* IN THE HIGH COURT OF DELHI AT NEW DELHI #53 + W.P.(C) 8918/2009 % Date of decision: 26th August, 2009 RESOURCES OF AVIATION REDRESSAL ASSN. ..... Petitioner Through: Mr. Vinod Bobde, Sr. Adv. with Mr. Arunabh Chouwdhury, Mr. A.L. Das, Mr. Kashi Vishvesar, Advs. versus UOI & ORS. ..... Respondents Through: Mr. Gopal Subramanyam, Solicitor General, Mr. A.S. Chandhiok, Addl. Solicitor General with Ms. Sweta Kakkad, Advs. for Respondent No.1/UOI Ms. Anjana Gosain, Ms. S. Fatima, Adv. for Respondent No.2/AAI Dr. A.M. Singhvi, Sr. Adv. with Mr. Atul Sharma, Mr. Milanka Choudhary, Mr. Abhishek Sharma, Advs. for R-3/DIAL CORAM: HON'BLE THE CHIEF JUSTICE HON'BLE MR. JUSTICE MANMOHAN 1. Whether reporters of the local papers be allowed to see the judg- ment ? 2. To be referred to the Reporter or not ? 3. Whether the judgment should be reported in the Digest ? AJIT PRAKASH SHAH, CHIEF JUSTICE (oral) This petition is filed in public interest assailing the levy of airport development fee from outgoing passengers travelling from Indira Gandhi International Airport, New Delhi at the rate of Rs.200/- from domestic passengers and Rs.1300/- from international passengers for a period of three years. The development fee is being levied by the WP(C) No. 8918/2009 Page 1 of 27 respondent No.3 - Delhi International Airport Pvt. Ltd. (‘DIAL’ for short) with the prior approval of the Central Government under Section 22-A of The Airports Authority of India Act, 1994 (“the Act” for short). The petitioner is a society espousing the cause of air passengers embarking from Indira Gandhi International Airport, New Delhi. The Union of India is impleaded as respondent No.1. The respondent No.2 is the Airports Authority of India, a statutory authority constituted under section 3 of the Act. The respondent No.3 - DIAL is the lessee under section 12-A of the Act to whom the functions of operation, management, development, design, construction, upgradation, modernization, finance and management of Indira Gandhi International Airport, New Delhi have been granted exclusively by the respondent Nos. 1 and 2. The principal contention of the petitioner is that the impost is sans any authority of law and the respondent No.3 has no power or jurisdiction to levy or collect the airport development fee from outgoing passengers at both domestic and international airport. The levy and collection of airport development fee is thus ex-facie illegal and unconstitutional, being ultra vires Article 265 of the Constitution of India. 2. The challenge to the levy of airport development fee is based on the following three grounds: i) That the law authorizes only the Airports Authority of India to levy development fee at a rate prescribed by the Central Government and the said power cannot be sub-delegated WP(C) No. 8918/2009 Page 2 of 27 to any person including respondent No.3; ii) That the development fee is being levied although no additional service is being provided to the travelling public. The development fee is being appropriated by the respondent No.3 for the purposes which have no nexus with any service, much less any additional service being provided to the travelling public; and iii) That section 22-A empowers the Airports Authority of India to levy and collect a development fee “at the rate as may be prescribed”. The term “prescribed” is defined by section 2(n) of the Act as to mean “prescribed by rules made under this Act”. The rule making power is contained in section 41. Rules have not been notified by the Central Government and in the absence of such rules, the levy and collection of development fee is illegal. 3. Counter affidavits have been filed on behalf of the Union of India and Airports Authority of India as well as respondent No.3-DIAL contending, inter alia, that the grounds raised by the petitioner for impugning the levy of development fee are misconceived and unsustainable in law. The levy of airport development fee by the respondent No.3 with prior permission of the Central Government is expressly permitted by the provisions of section 12-A read with section 22-A of the Act. The permission was granted upon a careful consideration of the matter and upon being satisfied that the WP(C) No. 8918/2009 Page 3 of 27 respondent No.3, for performance of the requisite functions under the Operation, Management and Development Agreement (OMDA), must have viable resources. Upon the materials furnished by the respondent No.3 and after consultation with the Airports Authority of India, the Union of India was satisfied that adequate factual basis existed to grant permission to the respondent No.3 to levy a development fee in order to discharge the primary functions of upgradation, expansion, development as well as management which integral obligations were covenanted, both in the lease deed between the Airports Authority of India and respondent No.3, as well as in the OMDA. Furthermore, the approval has been granted subject to compliance by the respondent No.3 with the terms and conditions stated therein. The approval is time bound and has been granted for a limited period of 36 months with effect from 01.03.2009. The letter of permission also places an upper limit on the amount that may be collected by respondent No.3 as development fee. The petitioner has not challenged the approval granted by the Central Government vide its letter dated 9.2.2009. The element of quid pro quo is not essential for the levy under section 22-A as on a plain reading of section 22-A itself, it becomes clear that the levy is for the specific purposes mentioned in clauses (a), (b) and (c) thereof and the provision of services is not a prerequisite for exercise of power under section 22-A. The absence of rules under section 41 does not prevent the exercise of power under section 22A and the contention that the power under section 22-A cannot be exercised until rules are notified in terms of WP(C) No. 8918/2009 Page 4 of 27 section 41 is misplaced. 4. On behalf of the petitioner Mr. Vinod Bobde, learned senior counsel strenuously contended that a bare reading of the provisions of the Act makes it clear that no person or body other than the Airports Authority of India has the authority of law within the meaning of Article 265 of the Constitution to levy and collect the development fee. There is no provision in the Act empowering the Airports Authority of India to further delegate the power to levy and collect the fee to any other person or authority. There is no provision specifically authorizing exercise of the ‘taxing power’ by a private person or company in- charge of an airport as lessee under section 12-A of the Act. There are clear limitations to the powers that the lessee may exercise under section 12-A(4) of the Act and those are that the power must be necessary, not merely useful or convenient for performing the functions assigned and the power must not be a taxing or fiscal power. Relying upon the decisions in The Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra T. Swamiar, AIR 1954 SC 282 and Hingir-Rampur Coal Co. v. State of Orissa, AIR 1961 SC 459, learned senior counsel contended that there is no generic difference between a tax and a fee as both are compulsory exactions of money by public authorities and in the absence of an express provision, a delegated authority cannot impose a tax or fee. In this connection, he relied upon a decision of the Supreme Court in Ahmedabad Urban Development Authority v. Sharadkumar Jayantikumar Pasawalla, (1992) 3 SCC 285. Mr. Bobde further WP(C) No. 8918/2009 Page 5 of 27 contended that the fact that the monies are to be exacted from passengers leads to the inescapable interpretation that framing of rules by Central Government under section 41(2)(ee) as contemplated by section 22-A itself is a sine qua non or condition precedent for levying a fee. Therefore, in the absence of the rules the development fee cannot be recovered from the passengers. Mr. Bobde lastly contended that the development fee under section 22-A has no nexus with any service, much less any additional service being provided to the passengers. The essential characteristic of a fee is, therefore, absent and on this ground also, the levy and collection of the impugned development fee is liable to be struck down. 5. In reply, learned Solicitor General appearing for respondent Nos. 1 and 2 and Dr. A.M. Singhvi, learned senior counsel appearing for respondent No.3 submitted that a combined reading of Statement of Objects and Reasons of the Amendment Act 43 of 2003 as well as the Amendment Act itself indicates that the twin objective of the Legislature was to empower the Airports Authority of India to levy development fee at airports for funding or financing the cost of upgradation, expansion or development of airports for which the fee is collected and also to empower the lessee of an airport who has been entrusted with the function of funding or financing the cost of upgradation, expansion or development of the airport to have all the powers of the Airports Authority of India under section 22-A. The power to collect a development fee under section 22-A is necessary for the WP(C) No. 8918/2009 Page 6 of 27 lessee for performing its function in terms of the lease granted to the lessee under section 12-A(1). Thus, the respondent No.3, as the lessee of the Indira Gandhi International Airport by operation of section 12- A(4) read with section 22, has the authority by law to collect development fee from the embarking passengers. There is, thus, no question of any delegation of power by the Airports Authority of India as the authorization is by the statute itself. It was further contended that it has been laid down time and again by the Supreme Court that it is not obligatory for framing of rules if the substantive provision itself empowers the levy. It was contended that the airport development fee is levied and collected at the airport for the purpose of funding or financing the costs of upgradation, expansion or development of the airport. It is not a fee for services rendered thereof as in the nature of charges under section 22 of the Act. Though termed as a ‘fee’, it is really in the nature of a cess and there need not be any direct correlation between the levy of fee and the services rendered. 6. In order to appreciate the controversy raised in this petition, it is necessary to consider the object and scheme of The Airports Authority of India Act, 1994. As can be seen from the Preamble of the Act, it has been enacted with a view to provide for the constitution of the Airports Authority of India for the better administration and cohesive management of the airports and civil enclaves and for matters connected therewith or incidental thereto. Section 3 of the Act provides for the constitution and incorporation of the Airports Authority WP(C) No. 8918/2009 Page 7 of 27 of India. Section 12 lays down the functions of the Airports Authority of India. Section 12(1) provides that it shall be the function of the Airports Authority of India to efficiently manage the airports, the civil enclaves and the aeronautical communication stations. Section 12(2) provides that it shall be the duty of the Airports Authority of India to provide air traffic service and air transport service at any airport and civil enclaves. Section 12(3) provides that without prejudice to the generality of the provisions contained in sub-sections (1) and (2), the Airports Authority of India may perform various functions stated thereunder including that prescribed under clause (a), namely, plan, develop, construct and maintain runways, taxiways, aprons and terminals and ancillary buildings at the airports and civil enclaves. Section 22 of the Act confers power on the Airports Authority of India to charge fees, rent etc. with the previous approval of the Central Government for various services and amenities provided by the Airports Authority of India. Amongst others, clause (c) of section 22 provides for the charge of fees for the amenities given to the passengers and visitors at any airport, civil enclave, heliport or airstrip. It appears that sometime in 2003, there was felt a need to improve the standard of services and facilities at the airports and to bring them at par with the international standards. To facilitate the process for such improvement, it was felt necessary to bring in the infusion of private sector investments as also for restructuring of airports. It was thought that this would speed up airport infrastructure development, improve managerial efficiency, increase local responsiveness and improve WP(C) No. 8918/2009 Page 8 of 27 service levels as well as, in turn, generally stimulate the economy by boosting tourism and trade. To achieve this purpose, the Airports Authority of India (Amendment) Act, 2003 (Act 43 of 2003) was enacted. It brought about the amendment to section 2 by insertion of clause (nn), insertion of new clause (aa) in section 12(3) and new sections 12-A and 22-A in the Act. These amendments were brought in to enable the Airports Authority of India to establish airports or assist in the establishment of private airports and also to lease the airport premises to private operators with the prior approval of the Central Government. By virtue of these amendments, some of the functions of the Airports Authority of India can also be assigned to lessees subject to the exception that air traffic services and watch and ward functions will continue to be provided by the Airports Authority of India. 7. The Statement of Objects and Reasons to the Amendment Act throws light on the Parliamentary intention and it reads as follows: “Statement of Objects and Reasons:- At present, the Airports Authority of India is a statutory organization under the administrative control of the Government of India, Ministry of Civil Aviation. It manages 94 civil airports and 28 civil enclaves at defence airports in the country. 2. There is need to improve the standard of services and facilities at the airports to bring them at par with international standards. To facilitate the process for such improvement, there is need, both for the infusion of private sector investments as also for restructuring of airports. This will speed up airport infrastructure development, improve managerial efficiency, increase local responsiveness and improve service levels. It will, in turn, generally stimulate the economy by boosting tourism and trade. It has been WP(C) No. 8918/2009 Page 9 of 27 decided to undertake the task of restructuring the airports under the Airports Authority of India as well as to encourage private participation for the greenfield airports in the country. Since the Airports Authority of India Act, 1994 is applicable to all airports whereat air transport services are operated or are intended to be operated, significant private sector investments in such project require an effective legal framework within which the investors would feel safe and secure about their operational and managerial independence. To achieve these purposes, the Bill proposes to amend the various provisions of the said Act. The salient features of the Bill are as under:- (i) It amends section 1 as well as section 2 of the Act to exclude the private airports from the purview of the Act except for certain limited purposes and to provide for definition of a private airport. The proposed amendment would also provide adequate comfort levels to enhance investors’ confidence and to ensure a level playing field to private sector greenfield airports by lifting control of the Airports Authority of India except in certain respects. (ii) It inserts new clause (aa) in sub-section (3) of section 12 and a new section 12-A in the Act. This amendment will enable the Airports Authority of India to establish airport or assist in the establishment of private airports and also to lease the airport premises to private operators with the prior approval of the Central Government. By this amendment, some of the functions of the Airports Authority of India can be assigned to lessees subject to the exception that air traffic services and watch and ward functions will continue to be provided by the Airports Authority of India. (iii) It inserts section 22-A in the Act empowering the Authority, after the previous approval of the Central Government to levy on the embarking passengers at an airport the development fees to be credited to the Authority which shall be regulated and utilized in the prescribed manner for funding and financing the costs of upgradation, expansion or development of airports and for the establishment or development of new airports in lieu of existing airports and for the investment in the equity in respect of shares to be subscribed by the authority in WP(C) No. 8918/2009 Page 10 of 27 companies engaged in establishing, owning, developing, operating or maintaining private airports or advancement of loans to such companies or other persons engaged in such activities. This amendment will make the projects, relating to construction of greenfield airports, economically viable by such fee collection. (iv) It also inserts a new Chapter V-A relating to eviction of unauthorized occupants, etc., of airport premises. It provides for the appointment of eviction officers and a Tribunal to obviate the menace of large scale encroachment and unlawful occupation of airport premises and to decide the cases relating thereto. 8. By the amendment, clause (nn) was inserted in section 2 which defines ‘private airport’ to mean an airport owned, developed or managed by – (i) any person or agency other than the Authority or any State Government, or (ii) any person or agency jointly with the Authority or any State Government or both where the share of such person or agency, as the case may be, in the assets of the private airport is more than fifty per cent. 9. In section 12, clause (aa) was inserted which reads as follows: “(aa) establish airports, or assist in the establishment of private airports, by rendering such technical, financial or other assistance which the Central Government may consider necessary for such purpose.” 10. Section 12-A makes provision for lease by the Airports Authority WP(C) No. 8918/2009 Page 11 of 27 of India and reads as follows: “12-A. Lease by the Authority. – (1) Notwithstanding anything contained in this Act, the Authority may, in the public interest or in the interest of better management of airports, make a lease of the premises of an airport (including buildings and structures thereon and appertaining thereto) to carry out some of its functions under section 12 as the Authority may deem fit. Provided that such lease shall not affect the functions of the Authority under section 12 which relates to air traffic service or watch and ward at airports and civil enclaves. (2) No lease under sub-section (1) shall be made without the previous approval of the Central Government. (3) Any money, payable by the lessee in terms of the lease made under sub-section (1), shall form part of the fund of the Authority and shall be credited thereto as if such money is the receipt of the Authority for all purposes of section 24. (4) The lessee, who has been assigned any function of the Authority under sub-section (1), shall have all the powers of the Authority necessary for the performance of such functions in terms of the lease.” 11. Section 22A of the Act empowers the Airports Authority of India to levy development fee and reads as follows : “22A. Power of Authority to levy development fees at airports. - The Authority may, after the pre- vious approval of the Central Government in this be- half, levy on, and collect from, the embarking pas- sengers at an airport, the development fees at the rate as may be prescribed and such fees shall be credited to the Authority and shall be regulated and utilized in the prescribed manner, for the purposes of- WP(C) No. 8918/2009 Page 12 of 27 (a) funding or financing the costs of upgradation, ex- pansion or development of the airport at which the fee is collected; or (b) establishment or development of a new airport in lieu of the airport referred to in clause (a); or (c) investment in the equity in respect of shares to be subscribed by the Authority in companies engaged in establishing, owning, developing, operating or main- taining a private airport in lieu of the airport referred to in clause (a) or advancement of loans to such com- panies or other persons engaged in such activities. 12. The purpose of the 2003 amendment was thus to have a new framework for the administration and management of airports in the country, wherein the Airports Authority of India would either assist a private initiative in re-developing existing airports or encourage and facilitate private initiative in establishment and development of greenfield airports. The various provisions of the Act will have to be interpreted in the above context. 13. In furtherance of the amended Act, as a part of public-private partnership initiative, the Union of India was considering involving of private sector as a partner in development and/or modernization and restructuring of Indian airports and for setting up world class international airports. The respondent No.3 - DIAL was established pursuant to such initiative for the development and/or modernization and restructuring of the Indira Gandhi International Airport, New Delhi. The respondent No.3 is a joint venture company, of which Airports Authority of India is a 26% shareholder. Pursuant to the execution of WP(C) No. 8918/2009 Page 13 of 27 various transaction documents including OMDA dated 04.04.2006, the respondent No.3 has been granted exclusive right and authority for performing the functions of operating, maintaining, developing, designing, constructing, upgrading, modernizing, financing and managing of the Indira Gandhi International Airport and to perform services and activities constituting the aeronautical services and non- aeronautical services. A State Support Agreement has also been executed between the Union of India and the respondent No.3, whereby the respondent No.3 has been authorized to recover certain fees including passenger services fees. Clause 2.1.2 of the OMDA spells out the rights of the respondent No. 3: “2.1.2 Without prejudice to the aforesaid, AAI recognizes the exclusive right of the JVC during the Term, in accordance with the terms and conditions of this Agreement to: (i) develop, finance, design, construct, modernize, operate, maintain, use and regulate the use by third parties of the Airport; (ii) enjoy complete and uninterrupted possession and control of the Airport Site and the Existing Assets for the purpose of providing Aeronautical Services and Non-Aeronautical Services; (iii) determine, demand, collect, retain and appropriate charges from the users of the Airport in accordance with Article 12 hereto; and (iv) Contract and/or sub-contract with third parties to undertake functions on behalf of the JVC, and sub-lease and/or license the Demised Premises in accordance with Article 8.5.7.” WP(C) No. 8918/2009 Page 14 of 27 14. Clause 8.3 of the OMDA provides that the JVC shall prepare a master plan for the airport setting out the proposed development for the entire airport, planned over a 20 year time horizon and Clause 8.3.7 provides that the JVC shall develop the airport in accordance with the then applicable master plan. The proposal of the respondent No.3 to levy the development fee at Indira Gandhi International Airport on the embarking passengers to be utilized for the purpose of funding and financing the cost of upgradation, expansion or development of the airport has been approved by the Central Government vide approval letter dated 9.2.2009 and the respondent No.3 has been authorized to levy and collect the airport development fee impugned in the writ petition. 15. Having considered the rival contentions of the parties, the principal question that falls for our consideration is whether the Act contains an express grant of power to a lessee to impose a development fee under section 22-A of the Act. In terms of section 12, the Airports Authority of India has been entrusted with the function of inter alia managing the airports and civil enclaves. In terms of