Can Airports Economic Regulatory Authority Determine Tariffs For Ground & Cargo Handling Services At Airports? Supreme Court To Decide

The Supreme Court on Thursday (September 19) heard the challenge to the decision of Telecom Disputes Settlement and Appellate Tribunal which ruled that Ground Handling Services and Cargo Handling Services would not be considered as 'Aeronautical Services' and cannot be subject to the tariff determined by Airports Economic Regulatory Authority (AERA).

The bench led by CJI DY Chandrachud comprising Justices JB Pardiwala and Manoj Misra  was hearing a challenge to the decision of Telecom Disputes Settlement and Appellate Tribunal which held that Airports Economic Regulatory Authority (AERA) does not have powers to impose tariffs on Ground Handling Services (GHS) and Cargo Handling Services (CHS) conducted by Specific City Airport handling companies  (like Delhi / Mumbai International Airport Limited) or their contractors. 

The Tribunal also held that under the AERA Act 2008, GHS and CHS are to be considered as 'Non-Aeronautical Services' and thus beyond the tariff imposition powers of AERA.

The AERA, the appellants before the Top Court, have relied upon S.13(1)(a)(iv) and (v) of the 2008 Act which states powers to determine tariffs for aeronautical services into consideration - economic and viable operation of major airport and revenue received from services other than the aeronautical services. 

Additional Solicitor General of India N Venkataraman made arguments for the AERA yesterday. The hearing will continue another day.

What Are The Facts Leading Up To The Present Challenge? 

Delhi International Airport Limited (DIAL) had entered into a contract with Airport Authority of India (AAI) for Operation, Management and Development (OMDA) of Indira Gandhi International Airport (IGI) in 2006. Another agreement was entered into with the Union in April 2006- 'State Support Agreement' (SSA) and by virtue of this agreement, Government of India has laid down principles for tariff fixation. Similar agreements were entered with the Mumbai International Airport Limited (MIAL). 

As per the OMDA, DIAL and its concessionaires were free to fix charges and float a contract for non-aeronautical services. However, as per two communications issued on 17.03.2021 and 18.05.2021 by AERA, if the Ground Handling Services (GHS) and Cargo Handling Services (CHS) are done by this appellant then it is Non-Aeronautical Services and the charges collected thereunder are known as Non-Aeronautical charges, whereas, if the aforesaid two services - GHS and CHS, if done through the contractor then these services are Aeronautical Services and the charges collected or the revenue generated by these two services are known as Aeronautical Charges. 

The impugned order dated January 13, 2023 by the Telecom Disputes Settlement and Appellate Tribunal held that GHS and CHS were to be construed as Non-Aeronautical services irrespective of them

being provided by DIAL/MIAL or third party concessionaires/Independent Service Providers (ISPs).

It further stuck down the impugned communications by AERA observing : 

"Consequently, the said communications dated 17.03.2021 and 18.05.2021 are bad in law and thus cannot be sustained. We hold that AERA has no jurisdiction to determine tariff of Cargo Handling Services & Ground Handling Services provided by MIAL or third-party concessionaires/ Independent Service Providers (ISPs). MIAL shall be entitled to determine the tariff/charges for Cargo Handling Services & Ground Handling Services provided at Mumbai Airport by itself or through third party concessionaires/Independent Service Providers (ISPs)."

The AERA however took umbrage to the subsequently enacted AERA Act of 2008 under S.13(1)(a) which states that the AERA shall have the authority to determine the tariff for 'aeronautical services' taking into consideration. AERA contended that GHS and CHS are to be considered as aeronautical services. 

The tribunal rejected the above contention by observing that  "AERA Act, 2008 fully respects and recognizes the concession offered by the Central Government by the virtue of agreements (like OMDA & SSA). Under the OMDA & SSA, once the CHS & GHS are non-aeronautical even after AERA Act, 2008 came into force, appellants have power to determine the charges for CHS & GHS." 

Referring to S. 13(1)(a)(vi), the Tribunal held that the 2008 Act does not dissolve the earlier concessions granted by the Central Government " in any agreement or memorandum of understanding or otherwise" . In addition, it reiterated that GHS and CHS were non-aeronautical services and would be outside the scope of S.13. 

"In fact, by virtue of this subsequently enacted law (i.e- AERA Act, 2008) maintains the concession given by the Central Government through the agreements as per Sec.13(1)(a)(vi) of AERA Act, 2008 therefore CHS & GHS which are Non-Aeronautical Services as per concession offered by Central Government by virtue of Schedule 6 of the OMDA remains as it is."

"The AERA Act,2008 was never intended to usurp the earlier legally binding contractual agreements, which were entered into AAI & DIAL through OMDA & supported by Central Government through SSA, hence, the concession accorded by the Central Government has to be taken into account by AERA, which is clearly a duty incumbent upon it as per the contents of Section 13 (1) (a) (vi) of AERA Act, 2008." 

The hearing will continue.

Case Details : AIRPORTS ECONOMIC REGULATORY AUTHORITY OF INDIA vs. DELHI INTERNATIONAL AIRPORT LTD.| C.A. No. 003098 - 003099 / 2023 and connected matters