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Kerala’s Govt’s Appeal Against Adani Enterprises Ltd.’s Lease of Thiruvananthapuram Airport Dismissed by SC

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Supreme Court LAW INSIDER

Bhuvana Marni

Published on: October 19, 2022 at 23:38 IST

The State of Kerala and a few employee unions petitioned the Supreme Court on Monday to overturn the Airport Authority of India’s (AAI) decision to lease Thiruvananthapuram’s International Airport to Adani Enterprises Limited (AEL).

The Kerala Government and certain unions representing airport employees filed special leave petitions against the Kerala High Court’s decision upholding the lease of the Airport to AEL in October 2020, but they were dismissed by a bench made up of Chief Justice of India UU Lalit and Justice Bela M Trivedi.

​​The court noted from the High Court decision that a business in which the State Government holds at least 25% equity shares would be granted the Right of First Refusal in the range of 10% depending on the mutual negotiations between the State Government and the Central Government.

As a result, a state-owned organisation called the Kerala State Industrial Development Corporation (KSIDC) took part in the bid. The KSIDC’s bid, however, was Rs 168 per passenger, while AEL’s was Rs 135 per person.

The KSIDC proposal was declined because it represented less than 20% of the winning offer. In these circumstances, the High Court “rightly rejected” the case, according to the Court.

Regarding the union’s complaint that the privatization of the airport will negatively impact its members’ working conditions, the Court highlighted that the employees had the choice of switching to airports run by the Airports Authority of India (AAI) or remaining with the private bidder.

“Considering these facts, as well as the fact that the private entity has been in operation since October 2021, we see no reason to interfere. Accordingly, these petitions are dismissed”, the bench noted in the order.

However, the bench made it clear that it had left open the matter of the land’s ownership that had been brought up by the State Government.

The AAI maintained that it had ownership of the property, contrary to the State’s claim that it owns the site.

The State was represented by Senior Attorney Chander Uday Singh, and the AAI was represented by Additional Solicitor General KM Nataraj.

High Court Judgment

On October 19, 2020, a division bench of the High Court, made up of Justices K Vinod Chandran and CS Dias, dismissed the petitions objecting to the AAI’s award of the contract to the Adani group, stating that the court could not interfere with the executive’s policy choice regarding the privatization of airports.

The Adani Group has no prior experience in developing and managing an airport, so the State challenged the leasing out of the Airport on four grounds:

(1) promissory estoppel and legitimate expectation;

(2) arbitrariness in awarding the tender to the Adani Group;

(3) the financial requirements in the RFP (Request For Proposal) being specifically tailored to the Adani Group; and

(4) the AAI Act having not permitted any cross-subsidization through the use of the income generated.

“We reject the ground raised by the State, of legitimate expectation as there is no benefit promised to the State Government or enjoyed by it; by way of participation in the management of TIA, which can be deemed to have been taken away by the Central Government by reason of the lease proposed. There can also be no claim of promissory estoppel as we find no promise having been extended by the Central Government or the AAI, at any point of time,” the High Court said rejecting the first ground.

The HC further noted that there could be no claim made that AEL’s financial standing was predetermined when nine other companies submitted bids for the six airports.

Only because AEL quoted the highest bid in each of the six Airports did the other bidders succeed in any of the Airports, it added.

“There are very few operators at the national level having Airport experience and hence the inclusion of the infrastructure sectors in the Harmonized Master List, is the submission. We also find the explanation, quite compelling; otherwise, there would be a monopoly exercised by those players having Airport experience, who would have an edge over others and be placed in a position from which they would dictate terms.”

“We do not find any reason to hold the RFP to be vitiated for reason of the same being tailor-made for AEL, which remains in the realm of an allegation without substantiation.”, the bench said while rejecting the ‘no prior experience ground.

According to the SLP that the state government filed, the Ministry of Civil Aviation’s earlier commitment to reject the state government’s proposal to create a Special Purpose Vehicle (SPV) to take control of and operate the Airport on a revenue-sharing basis is violated by the concession granted to Adani.

The Kerala Government claim that the Government of India had promised to consult with the State of Kerala when a decision is made to bring in the private sector to manage Thiruvananthapuram Airport, taking into account the State’s contribution to the airport’s land acquisition, also demonstrates that the State Government’s expectations are based on the Government of India’s statement.

“It is submitted that crystallization of such the legitimate expectation cannot be varied on unfair and illegal activities on the part of the Government of India,” the plea states.

Last year, the Karnataka High Court issued notice on a petition filed by Airport Employees Union challenging the decision to hand over Mangalore airport to Adani Group.