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Judgment
D.N. Patel, Chairperson
This Appeal has been preferred against the Order No.9/2023-24 dated 14.6.2023 (Annexure A-1). The impugned order is for levy of the Development Fee (hereinafter referred to as “DF” for the sake of brevity) for Project Work and Metro connectivity project at Chhatrapati Shivaji Maharaj International Airport, Mumbai by the Airports Economic Regulatory Authority of India [Hereinafter referred to as AERA for the sake of brevity (respondent no.1)].
Having heard the counsels for both the sides and looking to the facts and circumstances of the case, this Appeal has already been admitted vide our order dated 9.11.2023 and this appellant has insisted for the final hearing of the appeal.
We are already in the midst of other final hearing and, therefore, we are unable to take up this matter for its final hearing and we are fixing the date of final hearing.
Learned Senior counsel for the appellant has submitted that by the virtue of the impugned order which is at Annexure A-1, the levy of the DF has been restricted by the respondent no.1 up to 31.12.2023 and, therefore, let this collection of DF be extended till end of February, 2024 and meanwhile, this AERA Appeal may be heard finally.
So far as this prayer of this appellant is concerned, we have heard counsels for the appellant as well as of the Airports Economic Regulatory Authority of India (AERA) at length.
Looking to the facts and circumstances of the case, it appears that notice inviting tenders were given in the years 2004-05 by Airports Authority of India (AAI) inviting tenders from private participants for operating, maintaining, designing, constructing, upgrading, modernizing, financing and managing Chhatrapati Shivaji Maharaj International Airport, Mumbai.
In pursuance of this notice inviting tender, a private consortium Mumbai International Airport Limited (Hereinafter referred to as MIAL for the sake of brevity) had entered into an agreement for Operation, Management and Development Agreement (Hereinafter referred to as OMDA for the sake of brevity) with Airports Authority of India (AAI) respondent no.2 on 4.4.2006.
On 26.4.2006, State Support Agreement (SSA) was executed between Ministry of Civil Aviation acting on behalf of the President of India and this appellant.
Counsels for both the appellant as well as AERA has taken this Tribunal to various averments made in the memo as well as in the reply and rejoinder along with annexures annexed with the appeal, reply and rejoinder.
As this is interim relief stage, we are not going into the fine nicety of the facts and we are not going to deal with all the arguments canvassed by the learned counsels for both the sides in detail.
To bridge the funding gap between the project cost and the equity and the debt incurred by this appellant, the DF was permitted to be recovered from the Domestic and International passengers. Rs.100 for every Domestic Embarking passenger and Rs.600 for every International Embarking passenger was permitted to be recovered by the Airlines and this amount was permitted to be recovered with effect from 1.4.2009 onwards.
This amount is to be deposited in a separate Escrow Account, the utilization of which is monitored by AAI. This amount is not going directly in the hands of this appellant. Only with the approval of the AAI, this amount can be withdrawn and can be utilized for the specific purposes approved by AAI and detailed accounts are being maintained and details about the use of this DF is to be given to AAI.
It further appears from the facts of the case that initially an order was passed which is known as Development Fee order no.29/2012-13 dated 21.12.2012 (Annexure A-12 to the memo of the appeal).
For the ready reference, paragraph no.5.135 and 5.136 of the aforesaid Development Fee order reads as under:-
“5.135. For the present calculation, the Authority has reckoned the amount of Rs.2515.00 crore on NPV basis (Calculation Vide Table 12) for the purposes of calculation of the time period as well as the total allowable DF to be billed (which would also represent interest component, as is explained in para 5.129). These calculations are based on the traffic forecast as considered by the Authority at time of Consultation Paper - 22/2012-13 dated 11.10.2012 (Calculations vide Table 14). The Authority has also reckoned interest @11.25%, as MIAL has informed, it being contracted interest rate with the lenders.”
“5.136. To summarise, therefore, the Authority would calculate the amount of Rs. 2515.00 crores on NPV basis with an interest rate of 11.25% and taking the tariff projections as assumed by it in its Consultation Paper-22/2012-13 dated 11.10.2012. The total period for which the DF billing would be allowed to cover the amount of Rs.2515.00 crores on NPV basis as of 01.01.2013 extends upto April 2021. According to the above calculations, the total amount of DF billing allowed is therefore estimated at Rs. 3845.50 crore of which Rs. 2515.00 crore will represent the balance DF as on 01.01.2013, the remaining amount of Rs.1330.50 crore representing the interest component (vide Table 14), it is also clarified that the interest calculations in this table are based on monthly interest rate at 0.89%. The total amount of interest to be paid to the lenders on the securitization of the DF would however be limited to the actual interest paid by MIAL based on the factors like periodicity of paying Interest (Quarterly or half-yearly interest)”
(Emphasis Supplied)
It appears from the aforesaid DF order that the DF was to be recovered on or before April, 2021.
Time to recover the Development Fee has already been extended by various orders as under:
i. 24.3.2021;
ii. 28.3.2022;
iii. 30.6.2022;
iv. 29.3.2023 and
v. 14.6.2023
Thus, the DF is being permitted to be collected right from 2009 onwards till December, 2023.
Now, the question arises whether any DF is yet to be recovered by this appellant or not. For this, at length the arguments have been canvassed by the counsel for the appellant as well as by the counsel for AERA in detail with all mathematical nicety and statistical accuracy. The facts and figures have been pointed and it is submitted by the counsel for the appellant that they have yet to recover the DF because the DF is nothing but a funding gap between the total cost of the of the project and the amount of equity and debt incurred by this appellant whereas it is submitted by the counsel for the respondent-AERA that the DF which was permitted to be recovered, has already been recovered.
Thus, much has been argued out about the amount to be recovered towards the DF. For the ready reference, the calculation of DF, as summarized by the counsel for the appellant, reads as under:
“THE RESPONDENT NO.1/AERA’S APPROACH OF CALCULATION OF BALANCE DF BILLABLE AMOUNT (Figures in INR Crores)
Actual Billing
Opening Loan
Interest Rate as per AERA
Interest payment
@11.25%
Principal Repayment
Closing Loan
A
b
c
d
e=a-d
f=a-e
2013
345
2603
11.25%
195.2
150.2
2453
2014
370
2453
11.25%
257.0
112.5
2340
2015
408
2340
11.25%
242.3
165.4
2175
2016
438
2175
11.25%
222.3
215.8
1959
2017
472
1959
11.25%
179.4
292.6
1666
2018
505
1666
11.25%
138.4
366.8
1300
2019
488
1300
11.25%
109.4
378.8
921
2020
163
921
11.25%
45.1
117.7
865
2021
121
865
11.25%
90.2
30.4
835
2022
381
835
11.25%
73.7
307.8
527
2023
43
527
11.25%
4.4
38.4
488
ACTUAL SCENARIO BASED ON ACTUAL INTEREST RATE (Figures in INR Crores)
Actual Billing
Opening Loan
Actual interest
rate
Interest based on actual
interest rate
Principal Repayment
Closing Loan
A
b
c
e=a-d
f=a-e
2013
345
2603
12.03%
223.5
121.8
2481
2014
370
2481
12.39%
303.4
66.1
2415
2015
408
2415
12.22%
288.3
119.4
2296
2016
438
2296
12.03%
266.8
171.3
2124
2017
472
2124
10.27%
207.1
264.9
1859
2018
505
1859
9.26%
157.0
348.1
1511
2019
488
1511
9.73%
131.0
357.3
1154
2020
163
1154
10.34%
57.4
105.5
1110
2021
121
1110
10.53%
117.5
3.1
1107
2022
381
1107
10.19%
102.9
278.6
829
2023
43
829
10.00%
6.9
35.9
793”
(Emphasis Supplied)
In view of the aforesaid submissions, it is vehemently contended that let this amount of the DF which is yet to be recovered, be permitted to be recovered up to 29.2.2024. This contention has been opposed vehemently by the counsel for the respondent no.1 and has submitted at length that there is a mistake in calculation of this appellant because of two factors. The Factor no.1 as per AERA
is that this appellant has not properly calculated the amount of the DF for the period running from May, 2012 to July, 2012 and the second mistake pointed out by the counsel for the AERA is the rate of interest applied upon the securitization of billing amount of DF.
It is further submitted by the counsel for the AERA that the cost of debt on the Project Term Loan is much lesser than 11.25% and, therefore, there cannot be a demand of more than 11.25% of interest upon the cost of debt on Development Fee Loan.
Prima Facie, we are not accepting the arguments canvassed by the counsel for the AERA mainly for the reason that the cost of debt on a Project Term Loan and cost of debt for the Development Fee Loan are entirely different. As this is not a final hearing stage, we are not going into the fine nicety of this contention, but, suffice it to say that Project Term Loan is having a security of the infrastructure and constructions whereas Development Fee Loan has no such security. The rate of interest depends upon the variety of factors and, therefore, there cannot be a mathematically one figure of the cost of debt, for both, Project Term Loan as well as for Development Fee Loan and that too same rate of interest for several years to come. Prima Facie, this is not tenable at law, more particularly, looking to the aforesaid Development Fee order dated 21.12.2012 (Annexure A-12 to the memo of this appeal), especially looking to paragraph nos. 5.135 and 5.136 of this Development Fee order.
It appears from this order dated 21.12.2012 that the total of the amount of interest to be paid to the lenders on the securitization of the DF would be limited to the actual interest paid by MIAL. Meaning thereby to there was no upper limit like 11.25% in the order of Development Fee dated 21.12.2012. This constitutes Prima Facie case in favour of this appellant.
Annexure A-13 and A-14 to the memo of this appeal refer to a letter of IDBI Bank Ltd. to AERA and the reply of AERA to IDBI Bank Ltd. dated 10.1.2013 and 23.1.2013 respectively. Prima Facie, looking to these annexures, it appears from Annexure A-14, which is a reply given by AERA, that the actual rate of interest paid by MIAL is to be considered.
Thus, Prima Facie, the capping of 11.25% interest on cost of debt is running counter to the DF order dated 21.12.2012 and is also running counter to Annexure A-14 to the memo of this appeal.
In view of the aforesaid discussions, facts and reasons, Prima Facie, sizeable amount of Development Fee is yet to be recovered by this Appellant.
Moreover, looking to the order passed by this Tribunal in AERA Appeal no.2/2013, Judgment dated 16.7.2020 paragraph no.6 and 9 thereof read as under:
“6. So far as rate of interest at 11.25% is concerned, on behalf of AERA it was explained that the same rate of interest finds mention in the loan agreement; it was prevailing at the time of the Order and it was also projected in the demand papers submitted by MIAL. The Regulator has sufficient powers to take care of impact of some changes either way in the rate of interest in future, if the impact is significant and requires consideration. According to learned counsel, this issue also has no merits so as to require any interference with the exercise fairly done by AERA in arriving at the allowable Project Cost at Rs.3400 crores and the rates of DF as Rs.100/-per embarking domestic passenger and Rs.600/-per embarking international passenger,w.e.f.01.01.2013.
So far as rate of interest is concerned, the issue is found to be non-substantial and of no practical effect. Changes in the rate of interest in future cannot be predicted and if changes have taken place, the effect can always be trued-up in future if the effect is substantiated and requires redressal at the hands of AERA. Hence, none of the three issues that have been agitated are found to have any merit, particularly in the light of judgment dated 20.03.2020 rendered in the case of DIAL."
(Emphasis Supplied)
In view of the aforesaid order also, there is a Prima Facie case in favour of this appellant. There is also an averment made by this appellant that for Delhi International Airport Limited (Hereinafter referred to as DIAL for the sake of brevity), AERA has allowed 11.75% interest whereas in the case of MIAL-appellant, AERA has limited the rate of interest at 11.25% p.a.
Moreover, looking to the Airports Authority of India (Major Airports) Development Fee Rules, 2011 [Hereinafter referred to as “The Rules, 2011” (Annexure A-7 to the memo of this appeal)], the DF is to be recovered from every passenger by the Airlines. This amount is to be deposited in a separate Escrow Account. For the withdrawal of this amount, details are to be supplied by this appellant to AAI and thereafter, AAI will permit the withdrawal of the amount by this appellant for the specific end use of this DF.
Meaning thereby to, if the DF is permitted to be recovered till 29.2.2024, the amount will go in Escrow Account and the withdrawal will have to be permitted by AAI.
Thus, the DF is never going directly in the hands of this appellant. There is a full regulation, control and monitoring by AAI for the usage of this Development Fee and therefore, Prima Facie, no question of misuse of the DF whatsoever arises.
So far as permission to collect DF @ Rs.100 per Domestic Passenger and Rs.600 for International passenger is concerned, if the recovery is not allowed as on today and if the Appeal is allowed at the time of final hearing, perhaps it will be impossible for this appellant to recover DF through Airlines from the Domestic as well as International passengers, at later stage.
Thus, there will be irreparable loss to this appellant. Balance of convenience is also in favour of this Appellant.
We, therefore, permit this appellant to continue to levy DF @ Rs.100 per Domestic Embarking Passenger and Rs.600 per International Embarking Passenger till 29.2.2024 on the condition that this amount shall be deposited in an Escrow Account and the utilization and the withdrawal of this amount shall be as per the permission granted by AAI and it will be as per “The Rules, 2011”. Moreover, this appellant shall maintain accurately the accounts for the DF collected through the Airlines for the period running from 1.1.2024 to 29.2.2024 and this account shall be presented by this appellant before AAI.
We hereby direct the Registry of this Tribunal to enlist this matter under the head “For Hearing” on 30.1.2024.