# DELHI INTERNATIONAL AIRPORT LTD v. AIRPORT ECONOMIC REGULATORY AUTHORITY OF INDIA

- **Citation:** [2022] 11 S.C.R. 869
- **Court:** Supreme Court of India
- **Decided:** 2022-07-11
- **Case number:** Civil Appeal No.8378 of 2018
- **Bench:** Sanjay Kishan Kaul, M.M. Sundresh
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/delhi-international-airport-ltd-v-airport-economic-regulatory-authority-of-india-35704
- **Pages:** 54

## Headnote

Airports Economic Regulatory Authority of India Act, 2008 -
ss.2(a) and 13(1)(a) - Privatisation of airports - Contractual and
Regulatory Framework - Tariff and other charges for aeronautical
services rendered at airports - Determination of - Revenue sharing
formula - Judicial Review qua decision of a regulatory body - Scope
- Joint Venture agreement between GMR Consortium and Airports
Authority of India (AAI) for Delhi International Airport Limited
(DIAL), and on similar pattern between GVK Consortium and AAI
for Mumbai International Airport Limited (MIAL) - AAI holding 26
per cent shareholding in each of the JVs - DIAL and MIAL entered
into Operation, Management and Development Agreement
('OMDA') with AAI and executed other project agreements including
State Support Agreement ('SSA') - Airport Operator Agreement
signed - DIAL and MIAL handed over management of respective
airports in Delhi and Mumbai - DIAL and MIAL both broadly earn
their revenue from two sources, viz., Aeronautical and Nonaeronautical - While they are free to fix charges towards the latter,
the former component is controlled by the Airports Economic
Regulatory Authority of India (AERA), which regulates tariff and
other charges for aeronautical services rendered at airports -
Dispute over different aspects of tariff fixation, viz. treatment of
Fuel Throughput Charges (FTC); calculation of Hypothetical
Regulatory Asset Base (HRAB); revenue from Disallowed Area;
calculation of tax for determining Target Revenue; Development
Fee (DF) and levy of User Development Fee (UDF) - Held: It would
not be fair to examine these aspects under the microscope - Different
aspects towards determination of Project Cost were examined by
AERA, and AERA carried out its responsibility while granting a little
leeway for the pioneering effort in an untested field in the country
- It does not really lie with this Court to superimpose a view which
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[2022] 11 S.C.R.
was not found feasible in the given conspectus of the large number
of reports and documents before the AERA as well as the TDSAT -
What is required to be seen by this Court is that the readings are
reasonably supported by evidence as judicial review is really not
concerned with matters of economic policy and the endeavour
certainly cannot be to substitute its view for that of the legislature
or to supplant the view of the expert body - Moreover, in the given
factual scenario there is something more which is required to be
addressed - Before the complete legislative structure was set in place,
operations were proceeded on the understanding of the agreement
between the parties and the legislative intent is also apparent -
This provides for due honour and consideration being given to the
aforesaid intent as per provisions of s.13 of the Act - The objective
is that all parties who have operated in what may be called a
pioneering effort in the field of civil aviation in India should not be
taken by surprise affecting their commercial viability as it would
discourage private participation in such economic activities
perceived to be essential by the Government - Clause (vi) of subsection (1) of s.13 of the Act clearly stipulates that in determination
of tariff for aeronautical services, one of the considerations, is
concession offered by Central Government in any agreement or
memorandum of understanding or otherwise - Thus, the principle
that legislative intent must prevail over any prior agreement would
not really apply in the present scenario as the legislative intent itself
incorporates and requires prior agreements to be taken into
consideration albeit along with certain other parameters /
requirements - All aspects in the appeals and cross-appeals, except
one aspect which arose from terminology and its definition, rejected
- Impugned order accordingly modified to that extent - Appeal from
Regulatory Authority.
Contract - Interpretation of - Plain construction - Held: There
is no reason

## Text

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869
869
 [2022] 11 S.C.R. 869
DELHI INTERNATIONAL AIRPORT LTD.
v.
AIRPORT ECONOMIC REGULATORY AUTHORITY OF INDIA
& ORS.
(Civil Appeal No.8378 of 2018)
JULY 11, 2022
[SANJAY KISHAN KAUL AND M.M. SUNDRESH, JJ.]
Airports Economic Regulatory Authority of India Act, 2008 -
ss.2(a) and 13(1)(a) - Privatisation of airports - Contractual and
Regulatory Framework - Tariff and other charges for aeronautical
services rendered at airports - Determination of - Revenue sharing
formula - Judicial Review qua decision of a regulatory body - Scope
- Joint Venture agreement between GMR Consortium and Airports
Authority of India (AAI) for Delhi International Airport Limited
(DIAL), and on similar pattern between GVK Consortium and AAI
for Mumbai International Airport Limited (MIAL) - AAI holding 26
per cent shareholding in each of the JVs - DIAL and MIAL entered
into Operation, Management and Development Agreement
('OMDA') with AAI and executed other project agreements including
State Support Agreement ('SSA') - Airport Operator Agreement
signed - DIAL and MIAL handed over management of respective
airports in Delhi and Mumbai - DIAL and MIAL both broadly earn
their revenue from two sources, viz., Aeronautical and Nonaeronautical - While they are free to fix charges towards the latter,
the former component is controlled by the Airports Economic
Regulatory Authority of India (AERA), which regulates tariff and
other charges for aeronautical services rendered at airports -
Dispute over different aspects of tariff fixation, viz. treatment of
Fuel Throughput Charges (FTC); calculation of Hypothetical
Regulatory Asset Base (HRAB); revenue from Disallowed Area;
calculation of tax for determining Target Revenue; Development
Fee (DF) and levy of User Development Fee (UDF) - Held: It would
not be fair to examine these aspects under the microscope - Different
aspects towards determination of Project Cost were examined by
AERA, and AERA carried out its responsibility while granting a little
leeway for the pioneering effort in an untested field in the country
- It does not really lie with this Court to superimpose a view which
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SUPREME COURT REPORTS
[2022] 11 S.C.R.
was not found feasible in the given conspectus of the large number
of reports and documents before the AERA as well as the TDSAT -
What is required to be seen by this Court is that the readings are
reasonably supported by evidence as judicial review is really not
concerned with matters of economic policy and the endeavour
certainly cannot be to substitute its view for that of the legislature
or to supplant the view of the expert body - Moreover, in the given
factual scenario there is something more which is required to be
addressed - Before the complete legislative structure was set in place,
operations were proceeded on the understanding of the agreement
between the parties and the legislative intent is also apparent -
This provides for due honour and consideration being given to the
aforesaid intent as per provisions of s.13 of the Act - The objective
is that all parties who have operated in what may be called a
pioneering effort in the field of civil aviation in India should not be
taken by surprise affecting their commercial viability as it would
discourage private participation in such economic activities
perceived to be essential by the Government - Clause (vi) of subsection (1) of s.13 of the Act clearly stipulates that in determination
of tariff for aeronautical services, one of the considerations, is
concession offered by Central Government in any agreement or
memorandum of understanding or otherwise - Thus, the principle
that legislative intent must prevail over any prior agreement would
not really apply in the present scenario as the legislative intent itself
incorporates and requires prior agreements to be taken into
consideration albeit along with certain other parameters /
requirements - All aspects in the appeals and cross-appeals, except
one aspect which arose from terminology and its definition, rejected
- Impugned order accordingly modified to that extent - Appeal from
Regulatory Authority.
Contract - Interpretation of - Plain construction - Held: There
is no reason why explicit grammatical connotation should not be
applied to a contract unless it results in some absurdity - On facts,
the contract was negotiated by experts and they were expected to
know all the ramifications of the language they use.
Doctrines / Principles - Principle of Reddendo Singula Singulis
-Sentence - Complex sentence - It is only when a complex sentence
has more than one subject and more than one object that a
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construction may be required to render each to each by reading the
provision distributively.
Nabha Power Ltd. (NPL) v. Punjab State Power
Corporation Ltd. (PSPCL) & Anr. (2018) 11 SCC 508
- distinguished.
Shri Sitaram Sugar Company & Anr. v. Union of India
& Ors. (1990) 3 SCC 223: [1990] 1 SCR 909 -
followed.
Modern Dental College and Research Centre v. State
of M.P. (2016) 7 SCC 353 and Akshay N. Patel v.
Reserve Bank of India & Anr. (2022) 3 SCC 694 -
relied on.
Rajendra Diwan v. Pradeep Kumar Ranibala & Anr.
(2019) 20 SCC 143 and Consumer Online Foundation
& Ors. v. Union of India & Ors. (2011) 5 SCC 360 :
[2011] 5 SCR 911 - referred to.
 Case Law Reference
(2019) 20 SCC 143
referred to
Para 14
(2016) 7 SCC 353
relied on
Para 15
(2022) 3 SCC 694
relied on
Para 16
[1990] 1 SCR 909
followed
Para 17
(2018) 11 SCC 508
distinguished
Para 53
[2011] 5 SCR 911
referred to
Para 120
CIVIL APPELLATE JURISDICTION : Civil Appeal No.8378
of 2018.
From the Judgment and Order dated 23.04.2018 of the Telecom
Disputes Settlement & Appellate Tribunal, New Delhi in AERA Appeal
No.10 of 2012.
With
Civil Appeal Nos.10902/2018, 6658-6659/2019, 7331 and 7334/
2021, 5401 and 5738/2019, 3675/2020, 145/2021.
DELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMIC
REGULATORY AUTHORITY OF INDIA
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SUPREME COURT REPORTS
[2022] 11 S.C.R.
Arvind Datar, Sajan Poovayya, Dr. Abhishek Manu Singhvi,
Krishnan Venugopal, Sr. Advs., Hemant Sahai, Ms. Amrita Narayan,
Ashwin Rakesh, Ms. Nikita Bhardwaj, Ms. Manisha Handa, Rajul
Shrivastav, Mohit D. Ram, Ms. Milanka Chaudhury, Ms. Naina Dubey,
Ms. Abhilasha Sharma, Ravneet Singh, Gaurav Ray, Ms. Deepanshi
Ishar, Ms. Pallavi Srivastava, Alok Tripathi, Buddy Ranganadhan, Ms.
Nishtha Kumar, Prantar Basu Chaudhury, Sahil Tagotra, Ms. Neelam
Rathore, Lovekesh Aggarwal, Nikilesh Ramachandran, Shubham Seth,
Ms. Sanya Dhingra, Mrinal Chaudhary, Alok Dhir, Gaurav Singh, Ritesh
Kumar, Karan Batura, Nitin Dahiya, Mohit Kumar, Ravi Kumar Tomar,
Ms. Ashly Cherian, Ms. Harshita Agarwal, Anil Kathuria, Ms. Renu
Grover, Dr. Kedar Nath Tripathy, Balaji Srinivasan, Ms. Pallavi Sengupta,
Sheshadri Sekhar Ray, Pranay Ranjan, Apoorv Kurup, Ritwiz Rishabh,
Amith J., Amrish Kumar, B. V. Balaram Das, A. K. Sharma, Arjun
Mahajan, Sumit R. Sharma, Raghvendra Budholiya, Advs. for the
appearing parties.
The Judgment of the Court was delivered by
SANJAY KISHAN KAUL, J.
1. The economic liberalisation of the 1990s brought in many regime
changes. One of the sectors which required a re-look was civil aviation
infrastructure. Modernisation of airports all over the world required India
to also step up in its efforts towards the development of international
level airports. One can say with some pride that this modernisation effort
has raised the status of the airports in India not only to an international
level but has also resulted in them being rated as amongst the best in the
world.
2. In furtherance of the modernisation effort, the Government of
India introduced the Airport Infrastructure Policy in 1997 with the objective
of augmenting India's airport infrastructure and with a view towards its
modernisation, development and upgradation. The policy promoted private
sector participation by way of Public Private Partnership Model and in
furtherance of the same, the Airports Authority of India Act, 1994
(hereinafter referred to as the 'AAI Act') was amended with effect
from 01.07.2004 to enable the setting up of private airports and leasing
of existing airports to private operators.
3. A new policy on airport infrastructure was introduced in 2002.
The Airports Authority of India (for short 'AAI') initiated a competitive
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bidding process, which culminated into the award for the operation,
management and development of the Indira Gandhi International Airport
(for short 'IGIA') and Chhatrapati Shivaji Maharaj International Airport
(for short 'CSIA') to consortiums led by GMR and GVK respectively.
4. A Joint Venture (for short 'JV') agreement was executed
between the GMR Consortium and the AAI for Delhi International Airport
Limited (for short 'DIAL'), and on similar pattern between the GVK
Consortium and the AAI for Mumbai International Airport Limited (for
short 'MIAL'). These agreements were executed simultaneously on
the same date with the AAI holding 26 per cent shareholding in each of
the JVs. DIAL and MIAL thereafter entered into the Operation,
Management and Development Agreement (for short 'OMDA') dated
04.04.2006 with AAI and executed other project agreements including
the State Support Agreement (for short 'SSA') dated 26.04.2006. The
fee sharing was, however, different in view of economic logistics and,
thus, DIAL was required to pay AAI an annual fee of 45.99 per cent of
the revenue received by DIAL while MIAL was required to pay AAI an
annual fee of 38.7 per cent of the revenue received by MIAL. An Airport
Operator Agreement was signed on 01.05.2006 and in pursuance of the
same, DIAL and MIAL were handed over management of the respective
airports in Delhi and Mumbai and operations commenced on 03.05.2006.
For the purpose of this judgment, DIAL and MIAL shall collectively
be referred to as "Airport Operators".
5. It was only after a hiatus period of about three years that the
Airports Economic Regulatory Authority of India Act (hereinafter referred
to 'said Act') came into force on 01.01.2009 with the exception of
Chapters III and VI, which were made effective from 01.09.2009.
Contractual and Regulatory Framework:
6. In order to appreciate the controversy being dealt with by us, it
is necessary to appreciate the contractual and regulatory framework.
DIAL and MIAL both broadly earn their revenue from two sources,
viz., Aeronautical and Non-aeronautical. While they are free to fix charges
towards the latter, the former component is controlled by the Airports
Economic Regulatory Authority of India (for short 'AERA/the Authority'),
which regulates tariff and other charges for aeronautical services
rendered at airports. Aeronautical services are defined in Section 2(a)
of the said Act and are enumerated in Schedule 5 of the OMDA. The
DELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMIC
REGULATORY AUTHORITY OF INDIA [SANJAY KISHAN KAUL, J.]
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calculation of tariff was to be carried out in accordance with Section 13
of the said Act, which inter alia provided that the determination of tariff
had to be made in accordance with the concession offered by the Central
Government in any agreement or Memorandum of Understanding. This
was obviously with the objective of having continuity of process in
protecting the terms on which the project began.
7. It is not in dispute that the SSA and the OMDA are in the
nature of 'concessions' offered by the Central Government. As per
Schedule I of the SSA, the AERA was required to observe certain
principles in determining tariff, which include having regard to following
an incentives based approach, adopting a consistent method of
determination, and recognising the need for DIAL and MIAL to generate
sufficient revenue and earn a reasonable return on their investment.
Schedule I of the SSA also contained the tariff determination formula
which was based on an Inflation - X Price Cap Model. The formula
contained multiple components which pertained to various aspects of
aeronautical assets and aeronautical services of DIAL and MIAL. From
these components, an element 'S' has to be subtracted, which reflects
30 per cent of the gross revenue generated by the JVC from Revenue
Share Assets (viz., non-aeronautical assets and assets required for
provision of aeronautical related services). This is known as the 'shared
till' or the 'hybrid till' model, as a portion of non-aeronautical revenue
surplus is used to cross-subsidize aeronautical costs. The objective
apparently was to ensure that at least a fixed percentage of the revenue
would flow to the authorities before different calculations are made.
This was in consideration for both land and other assets which were
handed over to DIAL and MIAL. The algebraic formulation for calculating
the Target Revenue (for short 'TR') as provided in Schedule 1 of the
SSA is reproduced below:
TRi = RBix WACCi + OMi + Di + Ti - Si
where TR = target revenue
RB = regulatory base pertaining to Aeronautical Assets and any
investments made for the performance of Reserved Activities
etc. which are owned by the JYC, after incorporating efficient
capitai expenditure but does not include capital work in progress
to the extent not capitalised in fixed assets. It is further clarified
that working capital shall not be included as part of regulatory
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base. It is further clarified that penalties and Liquidated Damages,
if any, levied as per the provisions of the OMDA would not be
allowed for capitalisation in the regulatory base. It is further clarified
that the Upfront Fee and any pre-operative expenses incurred by
the Successful Bidder towards bid preparation will not be allowed
to be capitalised in the regulatory base.
WACC = nominal post-tax weighted average cost of capital,
calculated using the marginal rate of corporate tax
OM = efficient operation and maintenance cost pertaining to
Aeronautical Services. It is clarified that penalties and Liquidated
Damages, if any, levied; as per provisions of "Provisions of the
OMDA would not be allowed as part of operation and maintenance
cost.
D = depreciation calculated in the manner as prescribed in Schedule
XIV of the Indian Companies Act, 1956. In the event, the
depreciation rates for certain assets are not available in the
aforesaid Act, then the depreciation rates as provided in the Income
Tax Act for such asset as converted to straight line method from
the written down value method will be considered. In the event,
such rates are not available in either of the Acts then depreciation
rates as per generally accepted Indian accounting standards may
be considered.
T = corporate taxes on earnings pertaining to Aeronautical
Services.
S = 30% of the gross revenue generated by the NC from the
"Revenue Share Assets". lbe costs in relation to such revenue
shall not be included while calculating Aeronautical Charges.
Revenue Share Assets" shall mean (a) Non-Aeronautical Assets;
and (b) assets required for provision of aeronautical related
services arising at the Airport and not considered in revenues
from Non-Aeronautical Assets (e.g. Public admission fee etc.)
i = time period (year) i
RBi= RBi-l - Di+ Ii
Where: RB0 for the first regulatory period would be the sum total
of (i) the Book Value of the Aeronautical Assets in the books of
the JVC and
DELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMIC
REGULATORY AUTHORITY OF INDIA [SANJAY KISHAN KAUL, J.]
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(ii) the hypothetical regulatory base computed using the then
prevailing tariff and the revenues, operation and maintenance cost,
corporate tax pertaining to Aeronautical Services at the Airport,
during the financial year preceding the date of such computation.
I= investment undertaken in the period.
8. In a nutshell, AERA is required to compute the tariff using the
formula and keeping in mind the principles listed in Schedule I. What
appears to be only an algebraic formulation was and is obviously capable
of generating controversy and interpretations which is what we face
today.
History of the litigation:
9.The belief in the requirement of specialised authority and
appellate tribunal gave rise to establishment of regulatory and judicial
fora for determination of any dispute forming subject matter of the field
in consonance with the said Act.
10. Although airport operations had commenced earlier, the First
Control Period commenced from 01.04.2009 for a period of five years,
i.e., up to 31.03.2014. AERA determined aeronautical tariffs for the
First Control Period with respect to DIAL on 20.04.2012 and for MIAL
on 15.01.2013 (referred to as the DIAL and MIAL Tariff Order
respectively). DIAL was aggrieved and it filed AERA Appeal No.10 of
2012 under Section 18(2) of the said Act challenging various decisions
taken by AERA in the DIAL Tariff Order. MIAL preferred a similar
appeal vide AERA Appeal No.4 of 2013. The history to these appeals is
what ought not to have been. This is more so as the operations of the
Airports were an important part of the economic agenda of governments
past and present. Over a period of three years from 2012 to 2015 various
benches of the erstwhile Airports Economic Regulatory Authority
Appellate Tribunal (for short 'AERAAT'), constituted under the said
Act considered various aspects but on account of the composition of the
Tribunal changing from time to time it never worked out. Finally, a
Notification was issued on 07.09.2015 whereby the Chairman and two
members of the National Consumer Disputes Redressal Commission
(for short 'NCDRC') were given additional charge to function as the
AERAAT. Once again, when the process of hearing was on, a
Notification was issued on 26.05.2017 by the Ministry of Finance notifying
that Part XIV of Chapter VI of the Finance Act, 2017 had come into
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force and the Telecom Disputes Settlement and Appellate Tribunal (for
short 'TDSAT') was designated as the appellate tribunal under the said
Act. Thus, the grievances of the parties were aggravated as half a decade
passed in this process. There was obviously an uncertainty created by
there being no quietus to the dispute. The scenario was such that tariff
determination took place even for the Second Control Period without
there being any finality to the First Control Period. This Court had to
step in and pass order dated 03.07.2017 in Civil Appeal No.8394/2017
filed by Air India Limited pertaining to tariff determination for the Second
Control Period, and the TDSAT was directed to conclude hearing for
the appeals filed by DIAL relating to the First Control Period within two
months from the date of the said order.
11. MIAL's endeavour for listing its appeal was not successful as
the TDSAT refused its request and commenced hearing DIAL's appeal
from August, 2017. This was predicated on the deadline of two months
fixed by this Court. However, TDSAT gave liberty to MIAL to make
submissions on important questions of law before concluding the hearing
for DIAL's appeal.
12. The TDSAT made its order dated 23.04.2018 with respect to
DIAL. There were four issues which survived and these were decided
vide order dated 15.11.2018 in an appeal preferred by MIAL. The
endeavour of MIAL to seek review for limited issue relating to
determination of Hypothetical Regulatory Asset Base was rejected on
17.01.2019. Apart from these, AERA Appeal No. 03 of 2013 and AERA
Appeal No. 05 of 2013 were also filed before the TDSAT wherein
imposition of Development Fee (for short 'DF') by DIAL and MIAL
respectively were challenged. AERA had allowed the said imposition of
DF and thus appeals were filed before the TDSAT. These came to be
decided by the TDSAT vide order dated 20.03.2020 and 16.07.2020
(for short 'DF orders') respectively for DIAL and MIAL wherein the
TDSAT agreed with the view taken by AERA. All these five orders
passed by the TDSAT are impugned before us in these Civil Appeals.
13. In the aforesaid appeals, Federation of Indian Airlines (for
short 'FIA'), Lufthansa German Airlines (for short 'Lufthansa') and
AERA are also before this Court as respondents in appeals filed by
DIAL and MIAL and there are appeals filed by FIA, Lufthansa and
others on similar issues in respect of the said impugned orders.
DELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMIC
REGULATORY AUTHORITY OF INDIA [SANJAY KISHAN KAUL, J.]
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Appeals from Regulatory Authority:
14. One may observe at this stage that in effect this Court has
been made a court of second appeal in similar matters arising out of
many such tribunals. This has resulted in a number of contentious matters
requiring consideration by this Court. The scenario is different from the
'SLP jurisdiction' where no re-appreciation of evidence is really required
unless extraordinary circumstances exist, while an appeal of this nature
stands on a different footing and is a continuation of the original
proceedings.1
15. This Court in Modern Dental College and Research Centre
v. State of M.P.2 has eloquently summarised the onset of the modern
regulatory era:
"87. Regulatory mechanism, or what is called regulatory
economics, is the order of the day. In the last 60-70 years, economic
policy of this country has travelled from laissez faire to mixed
economy to the present era of liberal economy with regulatory
regime. With the advent of mixed economy, there was
mushrooming of public sector and some of the key industries like
aviation, insurance, railways, electricity/power, telecommunication,
etc. were monopolized by the State. License/permit raj prevailed
during this period with strict control of the Government even in
respect of those industries where private sectors were allowed to
operate. However, Indian economy experienced major policy
changes in early 90s on LPG Model, i.e. liberalization, privatization
and globalization. With the onset of reforms to liberalize the Indian
economy, in July 1991, a new chapter has dawned for India. This
period of economic transition has had a tremendous impact on the
overall economic development of almost all major sectors of the
economy."
....
....
....
....
....
....
89. With the advent of globalization and liberalization, though the
market economy is restored, at the same time, it is also felt that
market economies should not exist in pure form. Some regulation
of the various industries is required rather than allowing selfregulation by market forces. This intervention through regulatory
1 Rajendra Diwan v. Pradeep Kumar Ranibala & Anr., (2019) 20 SCC 143 (Constitution
Bench).
2 (2016) 7 SCC 353.
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bodies, particularly in pricing, is considered necessary for the
welfare of the society and the economists point out that such
regulatory economy does not rob the character of a market
economy which still remains a market economy. Justification for
regulatory bodies even in such industries managed by private
sector lies in the welfare of people. Regulatory measures are felt
necessary to promote basic wellbeing for individuals in need. It is
because of this reason that we find regulatory bodies in all vital
industries like, insurance, electricity and power, telecommunications,
etc."
16. The contours of judicial review by this Court qua the decision
of a regulatory body have evolved. In Akshay N. Patel v. Reserve
Bank of India & Anr.3 a notification of the Reserve Bank of India
prohibiting the export of PPE kits during the Covid-19 pandemic was
assailed. It was observed therein that adelicate role is played by this
Court in reviewing the actions of independent regulatory bodies:
"64. .... In liberalized economies, regulatory mechanisms represent
democratic interests of setting the terms of operation for private
economic actors. This Court does not espouse shunning of judicial
review when actions of regulatory bodies are questioned. Rather,
it implores intelligent care in probing the bona fides of such action
and nuanced deference to their expertise in formulating regulations.
A casual invalidation of regulatory action in the garb of upholding
fundamental rights and freedoms, without a careful evaluation of
its objective of social and economic control, would harm the general
interests of the public."
17. The liberalised era from 1990s has seen enunciation of limits
of judicial intervention in such appeals from decision of regulators. A
Constitution Bench of this Court in Shri Sitaram Sugar Company &
Anr. v. Union of India & Ors.4 made some relevant observations to
emphasise that what is required to be seen by this Court is that the
readings are reasonably supported by evidence as judicial review is really
not concerned with matters of economic policy and the endeavour certainly
cannot be to substitute its view for that of the legislature or to supplant
the view of the expert body. The relevant observations are reproduced
hereunder:
3 (2022) 3 SCC 694.
4 (1990) 3 SCC 223.
DELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMIC
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"56. The court has neither the means nor the knowledge to reevaluate the factual basis of the impugned orders. The court, in
exercise of judicial review, is not concerned with the correctness
of the findings of fact on the basis of which the orders are made
so long as those findings are reasonably supported by evidence.
In the words of Justice Frankfurter of the U.S. Supreme Court in
Railroad Commission of Texas v. Rowan & Nichols Oil
Company [311 US 570, 575 : 85 L ed 358, 362] :
"Nothing in the Constitution warrants a rejection of these expert
conclusions. Nor, on the basis of intrinsic skills and equipment,
are the federal courts qualified to set their independent
judgment on such matters against that of the chosen State
authorities.... When we consider the limiting conditions of
litigation - the adaptability of the judicial process only to issues
definitely circumscribed and susceptible of being judged by
the techniques and criteria within the special competence of
lawyers - it is clear that the Due Process Clause does not
require the feel of the expert to the supplanted by an independent
view of judges on the conflicting testimony and prophecies
and impressions of expert witnesses".
This observation is of even greater significance in the absence of
a Due Process Clause.
57. Judicial review is not concerned with matters of economic
policy. The court does not substitute its judgment for that of the
legislature or its agents as to matters within the province of either.
The court does not supplant the "feel of the expert" by its own
views. When the legislature acts within the sphere of its authority
and delegates power to an agent, it may empower the agent to
make findings of fact which are conclusive provided such findings
satisfy the test of reasonableness. In all such cases, judicial inquiry
is confined to the question whether the findings of fact are
reasonably based on evidence and whether such findings are
consistent with the laws of the land. As stated by Jagannatha
Shetty, J. in Gupta Sugar Works [1987 Supp SCC 476, 481] :
"... the court does not act like a chartered accountant nor acts
like an income tax officer. The court is not concerned with any
individual case or any particular problem. The court only
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examines whether the price determined was with due regard
to considerations provided by the statute. And whether
extraneous matters have been excluded from determination."
58. Price fixation is not within the province of the courts. Judicial
function in respect of such matters is exhausted when there is
found to be a rational basis for the conclusions reached by the
concerned authority. As stated by Justice Cardozo in Mississippi
Valley Barge Line Company v. United States of America [292
US 282, 286-87 : 78 L ed 1260, 1265] :
"The structure of a rate schedule calls in peculiar measure for
the use of that enlightened judgment which the Commission by
training and experience is qualified to form.... It is not the
province of a court to absorb this function to itself.... The judicial
function is exhausted when there is found to be a rational basis
for the conclusions approved by the administrative body."
18. We may, however, add that in the given factual scenario in the
dispute before us there is something more which is required to be
addressed. Before the complete legislative structure was set in place,
operations were proceeded on the understanding of the agreement
between the parties and the legislative intent is also apparent. This
provides for due honour and consideration being given to the aforesaid
intent as per the provisions of Section 13 of the said Act. The objective
is that all parties who have operated in what may be called a pioneering
effort in the field of civil aviation in India should not be taken by surprise
affecting their commercial viability as it would discourage private
participation in such economic activities which have been perceived to
be essential by the Government. To that extent, we are inclined to consider
that some aspects of the agreements have pre-legislative features and,
thus, there is a requirement to look into them. Section 13 of the said Act
forming part of Chapter III deals with "Powers and Functions of the
Authority" and reads as under:
"CHAPTER III
POWERS AND FUNCTIONS OF THE AUTHORITY
(1) The Authority shall perform the following functions in respect
of major airports, namely:-
DELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMIC
REGULATORY AUTHORITY OF INDIA [SANJAY KISHAN KAUL, J.]
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(a) to determine the tariff for the aeronautical services taking into
consideration-
(i) the capital expenditure incurred and timely investment in
improvement of airport facilities;
(ii) the service provided, its quality and other relevant factors;
(iii) the cost for improving efficiency;
(iv) economic and viable operation of major airports;
(v) revenue received from services other than the aeronautical
services;
(vi) the concession offered by the Central Government in any
agreement or memorandum of understanding or otherwise;
(vii) any other factor which may be relevant for the purposes of
this Act:
Provided that different tariff structures may be determined for
different airports having regard to all or any of the above
considerations specified at sub-clauses (i) to (vii);
(b) to determine the amount of the development fees in respect of
major airports;
(c) to determine the amount of the passengers service fee levied
under rule 88 of the Aircraft Rules, 1937 made under the Aircraft
Act, 1934 (22 of 1934);
(d) to monitor the set performance standards relating to quality,
continuity and reliability of service as may be specified by the
Central Government or any authority authorised by it in this behalf;
(e) to call for such information as may be necessary to determine
the tariff under clause (a);
(f) to perform such other functions relating to tariff, as may be
entrusted to it by the Central Government or as may be necessary
to carry out the provisions of this Act.
(2) The Authority shall determine the tariff once in five years and
may if so considered appropriate and in public interest, amend,
from time to time during the said period of five years, the tariff so
determined.
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(3) While discharging its functions under sub-section (1) the
Authority shall not act against the interest of the sovereignty and
integrity of India, the security of the State, friendly relations with
foreign States, public order, decency or morality.
(4) The Authority shall ensure transparency while exercising its
powers and discharging its functions, inter alia,-
(a) by holding due consultations with all stake-holders with the
airport;
(b) by allowing all stake-holders to make their submissions to the
authority; and
(c) by making all decisions of the authority fully documented and
explained."
19. Clause (vi) of sub-section (1) of the said Act clearly stipulates
that in the determination of tariff for the aeronautical services, one of
the considerations, is the concession offered by the Central Government
in any agreement or memorandum of understanding or otherwise. Thus,
the principle that legislative intent must prevail over any prior agreement
would not really apply in the present scenario as the legislative intent
itself incorporates and requires the prior agreements to be taken into
consideration albeit along with certain other parameters/requirements.
20. We would now like to turn to the different aspects of tariff
fixation which have formed a debate before us and we consider it
appropriate to deal with them as per the aspects raised, which are really
common to the appeals in a larger perspective.
Treatment of Fuel Throughput Charges:
21. The fuel supply chain at the airport begins from entry of
Aviation Turbine Fuel (for short 'ATF') into the airport premises and
extends up to fuelling the aircraft. Fuel Throughput Charge (for short
'FTC') is a fee collected by the airport operators from Oil Marketing
Companies (for short 'OMCs') for providing fuel to the aircraft. If FTC
is treated as an aeronautical revenue, it would be covered within the TR
and in case it is treated as non-aeronautical revenue, only 30 per cent of
the fee recovered from FTC will be covered in the TR. Thus, the
controversy as it appears before this Court is whether FTC is a service
or an access fee and if FTC is a service, whether FTC falls within the
category of aeronautical services.
DELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMIC
REGULATORY AUTHORITY OF INDIA [SANJAY KISHAN KAUL, J.]
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22. The opinion of the AERA, in the DIAL tariff order dated
20.04.2012 is that the FTC should be treated as aeronautical revenue as
Section 2(a)(vi) of the said Act defines 'aeronautical service' to mean
any service provided "for supplying fuel to the aircraft at an airport."
Further, Entry 17 of Schedule 5 of the OMDA mentions "common hydrant
infrastructure for aircraft fuelling services by authorised providers" as
an aeronautical service, whereas fuel supply finds no mention in Schedule
6 of the OMDA which lists non-aeronautical services. FTC was, thus,
held to be a charge in respect of provision of an aeronautical service,
namely, supply of fuel to the aircraft and washence considered an
aeronautical charge, which is to be determined by the Authority under
Section 13(1)(a) of the said Act.
23. Another aspect considered by AERA in the MIAL tariff order
dated 15.01.2013 was that the mere establishment of common hydrant
infrastructure alone does not comprise any service unless the concerned
fuel hydrant infrastructure gets appropriate fuel into it. Since the entry
of fuel into the CSI Airport, Mumbai is entirely in the control of MIAL,
it was held that MIAL became a service provider in the chain of supply
of fuel to the aircraft. There is nothing in Schedule 6 of OMDA to indicate
that FTC is a non-aeronautical charge or revenue but on the other hand
Schedule 5 of OMDA clearly provides for aircraft fuelling services.
Entry 11 of Schedule 5 of OMDA states that "any other services deemed
to be necessary for the safe and efficient operation of the airport" means
provision of an aeronautical service, and Entry 17 of the said schedule
provides that the common hydrant infrastructure is an aeronautical
service. Thus, merely labelling it as "fuel concession fee" or any other
nomenclature does not change the nature of the aeronautical service
and as this part is provided by the Airport Operator, the revenues arising
from such aeronautical service in the hands of the Airport Operator are
reckoned as aeronautical revenues. SSA and OMDA clearly indicate
the intention of the Government to establish an independent regulator, so
it could not be said that the bidders were unaware that tariff determination
would be impacted in the future.
24. The relevant provisions to appreciate this reasoning read as
under:
Section 2(a)(vi) of the AERA Act:
"2. Definitions.-In this Act, unless the context otherwise
requires,-
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(a) "aeronautical service" means any service providedxxxx
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(vi) for supplying fuel to the aircraft at an airport; and"
....
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....
OMDA:
"CHAPTER I
DEFINITIONS AND INTERPRETATION
1.1 Definitions
In this Agreement, unless the context otherwise requires:
"Aeronautical Services" shall have the meaning assigned hereto
in Schedule 5 hereof."
....
....
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....
....
"SCHEDULE 5
AERONAUTICAL SERVICES
"Aeronautical Services" means the provision of the following
facilities and services:
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11. any other services deemed to be necessary for the safe and
efficient operation of the Airport.
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A more detailed list of the above facilities and services would
include the following:
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17. Common hydrant infrastructure for aircraft fuelling services
by authorised providers"
"SCHEDULE 6
NON-AERONAUTICAL SERVICES
"Non-Aeronautical Services" shall mean the following facilities
and services (including Part I and Part II):
DELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMIC
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Part I
1. Aircraft cleaning services
2. Airline Lounges
3. Cargo handling
4. Cargo terminals
5. General aviation services (other than those used for commercial
air transport services ferrying passengers or cargo or a combination
of both)
6. Ground handling services
7. Hangars
8. Heavy maintenance services for aircrafts
9. Observation terrace
Part II
10. Banks / ATM*
11. Bureaux de Change*
12. Business Centre*
13. Conference Centre*
14. Duty free sales
15. Flight catering services
16. Freight consolidators/forwarders or agents
17. General retail shops*
18. Hotels and Motels
19. Hotel reservation services
20. Line maintenance services
21. Locker rental
22. Logistic Centers*
23. Messenger services
24. Porter service
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25. Restaurants, bars and other refreshment facilities
26. Special Assistance Services
27. Tourist information services
28. Travel agency
29. Vehicle fuelling services
30. Vehicle rental
31. Vehicle parking
32. Vending machines
33. Warehouses*
34. Welcoming services
35. Other activities related to passenger services at the Airport, if
the same is a Non-Aeronautical Asset.
* These activities/ services can only be undertaken/ provided, if
the same are located within the terminal complex/cargo complex
and are primarily meant for catering the needs of passengers, air
traffic services and air transport services."
25. The aforesaid determination, not being favourable at all to
DIAL or MIAL, was assailed before the TDSAT. Insofar as the DIAL
tariff order dated 22.04.2018 is concerned, submissions of both DIAL
and MIAL were appreciated. MIAL submitted that revenue from
aeronautical services like cargo, ground handling and FTC must always
be treated as non-aeronautical revenue. It was further submitted that if
the service provider is DIAL, the revenue will be a fee for services but
once it outsources an aeronautical service, the fee for such outsourcing
should be treated as non-aeronautical revenue because in such a case,
DIAL is not rendering any service. This plea did not find favour with the
TDSAT, which held that even when the airport operator engages in
providing an aeronautical service through its servants or agents, the
service must be deemed to be one provided by the airport operator. The
colour of revenue from aeronautical service cannot get changed to that
of revenue from non-aeronautical service by an act of delegation or
leasing out by the concessionaire.