Delhi, Mumbai airports get HC notice in Airports Authority’s revenue sharing plea

New Delhi: The Delhi high court’s division bench on Wednesday issued notices to Delhi International Airport Ltd and Mumbai International Airport Ltd, subsidiaries of GMR Airports Ltd and Adani Airport Holdings Ltd, respectively, in response to a petition filed by the Airports Authority of India (AAI) over the revenue-sharing model. 

The petition challenged a 2022 arbitral award that ruled against AAI. The bench, led by chief justice Manmohan, deferred the hearing to 29 January after the airports informed the court that they would not enforce the arbitral award until further orders.

The dispute centres around confusion in the revenue-sharing model between the airports and the AAI under the operation, management, and development agreement of 2006. 

The case reached the division bench after a single judge of the high court, in October, refused to interfere with the arbitral award and dismissed AAI’s challenge. 

Dissatisfied with the outcome, AAI approached the division bench to contest the decision.

The background

In 2006, the government, aiming to enhance airport infrastructure, invited private firms to operate and develop major airports. As part of this initiative, AAI entered into joint ventures with private entities, forming Delhi International Airport Ltd for the Indira Gandhi International Airport (led by GMR Group) and Mumbai International Airport Ltd for the Chhatrapati Shivaji Maharaj International Airport (initially led by GVK Group and later acquired by Adani Airport Holdings).

Under the operation, management, and development agreement, the JVs were required to pay an annual fee to AAI as a percentage of “projected revenue” outlined in their business plans. This revenue-sharing arrangement was central to the agreement. Additionally, a state support agreement and nine other covenants were signed, collectively forming the project agreements.

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The dispute

The disagreement arose over the interpretation of the term ‘revenue’ in agreement, which determined how the annual fee payable to AAI would be calculated. While the agreement defined “revenue” as all pre-tax gross revenue with specific exclusions, the JVs argued that they had been mistakenly paying the annual fee based on their gross receipts instead of the “projected revenue” outlined in the business plans.

Delhi Airport asserted that it had overpaid ₹6,663.25 crore by calculating the annual fee on gross receipts instead of projected revenue. This overpayment was allegedly realized only in September 2018.

Also Read: Mumbai Airport claimed an overpayment of ₹3,582.92 crore due to the same miscalculation.

Arbitral order

The dispute was referred to arbitration, where a tribunal comprising three former Supreme Court judges delivered a majority opinion in favour of the JVs. The tribunal ruled that the annual fee should have been based on projected revenue as per the business plans. It acknowledged the significant overpayments claimed by the two airports.

The tribunal also noted that the JVs had been paying the annual fee based on gross receipts for several years before realizing the alleged error.

The minority opinion in the tribunal, however, differed, acknowledging Mumbai airport's claim of overpayments but disagreeing with the majority ruling.

This led to the arbitral award being challenged in the high court. 

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