Civil Aviation

Case BriefsCOVID 19Supreme Court

Supreme Court: The 3-judge bench of Ashik Bhushan, R. Subhash Reddy, JJ has directed full refund of air tickets booked during lockdown period i.e. from 25th March, 2020 to 24th May, 2020 for travel during lockdown period. The order of the Court came after accepted Directorate General of Civil Aviation’s (DGCA) proposal of

To contain the pandemic situation of COVID¬19, lockdown was imposed by the Government of India, from 25th March 2020 to 14th April 2020 which was later extended upto 03rd May 2020.  A ban was also imposed on operation of all domestic and international flights. There was an issue of refund of air fare during the lockdown period, when domestic and international flights’ operation was suspended. The Ministry of Civil Aviation (MoCA), while acknowledging the unusual situation that has arisen due to the lockdown imposed, to contain further spread of COVID¬19 and its consequential effect on the air passengers and airlines, by examining the grievances received from various quarters, issued an advisory to all stake holders in civil aviation sector in the shape of Office Memorandum dated 16th April 2020.

The present writ petition was filed to declare the action on the part of the respondent-airlines, operating domestic as well as international flights in India, in not refunding the full amount collected for the tickets, due to the cancellation of flights in the wake of restrictions imposed by the Government of India to contain COVID-19 as arbitrary and in violation of Civil Aviation Requirements, issued by the Directorate General of Civil Aviation. A consequential relief was sought to direct the respondents to refund the full amount upon such cancellations.

The Court noticed that in ordinary course modalities and timelines for refund on cancellation of tickets are governed by, the Civil Aviation Requirements, i.e. CAR dated 22nd May 2008; 06th August 2010 as revised on 27th February 2019, and the said Requirements are issued by the competent authority in exercise of powers under the provisions of Aircrafts Act, 1934 and the Rules made thereunder.

It, however, said that

“… we cannot lose sight of the present situation prevailing in the country and across the globe, i.e. the effect of pandemic COVID-19.  It cannot be disputed that the civil aviation sector, which is one of the important sectors, is seriously affected in view of the ban imposed for operating flights. Added to the same, air passenger traffic has come down heavily and which is gradually being restored.  At this moment any strict enforcement action of the CARs would further restrict/reduce their operations and such enforcement action may further jeopardise the possibilities of generation of cash by airlines which can further adversely affect/delay the refund cycle. “

Strict enforcement of Civil Aviation Requirements at this moment may not yield any meaningful result for any stake holder.  Hence, in view of the suggestions and formulations arrived at in the meetings held by Union of India and DGCA, which are acceptable to the majority of stake holders, the Court directed that the same have to be implemented in letter and spirit since such formulations are workable solutions in these peculiar circumstances which are prevailing in the country.

DIRECTIONS ISSUED

  1. If a passenger has booked a ticket during the lockdown period (from 25th March, 2020 to 24th May, 2020) for travel during lockdown period and the airline has received payment for booking of air ticket for travel during the same period, for both domestic and international air travel and the refund is sought by the passenger against that booking being cancelled, the airline shall refund the full amount collected without any cancellation charges. The refund shall be made within a period of three weeks from the date of cancellation.
  2. If the tickets have been booked during the lockdown period through a travel agent for a travel within the lockdown period, in all such cases full refund shall be given by the airlines immediately. On such refund, the amount shall be passed on immediately by the agent to the passengers.
  3. Passengers who booked tickets at any period of time but for travel after 24th May, 2020 – refund of fares to the passengers covered under this category shall be governed by the provisions of Civil Aviation Requirements (CAR).
  4. Even for international travel, when the tickets have been booked on an Indian carrier and the booking is ex¬India, if the tickets have been booked during the lockdown period for travel within the lockdown period, immediate refund shall be made.
  5. If the tickets are booked for international travel on a foreign carrier and the booking is ex¬India during the lockdown period for travel within the lockdown period, full refund shall be given by the airlines and said amount shall be passed on immediately by the agent to the passengers, wherever such tickets are booked through agents. In all other cases airline shall refund the collected amount to the passenger within a period of three weeks.
  6.  In all other cases, the airlines shall make all endeavours to refund the collected amount to the passenger within 15 days from today. If on account of financial distress, any airline / airlines are not able to do so, they shall provide credit shell, equal to the amount   of   fare   collected,   in   the   name   of passenger when the booking is done either directly by the passenger or through travel agent so as to consume the same on or before 31st March, 2021.  It is open to the passenger either to utilize such credit etc. shell upto 31st  March, 2021 on any route of his choice or the passenger can transfer the credit shell to any person including the travel agent through whom he/she has booked the ticket and the airlines shall honour such a transfer.

The credit shell issued in the name of the passenger shall be transferable which can be utilize upto 31st  March, 2021 and the concerned airline shall honour such a transfer by devising a mechanism to facilitate such a transfer. It is also made clear that such credit shell can be utilized by the concerned agent through whom the ticket is booked, for third party use. It is also made clear that even in cases where credit shell is transferred to third party, same is to be utilized only through the agent who has booked the ticket at the first instance.

  1. In cases where passengers have purchased the ticket through an agent, and credit shell is issued in the name of passenger, such credit shell is to be utilized only through the agent who has booked the ticket. In cases where tickets are booked through agent, credit shell as issued in the name of the passenger which is not utilized by 31st March, 2021, refund of the fare collected shall be made to the same account from which account amount was received by the airline.
  2. In all cases where credit shell is issued there shall be an incentive to compensate the passenger from the date of cancellation upto 30th June, 2020 in which event the credit shell shall be enhanced by 0.5% of the face value (the amount of fare collected) for every month or part thereof between the date of cancellation and 30th June, 2020. Thereafter the value of the credit shell shall be enhanced by 0.75% of the face value per month upto 31st March, 2021.

[Pravasi Legal Cell v. Union of India, 2020 SCC OnLine SC 799, decided on 01.10.2020]

Cabinet DecisionsLegislation Updates

To permit foreign investment upto 100% by those NRIs, who are Indian Nationals, in case of M/s Air India Ltd., the Union Cabinet approved to amend the extant FDI Policy to permit Foreign Investment (s) in M/s Air India Ltd by NRIs, who are Indian Nationals, upto to 100% under automatic route.

As per the present FDI Policy, 100% FDI is permitted in scheduled Air Transport Service/Domestic Scheduled Passenger Airline (Automatic upto 49% and Government route beyond 49%).  However, for NRIs 100% FDI is permitted under automatic route in Scheduled Air Transport Service/Domestic Scheduled Passenger Airline. Further, FDI is subject to the condition that Substantial Ownership & Effective Control (SOEC) shall be vested in Indian Nationals as per aircraft rules, 1937.  However, for M/s Air India Ltd., as per the present policy, foreign investment(s) in M/s Air India Ltd. Including that of foreign Airline(s) shall not exceed 49%, either directly or indirectly, subject to the condition that substantial ownership and effective control of M/s Air India Ltd. shall continue to be vested in Indian Nationals.  Therefore, although 100% FDI is permitted under automatic route for NRIs in Scheduled Air Transport Service/Domestic Scheduled Passenger Airline, it is restricted to be only 49% in the case of M/s Air India.

Benefits:

In light of the proposed strategic disinvestment of 100% of M/s Air India Ltd. by the Government of India, M/s Air India Ltd. will have no residual Government ownership and will be completely privately owned, it has been decided that foreign investment in M/s Air India Ltd be brought on a level playing field with other scheduled airline operators.  The amendment in FDI policy will permit foreign investment in M/s Air India Ltd at par with other Scheduled Airline Operators i.e. upto 100% in M/s Air India Ltd by those NRIs, who are Indian Nationals.  The proposed changes in FDI Policy will enable foreign investment by NRIs into M/s Air India Ltd. upto 100%, under automatic route.

          Above amendment to the FDI Policy are meant to liberalise and simplify the FDI policy to provide ease of doing business in the country.  Leading to largest FDI inflows and thereby contributing to growth of investment, income and employment.

Background:

FDI is a major driver of economic growth and a source of non-debt finance for the economic development of the country. The FDI policy is reviewed on an ongoing basis, with a view to attract larger volumes of foreign investment inflows into the country. Government has put in place an investor friendly policy on FDI, under which FDI up to 100% is permitted on the automatic route in most sectors/activities.

FDI policy provisions have been progressively liberalized across various sectors in the recent past to make India an attractive investment destination. Some of the sectors include Defence, Construction Development, Trading, Pharmaceuticals, Power Exchanges, Insurance, Pension, Other Financial Services, Asset Reconstruction Companies, Broadcasting, Single Brand Retail Trading, Coal Mining, Digital Media etc.

These reforms have contributed to India attracting record FDI inflows in the recent past.  FDI inflows in India stood at US $ 45.15 billion in 2014-15 and have consistently increased since then.  FDI inflows increased to US $ 55.56 billion in 2015-16, US $ 60.22 billion in 2016-17, US $ 60.97 billion in 2017-18 and the country registered its highest ever FDI inflow of US $ 62.00 billion (provisional figure) during the last Financial Year 2018-19. Total FDI inflows in the last 191/2 years (April 2000- September 2019) are US $ 642 billion while the total FDI inflows received in the last 51/2 years (April 2014- September 2019) are US $ 319 billion which amounts to nearly 50 % of total FDI inflow in last 191/2 years.

Global FDI inflows have been facing headwinds for the last few years. As per UNCTAD’s World Investment Report 2019, Global Foreign Direct Investment (FDI) flows slid by 13% in 2018 to US $1.3 trillion in the previous year, that is the third consecutive annual decline. Despite the dim global picture, India continues to remain a preferred and attractive destination for Global FDI flows. However, it is felt that the country has the potential to attract far more Foreign Investment which can be achieved, inter-alia, by further liberalizing and simplifying the FDI policy regime.

Cabinet

[Source: PIB]

[Press Release dt. 04-03-2020]

Cabinet DecisionsLegislation Updates

The Union Cabinet has given its approval to introduce the Aircraft (Amendment) Bill, 2019 for carrying out the amendments to the Aircraft Act, 1934 (XXII of 1934).  The Bill will now be introduced in the Parliament.

The Bill enhances the maximum limit of fine from the existing Rs 10 lakhs to Rs One Crore. It also enlarges the scope of the existing Act to include regulation of all areas of Air Navigation.

The amendments would fulfill the requirements of the International Civil Aviation Organisation (ICAO). This will enable the three regulatory bodies in the Civil Aviation sector in India, namely Directorate General of Civil Aviation, Bureau of Civil Aviation Security and Aircraft Accident Investigation Bureau to become more effective, which will lead to enhancement in the level of safety and security of aircraft operations in the country.

Cabinet

[Press Release dt. 11-12-2019]

[Source: PIB]