IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 03.08.2010 CORAM: THE HONOURABLE MR. JUSTICE V.DHANAPALAN W.P.No.14326 of 2010 M/s. Paramount Airways Private Ltd., A Company incorporated under the Companies Act, 1956, having its Registered Office at Alexander Square, No.35, Sardar Patel Road, Guindy, Chennai 600 032, represented by its Authorised Signatory, Mr.K.Vijayakumar ..Petitioner vs. 1. The Director General, Director General of Civil Aviation, DGCA Complex, Opp. Safdarjung Airport, New Delhi. 2. The Ministry of Civil Aviation, represented by its Under Secretary, "B" Block, Rajiv Gandhi Bhavan, New Delhi. ..Respondents Writ Petition filed under Article 226 of the Constitution of India praying for the issuance of a writ of certiorari, calling for the records of the 1st respondent pertaining to the order bearing AV.14015/01/05-AT.1 dated 02.07.2010 and quash the same. For Petitioner : Mr.T.V.Ramanujam, Senior Counsel for M/s.T.K.Bhaskar For Respondents: Mr.M.Raveendran, Addl. Solicitor General for Mr.A.S.Vijayaraghavan, Sr. Central Government Standing Counsel https://hcservices.ecourts.gov.in/hcservices/ O R D E R This writ petition is filed, challenging the order in AV.14015/01/05-AT.1, dated 02.07.2010, passed by the 1st respondent. 2. The case of the petitioner as put forth in the affidavit would run thus : (i) On 29.07.2005, the petitioner entered into three Aircraft Specific Lease Agreements (hereinafter referred to as ASLA) with Celestial Aviation Trading 71 Limited (Celestial Aviation) under which the following three Aircrafts were leased in favour of the petitioner. A. MSN 17000126 VT-PAD B. MSN 17000137 VT-PAE C. MSN 17000147 VT-PAF Simultaneously, with the execution of the said ASLA, the petitioner also entered into a common Terms Agreement (hereinafter referred to as CTA) with M/s.GE Commercial Aviation Services Ltd. (GECAS), under which Celestial Aviation would play the role of a lease manager in respect of the aforementioned Aircrafts. In 2006, pursuant to the execution of the said Lease Agreements, the Aircrafts were handed over to the petitioner and since then, the petitioner has been in possession and control of the Aircrafts. From 2006 onwards till September 2009, all rentals and dues were duly paid by the petitioner to GECAS. (ii) On 02.09.2009 and 17.09.2009, GECAS served an Urgent Default Notice upon the petitioner, alleging therein that the petitioner had defaulted in paying the agreed rent under the CTA & ASLA. Subsequently, GECAS issued another Default Notice on the petitioner, stating that the petitioner had failed to maintain the Aircraft bearing S.No.17000137 in good operating condition and had removed various parts from the aircraft. On the basis of the said allegation, GECAS also contended that an event of default had occurred in terms of the Aircraft Lease Common Terms Agreement dated 29.07.2005 and therefore, sought to terminate the leases. On 25.09.2009, a Grounding Notice was issued by GECAS/Celestial Aviation in respect of the aircrafts leased to the petitioner prohibiting the Aircrafts from flying. On 05.10.2009, Notice of continuing Event of Default and Warning was issued by GECAS/Celestial Aviation to the petitioner. The petitioner, in response to the aforesaid two notices stated that as per the contract between the parties, the petitioner is also entitled to a refund to the tune of about US$ 1.27 million. GECAS/Celestial Aviation had a security deposit worth about US$ 5 million and in addition, the petitioner was also maintaining a further safety deposit in the form of maintenance reserve for about US $ 10 million. Further, more than 65% of the amounts claimed by https://hcservices.ecourts.gov.in/hcservices/ had already been paid and acknowledged. The petitioner, by way of the response had claimed offset of the amounts due to it to be adjusted against any rental due from the petitioner to GECAS/Celestial Aviation. On 14.10.2009, GECAS issued a notice of termination purporting to terminate the Lease Agreements, CTA and ASLA, and called upon the petitioner to stop using the Aircraft and handover the possession of the same. The Letter of Credit was also encashed and GECAS realized an amount of approximately INR 8 crores. (iii)On 15.10.2009, Celestial Aviation filed a claim form before the High Court of Justice, Queens Bench in London seeking a declaration that the termination of the lease agreement is valid and for a direction that the petitioner should have over to it the possession of the Aircrafts, Celestial Aviation had, in accordance with the laws of England, requested for a summary judgment, wherein, the court delivered a judgment solely based on the pleadings, without conducting a regular trial. On 17.10.2009, the petitioner issued replies to the notices sent by GECAS. (iv) The Director General of Civil Aviation (DGCA), on 19.11.2009, informed the petitioner of having received a letter dated 13.11.2009 from the representatives of GECAS requesting them to de- register the leased aircrafts and also asking the petitioner to give their comments on the same. The said letter was suitably replied to by the petitioner on the same date. On 30.11.2009, the petitioner received another letter from DGCA providing with a last opportunity to the petitioner to offer their comments with regard to de- registration of the leased Aircrafts. The petitioner replied on the same day informing the DGCA that they had preferred a Writ Appeal No.1704 of 2009, before the Hon'ble Division Bench of this court and also informed them of the request made before the High Court at Madras, to grant them two weeks' time to file a detailed reply. Vide the said reply, the petitioner specifically pointed out that there was on-going proceedings before the High Court of Justice at London pertaining to declaration that a valid termination of lease has occurred and that therefore the matter is sub-judice in relation to the validity of the termination. The petitioner sought some more time to file a detailed reply considering the above facts. On 30.11.2009, a draft order was circulated by the Queen's Bench Commercial Division Court in London. (v) On 02.12.2009, the petitioner issued a detailed reply to the DGCA reiterating that the matter was sub-judice and that the termination of the lease agreements was not valid and again sought a personal hearing. On 04.12.2009, the DGCA passed an order cancelling the registration of the Aircrafts leased to the petitioner with immediate effect, without waiting for the decision of the Queens Bench Division, London. On the same date, the High Court of Justice, Queens Bench, London passed an order in which it refused to grant declaration that the lease agreement was validly terminated and that https://hcservices.ecourts.gov.in/hcservices/ the GECAS/Celestial Aviation are entitled to re-possess the Aircrafts. On 07.12.2009, the petitioner preferred W.P.(C) No.13678 of 2009 along with an Application for stay before the Hon'ble High Court, Delhi against the order of the DGCA dated 04.12.2009. On 07.12.2009, the learned Single Judge of the High Court stayed the operation of the order dated 04.12.2009. (vi) The Queen's Bench Division arrived at a conclusion on 11.02.2010 that it could not grant the relief against forfeiture to the petitioner on various grounds. The petitioner sought permission to appeal against the order dated 12.02.2010 passed by the Queen's Bench Division Commercial Court, London before the Appellate Court in London challenging the findings of the court and praying for a stay of the order passed by that Court. Subsequently, on 05.03.2010, the Appellate Court in London stayed the operation of the order dated 12.02.2010, while imposing certain conditions upon the petitioner, which were to be complied with by the petitioner for the stay to operate. The petitioner was granted a time frame up to 10.03.2010 for compliance with the said conditions. (vii)On the basis of the orders dated 11.02.2010 and 23.02.2010, GECAS/Celestial Aviation, on 05.03.2010 approached the learned Single Judge of the Delhi High Court under Section 151 of the Code of Civil Procedure for vacation of stay of the order dated 07.12.2009, staying the order of the DGCA. Due to regulatory constraints imposed by Indian Foreign Exchange Laws, the petitioner was unable to comply with the conditions of stay imposed upon it despite sufficiency of funds. The petitioner was therefore constrained to file an application for modification of the conditions of stay before the Appellate Court in London on 12.03.2010. On 15.03.2010, the petitioner brought to the notice of the learned Single Judge of the Delhi High Court, the application for modification filed by the petitioner before the Appellate court in London as also a suit filed by the petitioner before the Chennai High Court, filed on 11.03.2010 for a declaration that the termination was invalid. The petitioner's application for vacation of stay filed by GECAS/Celestial Aviation was allowed and further proceeded to dismiss the writ petition of the petitioner. (viii) According to the petitioner, even assuming without admitting that DGCA was entitled to act pursuant to the decision of the Queens Bench Division, it is submitted that in order for that decision to be effective as against the petitioner, it had to pass the test of Section 13 of the CPC. The DGCA could only have proceeded against the petitioner once this test was satisfied. Therefore, the petitioner preferred a Writ Petition before this court in W.P.(C) No.5283 of 2010 on 15.03.2010 praying for restraining the DGCA from proceeding to de-register the aircrafts of the petitioner. The said writ petition was dismissed by this court on 18.03.2010 by the learned Single Judge holding that the petition was not https://hcservices.ecourts.gov.in/hcservices/ maintainable in the light of the order dated 15.03.2010 passed by the Delhi High Court in W.P.(C) No.13678 of 2009. On the same day, i.e. 18.03.2010, the petitioner preferred a Writ Appeal in W.A.No.546 before the Division Bench of this court against the order of the learned Single Judge of this court and the Division Bench, after hearing the petitioner's contentions, was pleased to direct the DGCA herein to permit the petitioner to fly its aircrafts until 3.00pm on 19.03.2010 and permitted the petitioner to approach the Delhi High Court in appeal against the order of the learned Single Judge of the Delhi High Court. (ix) In view of the above direction of the Division Bench of this court, the petitioner on 18.03.2010 itself, preferred L.P.A.No.198 of 2010 before the Delhi High Court against the judgment and order dated 15.03.2010 passed by the learned single Judge of the Delhi High Court in W.P.(C) No.13678 of 2009, on the grounds that the learned Single Judge of the Delhi High Court had failed to appreciate that the order dated 04.12.2009 was passed by the DGCA in violation of the petitioner's rights under the principles of natural justice as well as other grounds. The Division Bench of the Delhi High Court heard and disposed of L.P.A.No.198 of 2010 on 22.03.2010 on the basis that the order of DGCA dated 04.12.2009 was passed without granting a proper hearing to the petitioner herein and the DGCA therefore, was directed to grant the petitioner an opportunity of hearing in the matter in the nature of a post-decisional hearing. (x) Aggrieved over the said order passed by the Division Bench of the Delhi High Court dated 22.03.2010, the petitioner preferred S.L.P.(C) No.9519 of 2010 before the Supreme Court praying to set aside the order of the Division Bench of Delhi High Court on the grounds that an order for post-decisional hearing would not serve the purposes of justice especially in the light of the fact that the direction had been passed by the Division Bench after considering the petitioner's contentions as to violation of principles of natural justice. (xi) In accordance with the order dated 22.03.2010 passed by the Division Bench of the Delhi High Court and without prejudice to the rights of the petitioner in S.L.P.(C) No.9519 of 2010, the petitioner appeared before the DGCA on 25.03.2010 for a post-decisional hearing further to the order dated 04.12.2009. As on previous occasions, the petitioner yet again requested the DGCA to provide a copy of the request for de-registration made by GECAS/Celestial Aviation. Yet again, the request was not adhered to by the DGCA. The petitioner put forth its case before the DGCA on the principles of natural justice, grounds of non-provision of fair hearing, non-issuance of a proper show cause notice and non-provision of the relevant documents relied upon in the show cause notice. The petitioner also submitted written submissions before the DGCA. On 29.03.2010, the DGCA passed an order sustaining its earlier order dated 04.12.2009, inter-alia, https://hcservices.ecourts.gov.in/hcservices/ relying on the provisions of the Cape Town Convention which has not been incorporated into Indian law in any form. (xii)In view of the decision of the DGCA after granting of the post-decisional hearing, the SLP filed by the petitioner before the Supreme Court was dismissed. Therefore, the petitioner was constrained to file a writ petition under Article 32 of the Constitution of India on 30.03.2010, being W.P.(C) No.127 of 2001, inter-alia, on he basis that the petitioner's rights under Article 19 (1)(g) has been violated. The said writ petition is still pending before the Supreme Court. (xiii) Prior to the order of the 1st respondent dated 04.12.2009, the petitioner was operating 5 Embraer 170 aircrafts, being the aforesaid 3 aircrafts leased from GECAS and 2 aircrafts bearing numbers VT-PAB (MSN : 17000005) and VT-PAC (MSN : 17000002) leased from one ECC Leasing Company Limited. On 06.04.2010, the 1st respondent issued show-cause notice to the petitioner calling upon it to show cause as to why its Scheduled Operator's Permit No.S-17 dated 14.10.2005 should not be suspended, within 3 working days from the date of issuance of the notice. The said show cause notice was issued pursuant to the Civil Aviation Requirements, wherein, C.A.R, Section 3, Series C, Part II, Para 3.2.3 reads provides as follows : "Before the Scheduled Operator's Permit is issued, an applicant shall have a fleet of minimum five aeroplanes or five multi-engine helicopters either by outright purchase or through lease. The aeroplanes shall be of maximum certified takeoff mass of more than 5,700 kg and type certified meeting the requirements of transport category aircraft acceptable to DGCA. ... " (xiv)The petitioner replied to the said Show Cause notice vide its letter dated 09.04.2010 based on the following points : (a) Although Certificate of Registration of 3 of its 5 Aircrafts have been de-registered, the petitioner's writ petition under Article 32 of the Constitution of India before the Supreme Court challenging the said de- registration is still pending disposal. (b) The petitioner has entered into purchase agreement with Airbus directly for purchase of ten numbers of A-321 Aircrafts and two numbers of Embraer Aircrafts from Golden Lotus Leasing Corporation. (c) The petitioner has entered into a lease agreement with M/s.Golden Lotus Leasing Corporation for lease of 3 numbers of A-320 and 2 numbers of A-319 aircrafts. https://hcservices.ecourts.gov.in/hcservices/ (d) The petitioner has submitted an application to the Ministry of Civil Aviation for obtaining NOC for import of aircrafts on 25.01.2009. (e) In the meanwhile, the petitioner also finalised agreements to bring 3 Aircrafts on short-term Wet-Lease basis." (xv) The petitioner would further submit that despite furnishing all relevant documents in support of the above grounds, the 1st respondent proceeded to suspend the Schedule Operator's licence of the petitioner vide order 16.04.2010. The said order of suspension was in utter violation of an order of injunction dated 14.12.2009 operating against the 1st respondent in W.P.No.25901 of 2009. The 1st respondent was constrained to revoke the said order of suspension vide letter dated 01.05.2010 after the petitioner issued a notice of contempt for violation of the aforesaid order in W.P.No.25901 of 2009. The writ petition in W.P.No.25901 of 2009 was filed by the petitioner challenging another Show Cause notice issued by the 1st respondent pertaining to de-registration of the petitioner's two aircrafts leased from ECC Leasing Company Ltd. Subsequently, on 19.06.2010, this court was pleased to dispose of the said writ petition with a direction to the 1st respondent to consider and dispose of the show cause notice in accordance with law. (xvi)The petitioner has already entered into a Wet Lease Agreement with M/s.Jagson Airlines for operating three Dornier Aircrafts bearing Registration No.VT-EUM, VT-ESS and VT-ESQ. The petitioner is in possession and operating two other aircrafts leased from ECC Leasing Company Ltd. Therefore, the petitioner, even at present, is having rights over 5 aircrafts. The petitioner gave a representation to respondents 1 and 2 for issuing necessary permits from respondents to operate the said aircrafts vide letter dated 20.04.2010. However, it is not able to operate the three aircrafts taken on Wet lease basis from M/s.Jagson Airlines as the respondents are deliberately delaying granting of necessary permits to enable the petitioner to use the aircrafts. Apart from the above three aircrafts, the petitioner has entered into a Memorandum of Understanding dated 21.12.2009 with Airbus for purchase of ten A321 Aircrafts. The petitioner has also entered into a Lease Agreement with Golden Lotus Leasing Corporation Ltd. for three A320-214 and two 319 Aircrafts. As per the Agreement, all Aircrafts are to be delivered to the petitioner before November 2010. In terms of the Agreement, the petitioner has paid the Said Golden Lotus Leasing Corporation Ltd. a sum of USD 2,50,000/-. The said payment has been acknowledged by the lessor vide letter dated 05.04.2010. (xvii) With regard to the import of the said Aircrafts purchased and taken on dry-lease from Airbus and Golden Lotus Leasing Corporation Ltd., the Ministry of Civil Aviation has granted 'in https://hcservices.ecourts.gov.in/hcservices/ Principal Approval' for the same. The letter communicating the said approval dated 05.05.2010 from the Ministry states as follows : "The decision has been conveyed to the Director General of Civil Aviation (DGCA) vide this Ministry's Letter No.AV.13030/1/2010-DT dated 05.05.2010. You are therefore requested to contact the DGCA for further necessary action in the matter." This important factual matter was not available to the the DGCA at the time of the decision dated 16.04.2010. If this factor is taken note of, then clearly the substance of the DGCA order dated 16.04.2010 would stand erased. (xviii) Therefore, the petitioner was constrained to file a writ petition bearing No.W.P.No.13314 of 2010 seeking a writ of mandamus directing respondents 1 and 2 to dispose of the representation of the petitioner dated 20.04.2010 and not to take any action against the petitioner till then. When the said writ petition was first listed before this court on 25.06.2010, it was represented on the said date on behalf of the respondents that the matter be adjourned to 29.06.2010 for the respondents' counsel to get instructions on the status of the petitioner's representation. On 30.06.2010, it was represented on behalf of the respondents before this court that the petitioner's representations for permission to operate more aircrafts can be considered only after providing certain documents by the petitioner to the respondents. The matter was accordingly adjourned by two weeks by this court to enable the petitioner to submit the documents required by the respondents for considering the petitioner's representation. Although the 'In Principle Approval' dated 05.05.2010 has been forwarded by the Ministry on 05.05.2010, no action has been taken thereon till then. Also, on 24.06.2010, the petitioner sent to the 1st respondent an application for permitting an import of 6 Bombardier Q 400 Aircrafts for which approval had already been obtained from the Ministry. (xix)At this stage, to the shock and surprise of the petitioner, the 1st respondent proceeded to cancel the schedule operator's permit of the petitioner pursuant to the show cause notice dated 06.04.2010 by way of online order, thereby reinstating the earlier order of suspension dated 16.04.2010, without affording an opportunity of hearing to the petitioner and the same was communicated to the petitioner vide letter dated 02.07.2010. Challenging the said order dated 02.07.2010, the petitioner is before this court in this writ petition. 3. A common counter affidavit has been filed by the respondents. The respondents would state that the petitioner had gone through a complete chain of litigation starting from W.P.(C) No.13678 of 2009 in the High Court of Delhi and ending with dismissal of their S.L.P. https://hcservices.ecourts.gov.in/hcservices/ (C) No.9519 of 2010 in the Supreme Court and in between, there were also several other steps like L.P.A. and post decisional hearing by DGCA. But, this complete chain of litigation too failed to satisfy them and they still chose to file a writ petition before the Supreme Court under Article 32, which they claim is still pending. The respondents would further state that the reply to the Show Cause Notice received from the petitioner vide their reply dated 09.04.2010 did not contain any defence as per sub-para(a). Even if the petitioner had taken such a defence, it would not have succeeded, as mere pendency of a writ petition is not a valid ground for restraining the executive from proceeding further in a particular matter as per existing law. The registration of the three Aircrafts VT-PAD, VT-PAE, VT-PAF was lawfully cancelled by the 1st respondent, as the lease agreement had been terminated by the lessor and, therefore, the 1st respondent was duty bound to de-register these Aircrafts in accordance with clause (vi), sub-rule 6 of Rule 30 of the Aircraft Rules, 1937. The Madras High Court as well as the Delhi High Court have upheld the action taken by the 1st respondent and dismissed the petitions filed by the petitioner against the order of the 1st respondent. 3.1. The respondents would further state that paragraph 3.2 of the Civil Aviation Requirements (in short 'CAR') Section 3 Series C Part Ii dated 1st March 1994, which has been amended from time to time, provides that before the Scheduled Operator's Permit is issued, the applicant shall have a fleet of minimum 5 aeroplanes or multi- engine helicopters either by outright purchase or through lease. Further 10.19 of the CAR provides that degradation of the Operator's capability below the required level or breach of any of the requirements of the CAR or of any provision of Aircraft Act, 1934, Aircraft Rules, 1937, Civil Aviation Requirements, Orders/directions/requirements issued under the said Act or Rules and as amended from time to time shall render the Operating Permit liable to alteration, suspension or cancellation. The 1st respondent had duly considered the documents furnished by the petitioner with their reply to the show cause notice, but, it was found that they were nowhere close to meeting the minimum fleet requirement, as they did not even possess the approval of the Ministry of Civil Aviation for import/acquisition of additional aircrafts. Merely entering into agreements with some parties does not suffice to meet the requirement. The requirement is not met even after approval of the Ministry is granted because actual arrival of aircraft takes a long time. 3.2. It is further stated that the subject matter of the Writ Petition in W.P.No.25901 of 2009 before this court was the de- registration of two aircrafts. Whereas, the subject matter of the present writ petition is the suspension of the Scheduled Operators Permit (SOP) issued to the petitioner. Two different sections or set of officers deal with the subjects relating to re-registration of https://hcservices.ecourts.gov.in/hcservices/ aircraft and the matters relating to SOP, under the DGCA. The injunction order dated 14.12.2009 would have been received by the Section of Officers dealing with de-registration. Hence, the section of Officers dealing with SOP were not aware of the same. Therefore, they proceeded to issue show cause notice dated 06.04.2010, for which the petitioner submitted its reply on 09.04.2010. The petitioner did not make any reference or mention about the injunction order dated 14.12.2009 in its reply dated 09.04.2010. As the concerned officials were not put on notice about the injunction order dated 14.12.2009, he proceeded to pass an order suspending the SOP on 16.04.2010, since the petitioner did not meet the minimum requirements, its SOP after considering the reply. However, when the injunction order was brought to the notice of the officials under the 1st respondent, immediate action was taken and the order issued vide letter No.AV/14015/01/2005-AT.1 dated 16.04.2010 was revoked on 30.04.2010. 3.3. With regard to the averment in the affidavit that the petitioner had approached the 2nd respondent on 20.04.2010 for permission to wet lease three Dornier type of Aircrafts from M/s.Jagson Airlines bearing Registration Nos.VT-EUM, VT-ESS AND VT- ESQ, the