tailor any section 9 application to the specific asset at risk, and may go to the arbitral tribunal for interim protection.

Limits of this ruling

• The findings are prima facie and were made for the section 9 petition only: the Court did not decide whether the notice of 16 August 2026 validly terminated the transaction, whether the sellers performed their pre-conditions, or the claim for specific performance, which are for the arbitral tribunal. It did not treat the alleged late payment of the first ₹47.50 lakh as decisive, as the documents on that point were inconsistent, and it decided no dispute under the loan agreement, which has no arbitration clause and provides for the courts at New Delhi.