Levy of Airport Development fees held ultra vires

Consumer Online Foundation, etc v. Union of India & Ors., etc.

Appeals were filed against the judgment and order of the Division Bench of the Delhi High Court in public interest litigations upholding the validity of levy of development fees on the embarking passengers by the lessees of the Airports Authority of India at the Indira Gandhi International Airport, New Delhi and the Chhatrapati Shivaji International Airport, Mumbai.

The Airports Authority of India Act, 1994 (1994 Act) came into force on 01.04.1995 and under Section 3 of the 1994 Act, the Central Government constituted the Airports Authority of India (the Airports Authority). By the Airports Authority of India (Amendment) Act, 2003 (the Amendment Act of 2003), Sections 12A and 22A were inserted in the 1994 Act with effect from 01.07.2004. The newly inserted Section 12A provide that the Airports Authority may make a lease of the premises of an airport to carry out some of its functions under Section 12 as the Airports Authority may deem fit. The newly inserted Section 22A of the 1994 Act provide that with the approval of the Central Government, the Airports Authority may levy on, and collect from, the embarking passengers at an airport, the development fees at the rate as may be prescribed. On 04.04.2006, the Airports Authority leased out the Indira Gandhi  International Airport, New Delhi to the Delhi International Airport Private Limited (DIAL) and also leased out the Chhatrapati Shivaji International Airport, Mumbai to Mumbai International Airport Private Limited (MIAL). Section 22A of the 1994 Act was amended by the Airports Economic Regulatory Authority of India Act, 2008 ( 2008 Act) and the amended Section 22A provided for determination of the rate of development fees for the major airports under clause (b) of sub-section (1) of Section 13 of the 2008 Act by the Airports Economic Regulatory Authority (Regulatory Authority). The amended Section 22A was to take effect on and from the date of the establishment of the Regulatory Authority. The Government of India, Ministry of Civil Aviation, sent a letter dated 09.02.2009 to DIAL conveying the approval of the Central Government under Section 22A of the 1994 Act for levy of development fees by DIAL at the Delhi Airport at the rate of Rs.200/- per departing domestic passenger and at the rate of Rs.1300/- per departing international passenger inclusive of all applicable taxes, purely on ad hoc basis, for a period of 36 months with effect from 01.03.2009. Similarly, the Government of India, Ministry of Civil Aviation, sent another letter dated 27.02.2009 to MIAL conveying the approval of the Central Government under Section 22A of the 1994 Act for levy of development fees by MIAL at the Mumbai Airport at the rate of Rs.100/- per departing domestic passenger and at the rate of Rs.600/- per departing international passenger inclusive of all applicable taxes, purely on ad hoc basis, for a period of 48 months with effect from 01.04.2009. The levy of development fees by DIAL as the lessee of the Delhi Airport was challenged in Writ Petition No. 8918/2009 by Resources of Aviation Redressal Association. The levy of development fees by DIAL and MIAL as lessees of the Delhi and Mumbai Airports were challenged in Writ Petition No. 9316 of 2009 and Writ Petition No. 9307 of 2009 by Consumer Online Foundation. The Writ petitioners contended inter alia that such levy of development fees under Section 22A of the 1994 Act can only be made by the Airports Authority and not by the lessee and that until the rate of such levy is either prescribed by the Rules made under the 1994 Act or determined by the Regulatory Authority under the 2008 Act as provided in Section 22A of the Act before and after its amendment by the 2008 Act, the levy and collection of development fees are ultra vires the 1994 Act. The Division Bench of the High Court held that there was no illegality attached to the imposition of development fees by the two lessees with the prior approval of the Central Government and dismissed the writ petitions by the impugned judgment and order.

The conclusion of the High Court in the impugned judgment that the lessee of the airport has the power of the Airports Authority under Section 22A to levy and collect development fees from the embarking passengers by virtue of sub-section (4) of Section 12A of the Act was held contrary to the legislative intent of the Amendment Act of 2003.

Though Airports Authority can utilize the fees levied by it, for all or any of these purposes mentioned in clauses (a), (b) and (c) of Section 22A, what can be assigned by the Airports Authority to a lessee under a lease entered into under Section 12A of the 1994 Act is the power to levy fees for the purposes mentioned in clause (a) of Section 22 A of the 1994 Act.

The functions of the Airports Authority under clause (aa) of sub-section (3) of Section 12 also inserted by the Amendment Act of 2003 to 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 purposes cannot be assigned to the lessee under Section 12A of the 1994 Act. The Amendment Act of 2003 which also inserted Section 12A therefore provide in sub-section (1) of Section 12A that the Airports Authority can 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 Airports Authority may, in the public interest or in the interest of better management of airports, deem fit. The Supreme Court held that “a lease of premises of an airport” as contemplated in sub-section (1) of Section 12A could not include establishing an airport or assisting in establishment of private airports as contemplated in clause (aa) of sub-section (3) of Section 12 of the Act.

Since the lessee of an airport cannot be assigned the function of the Airports Authority to establish airports or assist in establishing private airports in lieu of the existing airports at which the development fees is being collected, the lessee cannot under sub-section (4) of Section 12A have the power of the Airports Authority under Section 22A of the 1994 Act to levy and collect development fees.

The High Court was not correct in coming to the conclusion in the  impugned judgment that the development fees to be levied and collected under Section 22A of the 1994 Act is in the nature of tariff or charges collected by the Airports Authority for the facilities provided to the passengers and the airlines. The nature of the levy under Section 22A of the 2004 Act, the Supreme Court held, was not charges or any other consideration for services for the facilities provided by the Airports Authority.  The levy under Section 22A though described as fees was really in the nature of a cess or a tax for generating revenue for the specific purposes mentioned in clauses (a), (b) and (c) of Section 22A. Article 265 of the Constitution which provides that no tax can be levied or collected except by authority of law get attracted in such case.

The Supreme Court thus held that until the rate of development fees was prescribed by the Rules, as provided in Section 22A of the 1994 Act, development fees could not be levied on the embarking passengers at the two major airports.

Section 22A of the 1994 Act before its amendment by the 2008 Act specifically provided that the development fees may be levied and collected at the rate as may be prescribed by the rules. Hence, the rate of development fees could not be determined by the Central Government in the two letters dated 09.02.2009 and 27.02.2009 communicated to DIAL and MIAL respectively.

The Supreme Court thus held that development fees could not be levied and collected by the lessees of the two major airports, namely, DIAL and MIAL, on the authority of the two letters dated 09.02.2009 and 27.02.2009 of the Central  Government from the embarking passengers under the provisions of Section 22A of the 1994 Act.  The Supreme Court declared that with effect from 01.01.2009, no development fee could be levied or collected from the embarking passengers at major airports under Section 22A of the 1994 Act, unless the Airports Economic Regulatory Authority determine the rates of such development fee.

The Supreme Court directed that DIAL and MIAL would account to the Airports Authority the development fees collected pursuant to the two letters dated 09.02.2009 and 27.02.2009 of the Central Government and the Airports Authority would ensure that the development fees levied and collected by DIAL and MIAL had been utilized for the purposes mentioned in clause (a) of Section 22A of the 1994 Act.