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TMI Blog2015 (11) TMI 401X X X X Extracts X X X X X X X X Extracts X X X X ..... to whether the Bangalore International Airport Ltd. [BIAL] is a statutory body u/s 80IA(4)(i) of the Act in view of the Judgment of the Hon'ble Karnataka High Court in the case of M/s. Flemingo Dutyfree Shops P. Ltd., in W.P.No.14215 of 2006 dated 19.12.2008. It was subsequently brought to the notice of this Tribunal that the Revenue has also filed M.P.No.20/Bang/2014 stating that this Tribunal had held that the activity carried on by the assessee is infrastructure development under section 80IA(4), but as far as its agreement with BIAL is concerned, it was held that the status of the BIAL is not that of statutory authority and therefore, disallowed the deduction under section 80IA of the Act. According to the department, this finding of the Tribunal is ambiguous and hence is a mistake apparent from record which needs rectification. Thus, the revenue has sought recall of the order and rectification of the alleged mistake apparent from record. The MP of the revenue was posted along with the appeal for hearing. 3. At the time of hearing, the learned counsel for the assessee submitted that after going through the details furnished by the assessee, this Tribunal held that the activit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agreement as well as the nature and functions and duties performed by BIAL to come to the conclusion that BIAL was discharging statutory functions/public functions for the convenience of travelling public and therefore is a State under Article 12 of the Constitution of India. 6. We find that in the earlier order of this Tribunal we have held that BIAL is not a statutory authority but is a company incorporated under the Companies Act and is not created by any statutory body or law. It was held that though it is constituted as per the policy of the Central Government, it cannot be said to be statutory body as required under section 80IA(4) of the Act with its public-private partnership. We find that the Hon'ble High Court of Karnataka in the case of M/s. Flemingo Duty Free Shops Pvt. Ltd., cited (supra) has also considered the constitution of BIAL, the shares of different parties in the said company and has come to the conclusion that it is a statutory body as it is discharging statutory functions of the Government. The relevant portion of the judgment are reproduced hereunder. "12. The first respondent has not filed its counter. 13. The A.A.I represented by Sri B.R. Sena. s/0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 12.09.2006, which fact is established by e-mail sent by the business development and marketing Manager of AERI, which is venture partner of the petitioner with whom it submitted EOI to BIAL. In the said e-mail it has made it clear that AERI respects the decision taken by BIAL regarding its exclusion of the consortium consisting of the petitioner. Therefore, the petitioner would have no locus standi to file this writ petition and further it is stated that AERI-partner of the consortium is not a petitioner in this petition, for this reason also the petitioner alone has no locus standi to question the action of the BIAL. Further it is stated that the writ petition is also liable to be dismissed on the ground of suppression of material facts in non-disclosure of material documents. It is further stated that on perusal of the provisions of the 'Shareholders Agreement' (hereinafter in short referred to as "S.H.A.") with G.O.K. dated 23.01.2002 entered between the BIAL and State promoters which makes abundantly clear that BIAL is not a Government company as defined u/s 617 of the Companies Act, 1956, as it has been either established or constituted or created by any law enacted by eithe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viation Security etc.,) only and not by BIAL. As per Part-IV-Financial Provision of C.A., sub-clause- 10 of Article 10 authorizes BIAL to collect airport charges and other charges in the nature of fees but it has no authority to collect tax. Under Article 10.4 of C.A. BIAL itself is liable to make payment of tax under relevant laws applicable to it. Therefore, it is submitted by it that, it does not exercise any government or sovereign functions as per the C.A. in its favour under the agreement. As per Clause 18.13.1 and 18.13.2 of Article 18 of the C.A., it stipulates that execution of the agreement constitutes private and commercial acts rather than public or governmental acts and no sovereign immunity will be claimed by the GOI in respect of proceedings that may be brought against it in relation to C.A. Therefore, it is evident that the agreement does not either confer or contemplate in any manner the entrustment of sovereign functions of the State on BIAL. The work of designing, financing, constructing and functioning of the airport has been entrusted to it by inviting global tenders which clearly indicates the activity that would be carried on is in the nature of commercial na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of five packages, which consisted of (i) retail package and (ii) Food and Beverage (F & B) Package 1, F & B Package 2 and F & B Package 3. Clause 2.3 of the EOI deals with the aforesaid aspects. Under clause 3 of the EOI selection process was determined. In clause 3.1 of EOI it is made very clear that the second phase award process was being adopted under clause 3.2 of EOI that maximum five (5) parties would be short-listed after receiving EOIs. It is its case that petitioner was one of the parties who submitted its EOI in relation to retail package-1 which consisted of duty free in the international departure and arrival zones, all retail outlets in the international departure zone. At the time of submitting EOI, petitioner did not raise an objection about clause 3.2 of EOI with regard to short listing of maximum five parties. Therefore, it is not open for it to turn round and object for the same in this writ petition. 20. The BIAL further submits that pursuant to the invitation for EOIs., totally seven companies submitted their EOIs. on fair and just evaluation being done by it, the EOI of petitioner among others was rejected and other remaining five companies were shortlisted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 4th respondent alone and further the 4th respondent submits that he was not in favour of any company as alleged by the petitioner and the mere fact that he was an employee of Zurich Airport Authority cannot be a ground for casting aspersions against him. In fact, Zurich Airport never had any share in the 5th respondent company or in any company nor it has any sister company and it never had any major equity ownership in Zurich Airport. The 5th respondent since 2001 is fully owned and controlled by two Italian public listed companies, therefore the 5th respondent is not even a sister company. further the 4th respondent submits that there are no extraneous considerations involved in the tender process as alleged, he being Chief Commercial Officer of the BIAL, his only aim and goal is to set up airport of international standard by getting in the best players in respective sectors. Therefore, it is stated that the allegations made against the respondents 3 and 4 are unfounded, baseless and deserve to be rejected. 21. Further they submit that under Article 3 of the C.A., Union of India under sub-clause 3.2.2 of Clause 3.2 has conferred upon BIAL right to grant service providers on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalties to the first respondent in the event of non completion of the international airport within the scheduled time and also City of Bangalore and India as a country would be put to shame in the international scenario, if, the project is not completed. 24. The counter on behalf of the respondent No.9 is filed inter alia contending that although five parties were short-listed after stage of EOI, only two parties i.e., the 5th respondent and the answering respondent submitted final bids, after submission of bids, contract was finally awarded to 5th respondent by BIAL by rejecting the bid of 9th respondent. It is further stated that it is given to understand that the bid submitted by the said respondent was rated next after the bid submitted by the 5th respondent which was declared successful. Further it has also found fault with the criteria followed with regard to evaluation of EOI, as it does not prescribe intelligible criteria. With regard to the transparency in the bidding process it has supported the case of the petitioner on the same line as has been stated by it in the writ petition. It is obligatory on the part of the second respondent not only to spell out in detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h respondent has affected public interest ? 9. Whether the denial of opportunity to offer financial bid to the 9th respondent requires interference by this Court ? 10. Whether the denial of opportunity to offer financial bid to the 9th respondent requires interference by this Court ? 11. What order ? Point Nos. 1 to 3 : 26. These two points are inter-related and therefore they are considered together. Learned Senior Counsel Mr. Vinod Bobade, for the petitioner submitted that the functions and duties entrusted to BIAL to establish the airport under section 12(3)(aa) of the Airports Authority of India Act, 1994 (in short referred to as 'A.A.I.A.' Act) to regulate air traffic service and transport service as defined under section 2(d) and (e) of the A.A.I.A. Act are statutory functions of 2nd respondent. He placed reliance upon the Constitutional Bench decision of the Apex Court reported in 1975(1) SCC 421 in the case of SUKHDEV SINGH vs. BHAGATRAM, three Judge Bench decision of the Apex Court reported in 1981 (1) SCC 449 in the case of SOM PRAKASH REKHI vs. UNION OF INDIA & ANR. And the seven Judges Constitutional Bench decision in PRADEEP KUMAR BISWAS vs. INDIAN INSTI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and having regard to the facts of this case, particularly the share holding agreement entered into between the Consortium members of BIAL and KSIIDC, S.S.A. dated 20.01.2005 and C.A. dated 05.07.2004 between the first respondent/Union of India-R1, Civil Aviation and BIAL. On the basis of the lease deed entered between KSIIDC and BIAL dated 30.04.2005 to establish a private airport at Devanahalli to assist the 2nd respondent to render technical, financial and other assistance in terms of the lease deed and the concession agreement. The object of establishing BIAL and the nature of the project are explicitly mentioned. Though it is an airport in terms of section 2(b) of the A.A.I.A. Act, lease of land is permissible under section 12-A(1) of the A.A.I.A. Act by the KSIIDC in favour of BIAL to establish international airport with a view to provide facilities and render assistance to the airport authority for operating the airport. Having regard to the nature of functions required to be carried on by the airport at Bangalore on the basis of the agreements referred to supra, providing a duty free shop to the customers by the BIAL in the Airport cannot be termed that it is discharging pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 28-A of the A.A.I.A. Act is applicable to the premises of the Airport for the purpose of eviction of unauthorized occupants from that premises, it cannot be construed by this Court that the functions of BIAL are that of public duties/functions. Therefore, it is contended by the learned Sr. Counsel that BIAL is not a State as defined under Article 12 of the Constitution of India. 30. Sri V. Lakshminarayana, learned Counsel for 9th respondent supported the submissions made on behalf of the petitioner, he has justified the maintainability of the writ petition by inviting our attention to paragraphs 162 to 169 of Unnikrishnan's case (1993) 1 SCC 645 @ 693, 697 paras 77, 79 and contended that the agreements entered into between the State of Karnataka - BIAL, KSIIDC - BIAL and Union of India - BIAL are for rendering statutory fundamental duties by establishing the international airport at Bangalore. The functions that are carried on by BIAL in the international airport on the basis of those agreements are supplementary to the fundamental statutory duties required to be discharged both by first and second respondent. Therefore, BIAL is a State amenable to writ jurisdiction of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, for any kind of remuneration, whatsoever, for the transport by air of persons, mail or any other thing, animate or inanimate, whether such service relates to a single flight or series of flights. Section 2(nn) reads : 2(nn) 'private airport' means an airport owned developed or managed by - (i) Any person or agency other than the Authority or any State Government. OR (ii) Any person or agency jointly with the Authority or any State Government or both where the share of such person or agency as the case may be in the assets of the private airport is more than fifty percent." "12. Functions of the Authority : (1) Subject to the Rules, if any, made by the Central Government in this behalf, it shall be the function of the Authority to manage the airports, the civil enclaves and the aeronautical communication stations efficiently. (2) It shall be the duty of the Authority to provide air traffic service and air transport service at any airport and civil enclaves. (3) Without prejudice to the generality of the provisions contained in sub-sections (1) and (2) the Authority may - (3-aa) establish airports, or against in the establishment of private airports ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er activity at the airports and the civil enclaves in the best commercial interests of the Authority including cargo handling, setting up of joint ventures for the discharge of any function assigned to the Authority; (4) In the discharge of the functions under this Section, the Authority shall have due regard to the development of air transport service and to the efficiency, economy and safety of such service. (5) Nothing contained in this Section shall be constructed as - (a) Authorizing the disregard by the Authority of any law for the time being in force; or (b) Authorizing any person to institute any proceeding in respect of duty or liability to which the Authority or its Officers or other employees would not otherwise be subject. (iii) As per Section 4 of the Air Craft Act, 1934 (in short referred to as 'A.C' Act) the first respondent has got power to make Rules as per the 1944 Convention dated 07.12.1944 in relation to International Civil Aviation signed at Chikago. Section 5.A of A.C. Act confers powers upon the Director General of Civil Aviation or other Officer specially empowered in accordance with the provisions of the Act to any person/s engaged in air cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... every type of authority set up under a statute for the purpose of administering the laws made by the Parliament or by the State including those vested with the duty in make decisions in order to implement those laws." (vi) The Apex Court in SUKHDEV SINGH & ORS. Vs. BHAGATRAM SARDAR SINGH RAGHUVANSHI reported in (1975) 1 SCC 421 at 440, para 39, 449 para 82, 452 paras 93 & 98 after referring to its various decisions and Halsbury's Laws of England has held thus, the relevant paras reads as hereunder: "39. A public authority is a body which has public or statutory duties to perform and which performs those duties and carries out its transactions for the benefit of the public and not for private profit. Such an authority is not precluded from making a profit for the public benefit. (See Halsbury's Laws of England 3rd Vol.30 paragraph 1317 at 682)." 82. Part-IV of the Constitution gives a picture of the services which the State is expected to undertake and render for the welfare of the people. Article 298 provides that the executive power of the Union and State extends to the carrying on of any business or trade. As I said, the question for consideration is whether a public co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it may be a society registered under the Societies Registration Act or any other similar statute. Whatever may be its genetical origin, it would be an 'authority' within the meaning of Article 12 if it is an instrumentality or agency of the Government and that would have to be decided on a proper ascertainment of the facts in the light of the relevant factors. The concept of instrumentality or agency of the Government is not limited to a corporation created by a statute but is equally applicable to a company or society and in a given case it would have to be decided, on a consideration of the relevant factors, whether the company or society is an instrumentality or agency of the Government so as to come within the meaning of expression 'authority in Article 12." (viii) The Seven Judge Bench decision of the Apex Court in PRADEEP KUMAR BISWAS vs. INDIAN INSTITUTE OF CHEMICAL TECHNOLOGY case reported in (2002) 5 SCC 111 after considering its various decisions has held that the functions/duties to be performed by the authority come within the purview of 'State' under Article 12 of the Constitution and has also laid down the Law on Article 12 on 'Centres of Power' and the cause for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of eminent domain, it may grant tax exemptions, or it may give monopolistic status for certain purposes. All these are relevant in making an assessment whether the operation is private or savours of State action. See generally: "The meaning of State Action, LX Columbia Law Rev 1083." "Institutions engaged in matters of high public interest or performing public functions are by virtue of the nature of the functions performed government agencies. See the decisions in Terry Vs. Adama, 273 US 536 and Nixon vs. Condon, 268 US 73. Activities which are too fundamental to the society are by definition too important not to be considered government function." 23. From this perspective, the logical sequitur is that it really does not matter what guise the State adopts for this purpose, whether by a Corporation established by statute or incorporated under a law such as the Companies Act or formed under the Societies Registration Act, 1860. Neither the form of the Corporation, nor its ostensible autonomy would take away from its character as 'State' and its constitutional accountability under Part III vis-a-vis the individual if it were in fact acting as an instrumentality or agen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depending on the facts and circumstances, an authority may also be found to be an instrumentality or agency of the State and to that extent they may overlap…………" (ix) In view of ZEE TELEFILMS LTD. & ANR vs. UNION OF INDIA & ORS reported in (2005) 4 SCC 649, in which tests are laid down in para-40 that the Body must be financially, functionally and administratively dominated under the control of Government and such control must be particular to the Body in question and must be pervasive. No doubt, in that case after referring to some tests from Ajay Hasia case, it is held that BCCI is not 'State' and it is not created by statute and no part of its capital is held by the Government. Practically no financial assistance is given by the Government to meet the whole or entire expenditure of the Board." The Board does enjoy a monopoly status in the field of cricket but such status is not State conferred or State protected. There is no existence of a deep and pervasive State control. The control if any is only regulatory in nature as applicable to other similar bodies. This control is not specifically exercised under any special statute applicable to the Boa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be considered to have been so 'purely private' as to fall outside the scope of the Fourteenth Amendment… what we hold today is that when a State leases public property in the manner and for the purposes shown to have been the case here, the prescriptions of the Fourteenth Amendment must be complied with by the lessee as certainly as though they were binding covenants written into the lease itself." (xii) In another case in EVANS Vs. NEWTON (1966) 15 L.Ed.2d. @ 373, 379 regarding bequeathing of private land by a will to the Mayor and Council of Macom, Georgia after the death of the testator's wife and daughters, for use as 'a park and pleasure ground' for while people only, was held to be usable by all - whites and blacks - and that no 'segregation' could be permitted in view of the 14th amendment as it was a 'public park', the relevant portion reads thus :- "What is 'private' and what is 'State' action is not always easy to determine. Conduct that is formally private may become so entwined with governmental policies or so impregnated with a governmental character as to become subject to constitutional limitations placed upon State action." "Under the circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of travelling public. All the facilities provided by BIAL, be it a State, lessee or entity, performs statutory/public functions in the Airport. This is expressly apparent from Clause 7.1 of Clause 7 of S.S.A. dated 20.01.2005. The relevant clause reads as hereunder : 7.1. Airport Operation and Maintenance : BIAL shall operate and maintain the Airport in accordance with Good Industry Practice. BIAL shall at all times comply with Applicable Laws in the operation and maintenance of the Airport and shall maintain, keep in good operating repair and condition, the Airport, in accordance with the Operation and Maintenance Plan, an indicative outline of which is as set out in Schedule-6 attached hereto. BIAL shall submit the Operation and Maintenance Plan to GOK no later than one (1) year from Financial Close. BIAL shall also renew, replace and upgrade to the extent reasonably necessary, the Airport which for these purposes shall exclude any systems or equipment to be operated by AAI in accordance with the terms of the CNS/ATM agreement. All operation, maintenance, repair and other works shall be carried out in such a way as to minimize inconvenience to users of the Airport. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 250 crores provided to BIAL by the Government of Karnataka under the State Government and capital of BIAL partly owned by it, 26% share capital owned by 2nd respondent, 13% by BIAL, in pursuant to the Concessional agreement referred to supra, there is transfer of powers of respondent No.2 to R-3 in relation to air traffic services to be rendered to the public at large. The grant of monopoly status in the concession agreement given to the BIAL is State conferred or State protected as the concession agreement provides exclusively of private concession to the existing airport and prohibits any airport being set-up within 150 kms from BIAL. (xviii) Even if it is not an entity and 'State' under Article 12 of the Constitution of India, the actions of BIAL are subject to judicial review under Article 226 of the Constitution of India. In this regard, learned Sr. Counsel for petitioner has rightly placed reliance upon the decisions reported in 1976(2) SCC 82 @ para 9 in the case of ROHTAS INDUSTRIES vs. ROHTAS INDUSTRIES STAFF, 1991 (1) SCC 171, 1995 (5) SCC 1811, 2003(4) SCC 225 @ 237 in the case of G. BASI REDDY vs. INTERNATIONAL CROPS RESEARCH INSTT. The principles laid down in those ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "To be enforceable by mandamus a public duty does not necessarily have to be one imposed by statute. It may be sufficient for the duty to have imposed charter, common law, custom or even contract'. We share this view." (xxi) In Unnikrishnan's case, after referring to Anadi Mukta and Drawakanath cases, it is held at paragraphs 81 and 83 as under: "81. As a sequel to this, an important question arises: what is the nature of functions discharged by these institutions ? They discharge a public duty. If a student desires to acquire a degree, for example, in medicine, he will have to route through a medical college. These medical colleges are the instruments to attain the qualification. If, therefore, what is charged by the educational institution is a public duty that requires to act fairly." "83. The emphasis in this case is as to the nature of duty imposed on the body. It requires to be observed that the meaning of authority under Article 226 came to be laid down distinguishing the same term from Article 12. In spite of it, if the emphasis is on the nature of duty on the same principle it has to be held that these educational institutions discharge public duties. Irrespective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the BIAL in its tender notification as it has set up free retailing business at Trivendrum, Jaipur, Amritsar and Lucknow Airports and further it has extended its business to airports at Chennai, Bangalore, Hyderabad, Ahmedabad, Calicut, Goa, New Delhi and Trichy. The petitioner in India has experience in emerging markets of its parent company across the world. It decided to join hands with AerRianta International cpt, for submitting a bid to obtain contract from BIAL in respect of carrying on the aforesaid business. According to the petitioner, the consortium of it with AerRianta International cpt, would be the only one qualified to receive tender and submit bid for obtaining contract for duty free retailing at BIAL. It is admitted that the petitioner was the first company to enter into the private retail duty-free business in Indian Airports and no other company privately owned has as much experience in duty free retailing in Indian Airports. Therefore, consortium of petitioner with AerRianta International cpt, submitted EOI to BIAL on 23.08.2006 which is in complete compliance with all requirement set out in the EOI invitation by furnishing all the information as set out in cl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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