| Date | Version | December 27, 2022 | 2.0 |
| Keywords | ‘AERA’, ‘Powers and Functions’, ‘Tariff Determination’, ‘Seizure’ |
| List of Legislation Referred |
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| Jurisdiction | India |
The Indian civil aviation sector has been growing tremendously, and with the second-largest population, the total traffic at major airports is also massive.
The Naresh Chandra Committee recommended setting up a regulatory authority to reduce the burden on the Airports Authority of India, which had been performing the role of operator and regulator.
The Central Government set up the Airports Economic Regulatory Authority (AERA) to regulate tariffs and other applicable charges for the provision of aeronautical services at major airports.
The Airports Economic Regulatory Authority Act, 2008 (AERA Act) vests the AERA with certain powers.
This write-up examines the scope of powers vested in the AERA under the AERA Act.
“Powers” in Relation to “Functions”
Chapter III of the Act deals with the Powers and Functions of AERA.
Section 13 of the AERA Act lists the Functions of AERA, and the Powers of AERA are listed in Sections 14 through 16.
Section 14 gives AERA the power to inquire into the affairs of service providers, ask them to furnish information and even inspect the books of account or other documents.[1]
The powers listed in this Section are extensive in nature, giving AERA the right to call for information/explanation to assess performance, undertake inquiry in relation to affairs of the service provider and inspect its books.
These powers can be invoked whenever AERA considers it “expedient”.
It is argued that such power shall be exercised only to the extent it helps AERA discharge its functions under Section 13.
This would still allow AERA extensive powers; however, the same shall give the service providers some clarity for the scenarios where information can be sought from them.
It shall also act as a guiding principle for AERA to invoke these powers.
This issue was dealt with partially by the Supreme Court in the case of Delhi International Airport Ltd. v. Airport Economic Regulatory Authority of India[2] where the Court looked into the Project Costs that had been exceeding the original estimate regularly.
Such Project Costs continuously affected the Regulatory Asset Base, which is used for determining tariffs.[3]
Tariff determination is one of the primary functions of AERA; thus, AERA should have invoked the powers under Section 14(1)(a) and (b) to assess the performance of service providers.
“No independent study was conducted by AERA even though the same is a statutory obligation under the said Act. Escalated Project Costs had been allowed without conducting thorough prudence checks as mandated under the aforesaid provisions.”[4]
This failure on AERA’s part was considered a dereliction of duty.
Interestingly, these powers have been considered statutory obligations by the Supreme Court, making it mandatory for AERA to invoke these powers under some circumstances.
From the judgement, tariff determination appears to be one of the functions for which AERA can invoke powers under Chapter III.
AERA may enquire into any activity or function performed by a service provider if the same may affect tariff determination in any manner.
Powers in Relation to the Preamble
The Telecom Disputes Settlement and Appellate Tribunal, in the case of Bangalore International Airport Ltd. and Others v. Airport Economic Regulatory Authority of India, examined the power of AERA to issue directions to service providers to monitor their performance.[5]
In addition to tariff determination, the Tribunal also highlighted the Preamble of the AERA Act which states:
“to monitor performance standards of airports and for matters connected therewith or incidental thereto.”[6]
The Tribunal further held:
“Monitoring of timely completion of vital projects like a terminal building has intrinsic relationship with performance of airports.”[7]
It was held that experts shall be used by AERA to constantly keep an eye over the aeronautical activities at the airports as AERA shall always act as a custodian of airport user interests.
Public interest is of great significance in determining tariffs.
AERA shall take these steps to ensure that no wrong or reckless costs are being imposed, the burden of which shall be borne by the users.
The Tribunal also held that AERA could exercise the power of seizure under Section 16 for such matters.[8]
Powers of Seizure
The power of seizure under Section 16 is exercisable only with respect to the subject matter of the inquiry.[9]
The AERA Act offers no clarification whether the inquiry mentioned in the Section is the same as the one made under Section 14(1)(b) of the Act.
The power of seizure under Section 16 is subject to Section 100 of the Code of Criminal Procedure, 1973, which deals with “Persons in charge of closed place to allow search”.[10]
Section 100 lists certain procedural safeguards in case of such a search, such as:
- Presence of two inhabitants as witnesses
- Preparation of a list of seized materials
- Power to search the body of individuals
It must be noted that non-compliance with some of these procedural requirements does not automatically make the seizure void or unlawful.
On numerous occasions, the Supreme Court has held that prosecution shall not be vitiated merely because some procedural safeguards were not followed.[11]
Therefore, the power granted under Section 16 also includes the power to search premises thoroughly in order to conduct an effective inquiry.
Viewpoint
- The AERA Act has granted wide discretion (arguably unbridled) to AERA to use these powers whenever it considers it expedient to do so.
- In some cases, it is also the obligation of AERA to use these powers, such as tariff determination and monitoring performance at the airport.
- It would be logical to argue that AERA shall not use its powers for any purpose as it deems fit, but only in accordance with the functions vested in it under Section 13 and the Preamble of the AERA Act.
- The Supreme Court has clarified that on certain occasions these powers become obligatory to ensure that tariffs are being determined correctly.
- As airports in India transition into a regime involving private participation, AERA must be vigilant in exercising its powers to ensure performance standards are maintained and users are not burdened with unnecessary charges.
- At the same time, these powers should not be interpreted so broadly that they discourage private participation in the aviation sector.
- Private service providers also play a crucial role in maintaining and improving airport performance standards.
- Their commercial interests require protection for an effective public-private participation framework to thrive.
References
[1] Sec. 14, Airports Economic Regulatory Authority Act, 2008.
[2] MANU/SC/0849/2022.
[3] Para 132, Delhi International Airport Ltd. v. Airport Economic Regulatory Authority of India, 2022.
[4] Para 139, Delhi International Airport Ltd. v. Airport Economic Regulatory Authority of India, 2022.
[5] Bangalore International Airport Ltd. v. Airports Economic Regulatory Authority, 2020 (MANU/TD/0016/2020).
[6] Preamble, Airports Economic Regulatory Authority Act, 2008.
[7] Para 54, Bangalore International Airport Ltd. v. Airports Economic Regulatory Authority, 2020.
[8] Para 55, Bangalore International Airport Ltd. v. Airports Economic Regulatory Authority, 2020.
[9] Sec. 16, Airports Economic Regulatory Authority Act, 2008.
[10] Sec. 100, Code of Criminal Procedure, 1973.
[11] Appabhai and Anr. v. State of Gujarat (AIR 1988 SC 696).
Suniti Kaur (Ms) and Ashwini Panwar (Mr)
Co-Founder & Managing Partner at Alaya Legal
