Disclaimer: This has been reported after the availability of the order of the Court and not on media reports so as to give an accurate report to our readers.
Madras High Court: In the writ petitions seeking certiorarified mandamus to quash the impugned letter and direct Airport Authority of India (AAI) to permit continuation of multiplex operations under the Development Agreement and the Sub-License Deed, a single-Judge bench of M. Dhandapani, J., held that there is no prohibition under Airports Authority of India Act, 1994 (AAI) for establishment of multiplexes in the airport premises. The Court directed the AAI to refer the multiplex closure issue to the Centre and continued status quo pending policy.
Factual Matrix
In the instant matter, the AAI issued an RFP/NIT for development of a Multi-Level Car Parking Complex (MLCP) with “integrated commercial infrastructure” on a Design, Build, Operate and Maintain (DBOM) basis, explicitly listing permissible commercial activities and not treating cinema halls as a prohibited activity. The project was designed to elevate the overall passenger experience to international standards.
Following Respondent 2’s successful bid, a Development Agreement dated 20-06-2018 was executed, granting the concessionaire rights to “design, construct, operate and maintain” the MLCP with integrated commercial components, and also permitting sub-licensing.
AAI itself took proactive steps facilitating establishment of a cinema multiplex, including obtaining Environmental Clearance dated 21-12-2018 for a Cinema Multiplex within MLCP, approving architectural drawings in 2019 and 2021 that explicitly provided for the establishment of a cinema hall and sending a letter on 20-07-2021 to the Commissioner of Police requesting Location NOC for a 5-screen multiplex, noting that the cinema was “an integral element of the development of the Chennai Airport in line with world class standards.”
The independent engineer of AAI approved the draft sub-license agreement between Respondent 2 and the petitioners. The Sub-License Deed dated 15-11-2022 granted exclusive rights to operate a 5-screen multiplex for 13.5 years, co-terminus with the Development Agreement. The petitioners began commercial operations on 01-02-2023 after receiving requisite Form ‘C’ licences under the Tamil Nadu Cinemas (Regulation) Rules.
On 21-07-2023, AAI directed closure of the multiplex “with immediate effect,” stating that “running of Cinema Hall is not permissible under the AAI Act,” without citing any specific statutory provision.
Subsequently, Respondent 2 terminated the Development Agreement on 15-05-2025, informing petitioners that AAI would take over the MLCP from 30-05-2025. The petitioners protested, stating that their rights under the Sub-License must continue in an unfettered and unhindered manner.
The petitioners challenged the AAI’s letter dated 20-06-2025, by which AAI directed cessation of operations of the multiplex housed in the Multi-Level Car Parking Complex (MLCP) at Chennai Airport. The petitioners had earlier secured an interim order of status quo on 16-06-2025, however, after the Arbitral Tribunal vacated interim protection on 10-06-2025, AAI issued the impugned communication rejecting the petitioners’ plea for continuation.
Despite the Court’s interim status quo, AAI issued the impugned letter dated 20-06-2025, reiterating that cinema operations are impermissible under the AAI Act. The petitioners termed it “manifestly arbitrary, discriminatory and perverse,” extinguishing a lawful business without due process.
Moot Points
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Whether the cinema multiplex is situated within the ‘Airport’ as defined under Section 2(b) of the AAI Act?
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Whether Section 12 of the AAI Act expressly prohibits running a cinema multiplex within airport premises?
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Whether AAI’s impugned action violates Articles 14 and 19(1)(g) and the doctrines of promissory estoppel/legitimate expectation?
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What is the effect of the termination of the Development Agreement on the petitioner’s Sub-License rights?
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What directions should be issued balancing contractual rights with public law considerations?
Court’s Analysis
The Court examined the long chain of affirmative acts undertaken by AAI and noted that the record “would be evident” that AAI had, all along, been inclined to permit the establishment of a cinema multiplex within the MLCP. The Court observed that AAI not only approved architectural drawings and aided in obtaining environmental clearance, but also “addressed communication dated 20-07-2021 to the Commissioner of Police requesting the issuance of a location No Objection Certificate” for a five-screen multiplex and emphasised that the facility was “an integral element of the development of the Chennai Airport in line with world class standards.”
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Whether MLCP falls within the ‘Airport’
The Court examined Section 2(b) of the AAI Act and the nature and location of the Multi-Level Car Parking (MLCP) facility. The Court noted that while the petitioners emphasised that MLCP revenues were excluded from aeronautical tariff determination, the Court held that tariff treatment cannot determine statutory classification.
The Court observed that the MLCP forms part of the “premises of the airport” and that the definition of ‘airport’ is broad enough to include “any area of land or water intended for use wholly or partly for the arrival, departure or movement of aircraft and includes all buildings, installations and equipment in that area.” Thus, the MLCP, though used for parking and commercial activity, remains physically and functionally integrated within the airport complex.
The Court held that the multiplex housed within the MLCP is situated within the airport premises for purposes of statutory interpretation. However, the Court clarified that even if the facility forms part of the airport, this does not automatically lead to a prohibition on a multiplex unless such prohibition is expressly contained in the Act or issued through a valid policy.
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Whether Section 12 prohibits cinema multiplexes
The Court found that AAI relied on Section 12(3) but had never identified the specific clause prohibiting cinema operations. The Court examined AAI’s reliance on letter dated 21-07-2023 and noted that this letter contained a “conspicuous absence… with regard to the relevant provision under which such prohibition is contained.”
The Court observed that Section 12(3) deals with regulation, control, and management of airport operations and nowhere does Section 12 contain an express bar on multiplexes. The Court stated that policy determination on whether multiplexes may operate inside airport premises cannot be unilaterally decided by AAI, but must be addressed by the Central Government under the Ministry of Civil Aviation.
The Court emphasised that AAI had itself approved architectural plans, environmental clearance, location NOC requests, and sub-license drafts, demonstrating that AAI never considered multiplex operations impermissible under the Act for several years.
The Court held that Section 12 does not expressly prohibit the running of a cinema multiplex within airport premises. The Court further held that any prohibition must come from a uniform national policy, not from AAI’s unilateral executive interpretation.
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Legitimate Expectation & Estoppel
The Court observed that AAI had, over several years, approved the architectural drawings (2019, 2021), obtained environmental clearance specifically for a “Cinema Multiplex,” sought a Location NOC from police describing the cinema as “an integral element of the development of the Chennai Airport in line with world class standards,” and permitted execution of the Sub-License after approval by its independent engineer. The Court asserted that this long chain of AAI’s conduct created a legitimate expectation in favour of the petitioners that cinema operations were permissible.
The Court relied on the doctrine that public authority behaviour must be “consistent, transparent, and predictable to avoid being regarded as arbitrary.” The Court stated that any arbitrariness or abrupt reversal without justification violates Article 14.
On Article 19(1)(g), the Court tool into account the petitioners’ investments and stated that closure would cause “immeasurable damages… loss of capital, loss of revenue, loss of goodwill and reputation.”
The Court found AAI’s impugned action to be unsupported by statutory authority and taken without any publicly declared policy. The Court held that —
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AAI’s sudden reversal of its long-standing approvals was arbitrary,
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the action violated Article 14 of the Constitution,
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the petitioners’ legitimate expectation had been frustrated without justification, and
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the closure order disproportionately restricted the petitioners’ right under Article 19(1)(g) of the Constitution.
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AAI’s impugned action was unsustainable in public law.
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Effect of Termination of Development Agreement
The Court noted that the sub-license was co-terminus with the Development Agreement. The Court observed that termination cannot become a post-facto justification for AAI’s arbitrary conduct. The Court further stated that AAI could not take advantage of the termination “to evade its obligations,” particularly when AAI itself had challenged that termination before the Arbitral Tribunal.
The Court held that termination does not automatically extinguish the petitioners’ rights until the legality of termination is determined in the arbitration process. The Court held that petitioners’ Sub-License rights cannot be defeated merely because AAI changed its stance on permissibility of multiplex operations. The Court asserted that any consequences of termination would apply only after the Central Government’s policy decision and after parties invoke their contractual remedies.
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Need for Central Government Policy
The Court stressed that the question of permitting multiplexes within airport premises “is not one that can be decided in isolation,” but requires a holistic national-level policy and must account for security considerations, passenger movement, international practice, revenue models and commercial planning and uniformity across airports.
The Court further emphasised that the petitioners would suffer “immeasurable damages on account of loss of capital expenditure, loss of revenue, loss of profits, loss of goodwill and reputation” if forced to shut down pending policy determination. Thus, the Court held that equitable considerations required continuation of status quo.
Court’s Decision
The Court did not either permit the multiplex to operate unconditionally or allow AAI to shut it down immediately. Instead, the Court issued the following directions —
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AAI should place the issue before the Ministry of Civil Aviation within four weeks, with due emphasis on Section 12(3), for a policy decision on allowing multiplexes within airport premises.
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The Ministry of Civil Aviation should take a policy decision expeditiously.
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Status quo in favour of the petitioners should continue until such policy decision is taken.
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If the Ministry permits multiplexes, AAI must negotiate with petitioners under Clause 42.2 of the Development Agreement for continuation of the Sub-License.
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If multiplexes are prohibited as a matter of policy, petitioners may pursue remedies against the respondent 2, and the respondent 2 may pursue claims under contract.
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Connected miscellaneous petitions were closed with no order as to costs.
[PVR INOX Ltd. v. AAI, W.P. Nos. 22968 & 23060 of 2025, Decided on 09-12-2025]
Advocates who appeared in this case:
Mr. P.S. Raman, SC, for M/s. Arva Merchant, Counsel for the Petitioner in WP No.22968/2025
Mr. Sathish Parasaran, SC, for M/s. Arva Merchant, Counsel for the Petitioner in WP No.23060/2025
Mr. AR.L. Sundaresan, ASG assisted by Mr. Ramaswamy Meyyappan, Counsel for the Respondent No. 1
Mr. Abhishek Jenasenan, Counsel for the Respondent No. 2
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