"Supreme Court to Decide if AERA Can Set Tariffs for Ground & Cargo Handling at Airports"

On Thursday, September 19, the Supreme Court heard an appeal against the Telecom Disputes Settlement and Appellate Tribunal's decision, which ruled that Ground Handling Services (GHS) and Cargo Handling Services (CHS) are not classified as "Aeronautical Services" and therefore cannot be subjected to tariff regulation by the Airports Economic Regulatory Authority (AERA). A bench led by Chief Justice DY Chandrachud, along with Justices JB Pardiwala and Manoj Misra, heard the case challenging the Tribunal's ruling. The Tribunal had concluded that under the AERA Act, 2008, GHS and CHS are categorized as "Non-Aeronautical Services," making them exempt from AERA's tariff-setting powers. This judgment applies to services provided by handling companies like Delhi or Mumbai International Airport Limited and their contractors. AERA, appealing the decision, referenced sections 13(1)(a)(iv) and (v) of the 2008 Act, which allow it to set tariffs for aeronautical services, considering the economic viability of major airports and revenue generated from non-aeronautical services. Representing AERA, Additional Solicitor General N Venkataraman presented arguments on the matter, and the hearing is set to continue. Background: In 2006, Delhi International Airport Limited (DIAL) signed a contract with the Airports Authority of India (AAI) under the Operation, Management, and Development Agreement (OMDA) to manage Indira Gandhi International Airport. A separate agreement, the State Support Agreement (SSA), was signed with the Indian government, outlining principles for tariff determination. Similar contracts were signed with Mumbai International Airport Limited (MIAL). The OMDA allowed DIAL and its concessionaires to set charges for non-aeronautical services. However, in March and May 2021, AERA issued communications stating that GHS and CHS provided by the appellant would be classified as non-aeronautical services, whereas, if provided by contractors, they would be classified as aeronautical services, with different tariff implications. The Tribunal's order, dated January 13, 2023, clarified that GHS and CHS are considered non-aeronautical services regardless of whether they are provided by DIAL/MIAL or third-party contractors, and that AERA does not have jurisdiction over their tariff setting. Consequently, the Tribunal nullified the 2021 communications from AERA, affirming that entities like MIAL are free to determine tariffs for these services themselves. AERA, relying on the AERA Act, 2008, argued that GHS and CHS should be categorized as aeronautical services. However, the Tribunal rejected this, affirming that the pre-existing agreements, like OMDA and SSA, grant autonomy to DIAL and MIAL in determining charges for these services. The hearing will resume on a later date. Case: AIRPORTS ECONOMIC REGULATORY AUTHORITY OF INDIA vs. DELHI INTERNATIONAL AIRPORT LTD. C.A. No. 003098 - 003099 / 2023 and connected matters www.legalmeet.in