W.P.(C) 8004/2010 Page 1 of 96 * IN THE HIGH COURT OF DELHI AT NEW DELHI Judgment Reserved on: 7th January, 2011 % Judgment Pronounced on: 4th March, 2011 + W.P.(C) 8004/2010 Federation of Indian Airlines & Ors. ..... Petitioners Through: Mr.Mukul Rohtagi and Mr. N.K. Kaul, Sr. Advocates with Mr.Buddy A. Ranganathan, Mr.Bhuvan Mishra, and Mr. Samar Kachwha, Advocates. versus Union of India & Ors. ..... Respondents Through Mr. Gopal Subramanium, Solicitor General and Mr.A.S. Chandhiok, ASG with Ms.Anjana Gosain and Mr.Sandeep Bajaj, Advocates and Mr. Alok Shekhar, Director for Respondent Nos.1,2,3 and 8 Mr. Sudhir Chandra, Sr. Advocate with Mr. Atul Sharma, Mr. Ravi Varma, Mr.Akhil Sibal, Mr. Abhishek Sharma and Mr. Sarojananda Jha, Advocates for Respondent Nos.4 and 6. Dr. A.M. Singhvi, Sr. Advocate with Mr. Ankur Chawla, Mr. Ashish Jha and Ms. Pallavi Langar, Advocates for Respondent Nos. 5 and 7. Mr. Ram Jethmalani, Sr. Advocate with Mr. Ankur Chawla, Mr. Ashish Jha, Ms. Pallavi Langar and Mr.Karan Kalia, Advocates for Respondent No.9. W.P.(C) 8004/2010 Page 2 of 96 Mr. Rajiv Nayar, Sr. Advocate with Mr. Gaurav Duggal, Ms. Niti Sudhakar and Ms. Monali Dutta, Advocates for Respondent Nos. 10 and 11. Mr. R.K. Mehta with Mr. Virender Mehta, Mr.P.K. Ray and Mr. Kunal Mehta, Advocates for Respondent No.12. Mr. Rajiv Nayar, Sr. Advocate with Mr. Amit Mahajan and Mr. Shashi Shekhar, Advocates for Respondent No.13. CORAM: HON'BLE THE CHIEF JUSTICE HON'BLE MR. JUSTICE MANMOHAN 1. Whether reporters of the local papers be allowed to see the judgment? Yes 2. To be referred to the Reporter or not? Yes 3. Whether the judgment should be reported in the Digest? Yes DIPAK MISRA, CJ Invoking the inherent jurisdiction of this Court under Article 226 of the Constitution of India, the petitioners have prayed for declaring the circulars AIC No: 7/2007 dated 28.9.2007, AIC No: 15/2008 dated 31.12.2008, AIC No: 6/2009 dated 30.6.2009, AIC No:13/2009 dated 31.12.2009, AIC No:3/2010 dated 2.6.2010 and the Regulations, namely, Airports Authority of India (General Management, Entry for Ground Handling Services) Regulations, 2007 (for short „2007 Regulations‟) as ultra vires the provisions of The Aircraft Act, 1934 (for short „the 1934 Act‟), The W.P.(C) 8004/2010 Page 3 of 96 Aircraft Rules, 1937 (for short „the 1937 Rules‟) and The Airports Authority of India Act, 1994 (for short „the 1994 Act‟) and also ultra vires Articles 14 and 19(1)(g) of the Constitution of India and further to issue a writ of certiorari for quashment of the same. THE FACTUAL EXPOSITION AND THE STAND OF THE PETITIONERS 2. The petitioner No.1, Federation of Indian Airlines, is a society registered under the Societies Registration Act, 1860 comprising all the airline carriers which include the other writ petitioners. It is involved in promoting and diffusing useful knowledge on the aviation industry in India and represents the aviation industry before the concerned authorities for the purpose of resolving the issues and challenges faced by the said industry. The petitioner Nos.2, 4, 6, 8, 10 and 12 are companies incorporated under the Companies Act, 1956 and are engaged in the business of providing scheduled air transport services. As an integral part of their business, they operate airlines under the brand names SpiceJet, IndiGo, GoAir, Jet Airways (including Jet Konnect), Jet Lite, Kingfisher (include Kingfisher Red), etc. The petitioner Nos.3, 5, 7, 9, 11 and 13 are shareholders and / or directors of their respective companies. 3. As set forth, the business of running the airlines consists, inter alia, of owning and / or operating airplanes and provision of ground handling W.P.(C) 8004/2010 Page 4 of 96 facilities in relation thereto all of which are undertaken by the personnel dedicated for the said purpose. Though there are outsourced personnel engaged by various airlines for the same purpose, yet the choice of whether to outsource and to whom had been left to the option of the concerned airlines. 4. The airlines, like the petitioners, are involved in providing self-ground handling service and even if they are undertaking ground handling services through third parties, each airline has the right to conduct self-ground handling services. Ground handling constitutes an integral and inalienable part of any airlines‟ business and it is one of the main and unique, selling proposition of the airlines differentiating the services provided by one particular airline from their competitors. The ground handling services are aimed at providing a hassle free experience to the passengers and are akin to providing hospitality services. Some of the airlines provide self-ground handling services themselves while some airlines sub-contract the same to the airports or a handling agent or to another airline. The said exercise is carried out by an airline after careful consideration of numerous factors including the capability and competency of the agency to provide ground handling services, the cost impact, the suitability of the business model and the reputation and standard maintained in the industry. The purpose of the said agents are monitored by the airlines by strict service level agreements W.P.(C) 8004/2010 Page 5 of 96 bearing, amongst others, financial implications in case of failure to meet the agreed standards of service. 5. It is the experience of the petitioners that undertaking ground handling services themselves have enabled them to maintain the quality, cost and efficiency, level of performance and also helped in providing comfort and satisfaction to the passengers. The decision to undertake the ground handling services, which includes ramp handling and traffic handling, by themselves or to outsource is a business decision intrinsic to their business model and the airlines have the liberty to do so. The ramp handling includes cabin services like cleaning the plane, replenishing the supplies and consumables, etc. and traffic handling services include guiding the aircraft into and out of the parking position, refilling of fresh water tanks, air conditioning, luggage handling by belt loaders and baggage carts, passenger stairs (used instead of aerobridges or air stairs), wheel chair lifts, providing check-in counter services, gate arrival and departure services and airline lounges, etc. In this regard, reference has been made to the circular AIC No:3/2010 dated 2.6.2010 issued by the Director General of Civil Aviation laying down the specific components of the ground handling operations. It is contended that as per the said circular, the private airlines are given permission only to be involved in ground handling activities where passenger interface is required. W.P.(C) 8004/2010 Page 6 of 96 6. As set forth in the petition, if the said circular is given effect to, the airline operators can only undertake very negligible activities and many activities intrinsically connected with the business cannot be undertaken by the operators. It is averred that since the inception of civil aviation in India, the majority of the member airlines of the petitioner No.1 have been providing self-ground handling services or sub-contracting it to an airport or handling agent or another airline who can satisfy the specific tailor-made requirements of an individual airline. The ground handling services have the statutory recognition, as is noticed from the notification issued by the Director General of Civil Aviation („DGCA‟) while granting permit to operate scheduled passengers air transport services. 7. It is put forth that the aforesaid requirement is one of the pre- conditions for the grant of a licence and regard being had to the same, the petitioners have invested huge amounts of money in employing people on its rolls and creating the necessary and highly capital-intensive infrastructure to undertake the ground handling services efficiently to cater to the airlines operations. 8. As set forth, on 18.10.2007, the Airports Authority of India („AAI‟) notified its 2007 Regulations. Prior to that, a circular dated 28.9.2007 was issued by DGCA for the airports of Delhi, Mumbai, Hyderabad, Bangalore, W.P.(C) 8004/2010 Page 7 of 96 Chennai and Kolkata though the airports at Delhi, Mumbai, Hyderabad and Bangalore are not managed by the AAI. It is contended that the 2007 Regulations ex facie cannot apply to such airports. A reference has been made to an order dated 21.8.2009 issued by the Bureau of Civil Aviation Security („BCAS‟) vide AVSEC order No.3/09 stipulating, inter alia, to the effect that several security functions mentioned therein would have to be carried out by the airline security personnel themselves and not by any ground handling agency. The DGCA by the circular dated 2.6.2010 extended the last date for the airline operators to conduct self-ground handling to 31.12.2010. 9. It is averred that the said circular dated 2.6.2010 prevents / prohibits the airlines to provide ground handling services where there is no passenger interface. It is contended that the said circular could not have been issued by the said authority in the absence of an amendment of the ground handling Regulations 2007 as there is a complete dichotomy between the circular and the 2007 Regulations in the field. 10. The impugned circulars and Regulations have been assailed on the ground that the said circulars / Regulations run counter to Rule 92 of the 1937 Rules. It is contended that the DGCA has no authority to issue the impugned circulars and that the said circulars have been issued in utter disregard of the provisions of the 1934 Act, the 1994 Act and the Rules and W.P.(C) 8004/2010 Page 8 of 96 Regulations made thereunder. It is further contended that the circulars have been issued without any application of mind, as an incurable dichotomy exists between the Regulations and the circulars. It is urged that the circulars are absolutely arbitrary, unreasonable, discriminatory and, hence, offend Article 14 of the Constitution of India; that the circulars / regulations violate the individual airlines‟ and their shareholders‟ fundamental right to practise any profession or to carry on any occupation, trade or business as enshrined under Article 19(1)(g) of the Constitution of India and do not meet the test of reasonableness enshrined under Article 19(6) of the Constitution of India; that the circulars do not in any way remotely suggest for enhancement of security; and that the applicability of the circulars / Regulations is immensely vague and the same are also not in accord with the Acts and the Regulations. 11. It is contended that while the circulars / Regulations permit ground handling facilities to either an airport operator or the National Aviation Company Ltd. or their joint venture, similar facility is denied to the airline operators as a result of which the discrimination gets writ large, inviting the frown of Article 14 of the Constitution of India and that the circulars / Regulations admit to endow the National Aviation Co. Ltd. with an unprecedented and unwarranted benefit at the cost of the petitioners despite the fact that the National Aviation Company Ltd. is a competitor of the W.P.(C) 8004/2010 Page 9 of 96 petitioners in the airline business and, hence, such conferment of benefit is completely unjustified and arbitrary. It is further contended that the impugned circulars / Regulations virtually make it impossible for the petitioners to undertake their licensed activities at the six airports out of many as a consequence of which they would have to abandon their own operations in the said six airports and eventually only restrict their operation to the remaining airports resulting in tremendous and immensurable decrease in their business activity. 12. It is urged that the plea of security is a subterfuge to paralyze the operational aspects of the petitioners inasmuch as at various sensitive airports, the petitioners are legally permitted to carry out the ground handling facilities and further private players have been allowed to carry out the ground handling facilities; and that the segregation of ground handling into those involving passenger interface and not involving passenger interface is wholly unreasonable and unworkable as both have to be operated in complete harmony and coordination, but the said aspect has not been taken into consideration by the authorities issuing the circulars and, therefore, the new policy, if implemented, would result in retrenchment of ground service personnel, idling of assets and would further put the reputation and goodwill of the airlines in jeopardy since such a service is an insegregable facet of running of the business. W.P.(C) 8004/2010 Page 10 of 96 13. It is contended that the circulars and Regulations have made a maladroit effort to overturn the level playing field that is required to be maintained between the National Aviation Company Ltd. and the private airlines and such an activity is contrary to any commercial policy. It is contended that in the international field, in many an airport in United States of America, United Kingdom and Australia, the airline operators are permitted to provide self-ground handling service in both ramp and terminal side operations but the same has been denied to the private airline operators as per the impugned circulars in the garb of security though it is basically incorrect. It is put forth that the circulars fundamentally transgress the basic facet of Rule 92 of the 1937 Rules as it totally demolishes the concept of competitive environment which is impermissible in the face of the said Rule. It is urged that as a result of the issuance of the notifications, the airlines would be compelled to avail of the services either from the National Aviation Company Ltd. or the airport operator who would, in turn, demand monopolistic charges as there is no provision for any kind of checks and balances. 14. It is advocated that the circulars in actuality do not achieve any significant enhancement of security inasmuch as the airlines had been involved in the ground handling business for a number of years and have acquired considerable expertise and there are immense protective guidelines W.P.(C) 8004/2010 Page 11 of 96 with regard to the ground handling facility carried out by the petitioners and their staff have been trained in the said regard and at no point of time it has been pointed out that there has been any security lapse. It is put forth that if the circulars have been issued to protect the security in the country, then there is no justification to restrict it to six airports in the metropolitan cities since security threat is more grave at some other airports and thus, the whole intention of the circular is to oust the petitioners from operating the ground handling facility. It is averred that the basic purpose of the circular is to give more mileage to the airport operators / owners in the guise of security and, hence, it is basically a cavil between the commercial interest of the petitioners and that of the private operators which smacks of total arbitrariness; that the airlines are responsible for the security of their equipment including aircraft, etc. and, therefore, it is extremely unreasonable to expect, on one hand, the airline operators to be responsible for the security of their own equipment and on the other, prevent them from undertaking ground handling services which also ensures the security of their equipment and thereby an anomalous situation has been introduced betraying all norms of rationality and reasonability. 15. It is further stated that the security aspect in respect of the ground handling services is subject to the control of BCAS clearances and, hence, the same cannot be a ground to deprive the petitioners of the said business W.P.(C) 8004/2010 Page 12 of 96 facility which is an inseparable facet of their business. It is contended that the ramp handling as well as passenger handling are an inalienable part of an airlines‟ operations and cost effect and are also connected with on-time performance, efficient turnaround time and utilization of the aircraft which are dependent on factors like time, security, efficiency and effective handling of passengers and their baggage at the airport and the same cannot be and should not be handed over to a third party. It is asserted that if any loss or damage is caused to the luggage, the individual airline operators will still be held liable, whereas, by virtue of operation of the impugned circulars, they are not permitted to conduct the ground handling facility and such a situation would be contrary to the Carriage by Air Act, 1972 and various rules framed thereunder. It is contended that the private owners or the proposed independent ground handling operators would require to recruit the same staff who are now working on behalf of the airline operators and thereby the security scenario would not improve but there would only be a diversion of business interest. THE STANCE IN OPPOGUNATION BY THE RESPONDENT NOS. 1 AND 2 16. A counter affidavit has been filed by the respondent Nos.1 and 2 contending, inter alia, that prior to 2007, ground handling at Indian airports was done under the 2000 Regulations and all scheduled airlines were W.P.(C) 8004/2010 Page 13 of 96 permitted to undertake ground handling services. At a later stage, ground handling of flights at the Indian airports became a matter of grave concern against the backdrop of international terrorism which witnessed hijacking of Indian Airline passengers, carrying shoe bombs, liquid explosives, etc. The respondents thought it prudent to consider the practice adopted in several other countries for civil aviation safety and security by restricting ground handling services to only the airport authority and the national carrier and their subsidiaries excluding all private agencies and self-handling airlines. Apart from the aspect of safety, certain other aspects, namely, minimum equipment which lies in the operational area, optimal utilization of equipment and personnel deployed, ground flight safety and minimum number of people operating equipment on the airside and a choice of world class operators for airlines at affordable prices in a competitive environment were also kept in view. It is put forth that Delhi and Mumbai airports have been restructured through joint ventures entered into by the airport authority and regard being had to the factum of restructuring, the concerned authorities were of the view that ground handling services, being an important element of service standards to be complied by the airport operators as laid down in Schedule 3 of the Operation Management and Development Agreement (OMDA) signed with the JVCs, should be a restricted activity and self-handling of flights by all airlines except Air India should not be allowed. The ground handling policy was reviewed by the W.P.(C) 8004/2010 Page 14 of 96 Cabinet Committee on Security (CCS) in its meeting held on 1.2.2007 wherein, the issues of security and aviation safety, achieving world class ground handling services, clarity on ground handling, etc. were approved. The ground handling policy allowed the entities to undertake ground handling services at all metropolitan airports located at Delhi, Mumbai, Chennai, Kolkata, Bangalore and Hyderabad. The policy was notified by the Regulation of 2007 on 18.10.2007 in respect of AAI airports and by the DGCA vide AIC dated 28.9.2007 for other airports. The policy came into effect from the date of its notification, except to the extent of the exit of non- entitled entities, which was scheduled for 1.1.2009. 17. It is asseverated that a representation was received from the airlines through the petitioner No.1 on 6.11.2008 raising certain issues and regard being had to the concern shown, time was extended till 30.6.2009. During the said period, the respondent No.1 undertook an exercise to consult other stakeholders, including the airlines and airport operators, in order to understand and accordingly redress the concerns. The petitioner No.1 made another representation to the respondents on 5.6.2009 almost at the end of the extended time period fixed for the exit of non-entitled entities and after examination of the said representation, time was extended by another six months, i.e., upto 31.12.2009. In order to finalize the views on the issues raised by the airlines and the petitioner No.1, the answering respondents W.P.(C) 8004/2010 Page 15 of 96 collected the details of the number of employees engaged in ground handling activities working directly on the rolls of the individual domestic airlines (excluding Air India) and outsourced / sub-contracted through the other agencies and the details of the equipment employed for ground handling by these airlines at all the six major airports. The manpower employed by the various airlines in the six metropolitan airports has been brought on record as Annexure R-1/5. It is put forth that the total number of 15,954 persons were employed by the five domestic airlines excluding Air India at the six metro airports out of which 6210 were direct employees on the rolls of these airlines and the rest are outsourced to other sub-contractors. With regard to the assertions made in the petition pertaining to business facilities and interest, it is averred that the airlines would require some additional time for phasing out the ground handling equipments and also to create a proper exit policy for the manpower employed by them and accordingly, certain amendments in the Regulations issued in the year 2007 were proposed which was considered by the CCS in its meeting held on 14.12.2009 and it was approved in the last Regulations, namely, the 2007 Regulations. It was decided that no further time would be given beyond 31.12.2010 and all necessary steps should be taken to implement the approved ground handling policy by that date. Thereafter, no further representation on the ground handling policy was received by the respondents. In pursuance of the above decision, the DGCA issued the AIC No.3/2010 dated 2.6.2010 in succession W.P.(C) 8004/2010 Page 16 of 96 to the AIC 07/2007 dated 28.9.2007 and amendment to the 2007 Regulations was issued on 2.12.2010. The BCAS vide its AVSEC order No.05/2009 dated 29.10.2009 had made the airlines responsible for certain activities relating to security, like the security of the aircrafts, security of catering items, etc. which otherwise are part of the ground handling activities. It is put forth that BCAS would be required to amend the AVSEC order No.03/2009 dated 21.8.2009 in order to bring it in tune with the decision of the CCS. 18. It is the stand in the return that the powers of the respondent No.2 emanate from Section 5A of the 1934 Act read with clause (m) of sub- section 2 of Section 5 and by no figment of imagination it can be said that the power does not vest with the said authority. Reference has been made to Rules 90 and 92 of the 1937 Rules to justify the action taken by the authorities. Reliance has been placed on Section 42 of the 1994 Act as the source of power. It is urged that a policy decision has been taken by the Government keeping in view the security and safety of the aircraft operators at the airports and in order to achieve economies of scale for proper utilization of resources and thereby to provide world class standardized services in ground handling operations and the said power which vests with the Government does not run counter to any Act or Rules and is not arbitrary. It is contended that the ground handling policy has been in force W.P.(C) 8004/2010 Page 17 of 96 since the year 2007 but not given effect to because of the representations submitted by the petitioners from time to time. It is put forth that except the domestic carriers, most of the other airlines are already carrying out their ground handling operations through the designated ground handling agencies as is evident from the information available in Annexure R-1/1. The ground handling services are an important element of the service standards to be complied by the airport operators as laid down in Schedule 3 of the OMDA signed by the JVCs at Delhi and Mumbai airports (Annexure R-1/2) and the airport operators are expected to enter into agreements with the selected ground handling agencies in order to ensure the prescribed services standards. The airlines would still have the right of choice from the selected ground handling concessionaries as the said circular and regulations allow for a minimum of two ground handling agencies in addition to the national carrier (Air India). That apart, the domestic airline operators are still permitted to do self-handling at the non-metro airports.