Airports Authority Of India vs Mumbai International Airport Limited

Headnote AI-drafted · Reviewed and approved

The Airports Authority of India (AAI) filed two petitions under Section 34 of the Arbitration and Conciliation Act, 1996 challenging Awards dated 16 July 2022 (as corrected on 29 August 2022) made by an Arbitral Tribunal comprising three former Supreme Court Justices in disputes with Delhi International Airport Ltd. (DIAL) and Mumbai International Airport Ltd. (MIAL) respectively. The disputes arose under the Operation, Management and Development Agreement (OMDA) and related agreements concerning the computation of Annual Fee/Minimum Annual Fee payable by the Joint Venture Companies to AAI, specifically the interpretation of 'Revenue' under the OMDA and whether capital costs, depreciation, interest on borrowed funds, return on equity, User Development Fee and Passenger Service Fee should be excluded therefrom. The Tribunal rendered split awards, with the majority holding that amounts representing costs relating to aeronautical assets, including sums from borrowed capital with interest and equity towards aeronautical asset costs, were to be excluded from shareable revenue for computing the Annual Fee.

The Court examined the scope of interference under Section 34, the proper interpretation of 'Revenue' as defined under the OMDA, the treatment of 'Other Income', payments to relevant authorities, and receipts for provision of utilities such as electricity, water and sewage, and the role of the Independent Auditor under the contractual framework. The Court also considered the role of the Airports Economic Regulatory Authority (AERA) in the regulatory regime governing the airports.

The petitions called for detailed analysis of the arbitral record, the OMDA and State Support Agreement, the submissions of AAI and DIAL/MIAL, and the majority and minority opinions of the Tribunal, before the Court arrived at its conclusions on each of the contested issues arising from the impugned awards.

Catchwords: Arbitration · Section 34 · setting aside award · Operation Management and Development Agreement · OMDA · Annual Fee · Revenue · aeronautical charges · capital costs · depreciation · User Development Fee · Passenger Service Fee · Joint Venture Company · airport privatisation · AERA · Independent Auditor · majority award · minority award · interpretation of contract

Arbitration and Conciliation Act