Thursday, March 10, 2011

A Level Playing Field and Public Interest

One of the striking features of the Indian economy post-1991 is the conception it has of a level playing field as between Government and private enterprises. It should be noted that this cuts both ways, for while there are commercial advantages for certain Government entities, others are required as part of Government policy to bear losses that a private enterprise in that position would choose not to bear. While the law governing this relationship has not been fully tested, the Delhi High Court last week had occasion to consider it in the context of a dispute in the aviation sector. The judgment of the First Bench in Federation of Indian Airlines v Union of India is available here.

The case arose out of set of circulars issued by the Director-General of Civil Aviation that, in gist, purported to require that “ground-handling” services in the six major airports in the country be handled exclusively by the airport operator, or by subsidiaries or joint venture partners of the national carrier (National Aviation Co. Ltd.). In other words, it prohibited private airlines from undertaking ground-handling services, and the object was said to be the protection of national security in light of the heightened risk of terrorist activity. There is no doubt that these services are an integral part of the airline business, not only because of their significant impact on consumer satisfaction, but also because of the enhancement of an airline's ability to secure its equipment. The Federation’s case therefore was that this circular was ultra vires inter alia s. 5A of the Aircraft Act, 1934, and ex facie unconstitutional, because it conferred an unfair advantage on airport operators (AAI or an AAI JV partner) and on the national airline.

The first of these issues raised a point of statutory construction that is likely to prove influential. It is necessary to reproduce s. 5A in its entirety:

5A. Power to issue directions. - (1) The Director- General of Civil Aviation or any other officer specially empowered in this behalf by the Central Government may, from time to time, by order, issue directions, consistent with the provisions of this Act and the rules made thereunder, with respect to any of the matters specified in [clauses (aa), (b), (c), (e), (f), (g), (ga), (gb), (gc)], (h), (i), (m) and (qq) of sub-section (2) of section 5, to any person or persons using any aerodrome or engaged in the aircraft operations, air traffic control, maintenance and operation of aerodrome, communication, navigation, surveillance and air traffic management facilities and safeguarding civil aviation against acts of unlawful interference], in any case where the Director-General of Civil Aviation or such other officer is satisfied that in the interests of the security of India or for securing the safety of aircraft operations it is necessary so to do [emphasis added].

For convenient analysis, it may be noted that s. 5A for the purpose of this controversy consists of three distinct parts – first, that the DGCA (or authorised officer) may issue directions “consistent with the provisions of this Act…”; secondly, those directions may be issued “with respect to any of the matters specified in…” and finally, “in any case where the DGCA… is satisfied that in the interests of security...”. The first impression one has of this provision is that the three conditions are cumulative, and not alternative. It is also difficult to take the view that the expression "with respect to any of the matters..." qualifies "consistent with the provisions..." because that construction denudes one or the other of meaning. Thus, the Federation argued that the DGCA circular is ultra vires s. 5A because it did not fulfill the second condition, as it was not shown that the circular was traceable to one of the provisions specified in s. 5A. The Delhi High Court rejected this contention, after referring to the uncontroversial principle that a provision in a statute must be construed “contextually”. The Court found two elements in the context that were said to militate against the view that every direction under s. 5A must arise out of one of the enumerated provisions. First, their Lordships held that the words “in any case” used in the opening part of the third condition are an indication that the provision is to be construed widely – to wit, “in all cases” where the security of India is involved, regardless of the applicability of one of the specific provisions enumerated. Secondly, their Lordships referred to s. 4A of the Act, which provides that the DGCA shall perform “safety oversight”.

With respect, it is submitted that this analysis of s. 5A, and in particular, of the expression “in any case”, may require reconsideration. To substantiate the proposition that “in any case” must be construed widely, the Delhi High Court cited the judgment in Lalu Prasad Yadav v State of Bihar, where the Supreme Court did indeed observe that “in any case” means “in all cases”. However, it is important to notice that the Supreme Court was dealing with the meaning of “in any case” in s. 378 of the Code of Criminal Procedure, 1973, which provides inter alia that the State Government may, “in any case”, direct the Public Prosecutor to present an appeal against acquittal. It is difficult to imagine that the legislature intended a similarly wide meaning to attach to the expression in s. 5A of the Aircraft Act, especially because the specific provisions enumerated in the second condition are not exhaustive - indicating that the power was consciously confined to a set of carefully defined circumstances. That impression is strengthened by the fact that s. 5 provides that the Central Government (not the DGCA) may make rules in general regulating the possession, use etc of aircraft. It is therefore submitted, with respect, that while “in any case” often means “in all cases”, that conclusion depends ultimately on whether the legislature purposefully confined what appears to be a general provision or did so merely by way of abundant caution. Similarly, s. 4A does not seem to be of assistance, since the "safety oversight" in question is "in respect of matters specified in this Act."

The second point - on constitutionality - is similarly likely to be of general importance. The Court repelled a challenge to the vires of the circular on the grounds of Art. 14 and 19(1)(g), holding essentially that the court will be slow to interfere with matters of policy, and will not substitute its view of what is desirable policy for that of the Government. That is especially so when the ground of restriction is national security, as it was in this case. The following observations are apposite:

The factum of security cannot be gone into by court of law and more so when specific aspects have been dwelled upon and delved into by the Bureau of Civil Aviation Security. The security of a country is paramount. It is in the interest of the nation. There is no question of any kind of competition between the commercial interest and the security spectrum. The plea that in the name of security the commercial interest of the petitioners is infringed or abridged does not merit consideration and in any case this Court cannot sit in appeal over the same

Interestingly, the Court also rejected a legitimate expectation challenge, holding that legitimate expectation is itself subject to a change of policy that is reviewable only on Wednesbury principles.

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