Court Allows Delhi Airport To Suspend Payments To AAI By Invoking Force Majeure
The Delhi High Court granted Delhi International Airport Ltd. interim relief, allowing it to suspend payments to the Airports Authority of India by invoking force majeure during the pandemic.
A high court bench comprising Justice C Hari Shankar directed the AAI and its banker, ICICI Bank Ltd., to return amounts which were collected from the airport operator’s proceeds account and transferred to the AAI’s fee account after Dec. 9 and has restricted them from making new fund transfers.
The court said the interim relief won’t affect the final outcome of the case which involves a larger set of disputes.
The case emanates from a 2006 agreement for the development and management of the Indira Gandhi International Airport in New Delhi, which was signed between DIAL and the AAI. Accordingly, the operator had to pay a “monthly annual fee”—or an annual fee divided into monthly installments—to the AAI during the contract’s duration.
As per the agreed terms:
- DIAL agreed to open an escrow account with ICICI Bank and deposit its receivables there.
- ICICI Bank would then transfer the receivables to the proceeds account.
- Funds in the proceeds account would then be classified as statutory dues, annual fees, management fees and then transferred to the AAI’s accounts every month.
DIAL invoked the force majeure clause in March last year, requesting the AAI to allow deferral on payment of the installments throughout the pandemic period, stating its ability to service obligations under the agreement were affected. The airports authority, however, only allowed for a deferral of fees relating to three months, prompting the operator to move court.
The AAI was earlier involved in a similar dispute with Mumbai International Airport Ltd. The court had then ruled in favour of MIAL citing the pandemic was a force majeure situation—an unforeseeable incident or circumstance that prevents a party from fulfilling a contract.
Entitled To Relief On Grounds Of Force Majeure, Says DIAL
Tushar Mehta, the solicitor general of India, opposed the airport operator’s plea stating that:
- DIAL is in a much better financial shape compared to the operator of Mumbai International airport. The company was capable of performing its obligations under the agreement as its balance sheet indicated a reserve of more than Rs 1,800 crore.
- The airport operator failed to make a case that it was unable to perform its obligations due to force majeure.
Abhishek Manu Singhvi, senior counsel representing DIAL, countered AAI’s arguments on the following grounds:
- The airport operator was entitled to relief on grounds of force majeure since the disputed facts in the present case were similar to an earlier case in which the high court had ruled in favour of Mumbai airport operator.
- A significant portion of cash in its balance sheet was required for the development of the international airport in New Delhi.
- As such, the reserves cannot be utilised for payment of the monthly annual fees.