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Income Tax Appellate Tribunal, BANGALORE B BENCH : BANGALORE
Before: SMT. P. MADHAVI DEVI & SHRI JASON P.BOAZ
IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE 'B' BENCH : BANGALORE BEFORE : SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI JASON P.BOAZ, ACCOUNTANT MEMBER ITA No.1160/Bang/2012 Assessment year: 2009-10 ACIT, Circle 12(1) vs. M/s.Menzies Aviation Bobba Bangalore. (Bangalore) Pvt. Ltd. Bangalore. PAN: AAECM6862D (Appellant) (Respondent) M.P.No.19/Bang/2014 Arising out of ITA No.1160/Bang/2012 - Assessment year 2009-10 M/s.Menzies Aviation ACIT, Circle 12(1) Bobba (Bangalore) Pvt. vs. Bangalore. Ltd. Bangalore. PAN: AAECM6862D (Appellant) (Respondent) For Revenue : Mr. Farahat Hussain Qureshi For Assessee : Mr. V. Srinivasan Date of Hearing : 24.06.2015 Date of Pronouncement : 05.10.2015 ORDER PER SMT. P. MADHAVI DEVI, J.M. This appeal by the revenue is against the order of the CIT(A)-III, Bangalore, dated 11.06.2012 for the assessment year 2009-2010.
2 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. 2. The appeal was earlier heard and disposed of by order dated 30.01.2014. However, vide order in MP No.19/Bang/2014 dated 18.09.2014 the Tribunal’s order was recalled only to re-consider the issue as 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.
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 activity carried on by the assessee is infrastructure development, but since the major shareholders in BIAL
3 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. are not Government authorities, it is not a statutory authority and therefore the deduction u/s 80IA(4) is not allowable. He submitted that the Hon'ble High Court of Karnataka in the case of M/s. Flemingo Duty Free Shops Pvt. Ltd. in WP No.14215 of 2006 dated 19.12.2008, had an occasion to go into the shareholdings of various parties in BIAL and after detailed examination of facts has held the BIAL to be a statutory body amenable to writ jurisdiction. It is on this ground, that the order of the Tribunal was recalled and reheard at length.
On going through the order of the Hon'ble High Court in the Writ Petition, we find that the Hon'ble High Court was dealing with a writ petition filed by M/s. Flemingo Duty Free Shops Pvt. Ltd. against the Union of India, the Airport Authority of India and the Bangalore International Airport Ltd., along with 2 other private parties as respondents. The said case came be filed by the petitioner therein on the ground that it was not issued the tender document to bid for a shop in the BIAL premises though BIAL is a statutory authority and was supposed to call for open tenders. The writ petition was filed challenging the above inaction. The Civil Aviation Department of the Government of India was the first respondent while Airport Authority of India and BIAL were 2nd and 3rd respondents respectively. The parties to whom tender documents were issued were the other respondents to the writ petition.
4 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. 5. The grievance of the petitioner in the writ petition was that BIAL, the 3rd respondent, was a statutory authority and therefore ought not to have restricted the issuance of tender document only to respondents 5 to 9 therein thereby excluding the petitioner from the competition. Before the Hon'ble High Court, BIAL had filed an affidavit stating that majority of the Board of Directors are private partners who constitute majority of the shareholders and the Board of Directors and therefore the petition filed against it, is not maintainable as it is neither a State or instrumentality of a State or a body discharging public duties for the purpose of Article 12 of the Constitution of India to exercise powers of the court under Article 226 of the Constitution of India. The Hon'ble High Court went into the Shareholders 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.
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
5 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. 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.
The A.A.I represented by Sri B.R. Sena. s/0 Sri Bhabadeb Sena, Airport Director in A.A.I, Bangalore has filed an affidavit on behalf of the second respondent and stated in the affidavit that it is a formal party to the petition, no relief whatsoever has been claimed by the petitioner against the second respondent, at para-6 it is stated that it is responsible for installations and maintenance of operations of Air Track services (ATS) consisting of Communication Navigation Surveillance (CNS) and Air Track Management (ATM) service and it is responsible for management of the said services and such services are mandatorily required to be provided by it.
Further at para 7 it is stated that, it has no role in the day to day management of BIAL. The decisions which require the approval of the Board of BIAL are discussed and approved by the members of
6 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. the second respondent, it had right to nominate two representatives on the Board of BIAL subject to percentage of equity holding prescribed in the shareholders agreement of it. It is further submitted that majority of the Board of Directors are from the private partners who constitute majority of the shareholders and Board of Directors.
It is further stated that only reserved matters as specified in clause 9.4 of the shareholders agreement are required to be brought before the Board of BIAL if such process are brought before it, the same will be discussed in the Board of the BIAL provided that the same are in its interest and not adversely affecting the interest of the respondent. Further it is stated that the decision regarding disqualification of the petitioner was not discussed and passed by the Board of the Directors of BIAL. Therefore, the second respondent was neither involved in the decision process by BIAL nor regarding disqualification of the petitioner in the tender process.
The respondents 3 and 4 have filed jointly statement of counter traversing the petition averments inter alia contending that the writ petition is not maintainable against the BIAL as it is neither a “State or instrumentality of a State or a body discharging public duties for the purpose of Article 12
7 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. of the Constitution of India to exercise power of this Court under Article 226 of the Constitution of India. Further it is contended in the statement of objections that as per the request made by the Managing Director of the petitioner, the 4th respondent met him on 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 either the Parliament or the State
8 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. Legislature. Under clause 9.1(ii) of the S.H.A., the Directors representing the promoters constitutes the majority, as per clause 9.2(vii) of the agreement all decisions are to be taken by a simple majority of the Board of Directors and as per sub-clause (iii) and (iv) of Clause-9.1 of the said agreement the Managing Director of BIAL is incharge of the day-to-day affairs nominated by the private promoters though the Chairman nominated by the said promoters does not have any executive powers. However, clause-22 of the S.H.A. makes it very clear that the terms of the same do not constitute a partnership between the parties besides under clause 7.4 of S.H.A. provides promoters the right to induct other investors. On a careful perusal of the provisions of S.H.A. it makes amply clear that neither the U.O.I. nor G.O.K. exercise their pervasive control over the management or affair of the BIAL.
The BIAL has also entered into a Concession Agreement (in short referred to as ‘C.A.’ ) dated 5th July, 2004 with the Ministry of Civil Aviation, Governemtn of India, pursuant to Article 3 at Clause-3.1 sub-clause 3.11 of C.A. the BIAL has got exclusive right and privilege to carry out development, design, financing, construction, commissioning, maintenance, operation and management of the airport. From the above said agreement, it is very clear and unambiguous fact that
9 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. the BIAL is neither an agency or instrumentality of the U.O.I. or G.O.K. in terms of Article 12 of the Constitution of India in view of sub clause 3.1.1 of Article 3 of C.A. In view of the nature of the above exclusive rights and/privileges granted to BIAL for the purpose of development and maintenance of infrastructural facilities required to be provided in the airport and facilities for commercial activities at the airport, award of duty-free shops according to the power of attorney of the Company is with the authority of the Manager of the company, therefore it is purely a management decision in the day-to-day affairs of the BIAL. Having regard to the right of the management of the airport under the C.A., the activities of the BIAL partake the character of Government Functions such as Customs, Immigration, Quarantine Communication and Navigation services to be carried out by the relevant authority namely, (GOI, AAI, Director General of Civil Aviation, Bureau of Civil Aviation 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
10 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. 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 nature in association with the State promoters namely A.A.I. and KSIIDC both together holding only 26% of the share holding of the BIAL. As per clause 3.3 of Article 3 of C.A. regarding payment of concessional fee by the BIAL to GOI which clearly indicates the fact that it is not carrying on or exercising any governmental function and further it is stated that there is no master and servant relationship either between the Central or State Government and the employees of the BIAL and they are not governed by service rules applicable to the employees of the Central or State Government. Therefore, in view of the aforesaid aspects, it is stated by the BIAL that it cannot be construed to be a State, Agency or instrumentality of a State in terms of Article 12 for the purpose of Article 226 of the
11 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. Constitution of India and therefore it has contended that the writ petition is liable to be dismissed at the threshold on the ground of maintainability.
The plea urged by the petitioner that GoK provides financial support to BIAL under S.H.A. is factually incorrect. The GoK under the State Support Agreement (hereinafter in short referred to as S.S.A.) dt.20.01.2005 provides loan to BIAL which is repayable by it in accordance with the provisions of the agreement, it has no way substantially financed the activity of BIAL which is repayable by it in accordance with the provisions of the agreement, it has no way substantially financed the activity of BIAL. The land referred to by the petitioner in the petition is concerned, the KSIIDC vide land lease dated 30th April, 2005 provided land to the BIAL for construction of the airport on lease basis for a period of 30 years and it continues to be the lessee to the land, no ownership rights are transferred to it. Therefore, on the basis of the aforesaid detailed averment regarding the grant of land by the State Government to BIAL cannot be construed to be a ‘State’, ‘Agency’ or instrumentality of State in terms of Article 12 for the purpose of Article 226 of the Constitution of India. Therefore, it is stated that the writ petition is liable to be dismissed at the threshold itself on the ground of its maintainability.
12 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. 19. The BIAL further submits that in the C.A., it is entitled to make available duty free shops and other amenities in the airport. In this view of the matter, it had called for E.O.I. by 26.07.2006 in respect 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.
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 for submission of tenders. The
13 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. contention of the petitioner that it was not aware of the decision of the BIAL of short-listing the persons to whom tender documents would be issued as no communication was made to it and said decision was known from the internet is clearly incorrect and false statement. It has deliberately suppressed the material fact while making such an averment in the petition. In fact, the petitioner was informed by e-mail on 01.09.2006 itself regarding the decision on the results of EOIs and the letter was written by the 4th respondent on the same date. On 01.09.2006 the Managing Director of the petitioner has written to the 4th respondent requesting him to re-look into the matter. However, it is stated that having regard to the evaluation of this EOIs. made by the BIAL, petitioner does not qualify for issuance of the tender documents and the other short-listed member in evaluation undertaken by the BIAL is not qualified for submission of tender. The aforesaid decision has been arrived at by BIAL on a critical appreciation of all the relevant material aspects. Therefore, there has been no arbitrariness or bias on its part as alleged in the petition, the entire process has been transparent and it has been carried out as per EOI. Submission of EOI by the petitioner without raising any objection either regarding clause 3.2 of EZOI or the relevant eligibility criteria as alleged by it as this point of time making a grievance is not tenable in law. The allegation made against the respondents 3 and 4 in
14 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. this petition for first time is an afterthought only to make out a case for grant of the reliefs sought for by it, therefore, the allegations made by the petitioner against them is misconceived, hence not sustainable in law. Further, the allegations made in the writ petition has been denied as totally baseless and unfounded. The 4th respondent categorically denies any personal interest regarding Swiss companies in the matter of awarding major concessions or in the other concessions for the airport such as ground handling tender conducted by the 4th respondent on behalf of BIAL, the world largest ground handling company, Swissport from Switzerland as also another ground handling company based in Zurich Jet Aviation, both applied for a concession and were not selected. According to the respondents 3 & 4 evaluation is done by the BIAL and not by the 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
15 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. 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.
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 such terms and conditions that it may determine as reasonable and appropriate. Therefore, it thought fit to adopt two phase methods in granting major concessions. The evaluation of the EOI was done by BIAL in fair, just and balanced manner and there has been no arbitrariness in the decision making process of the list as alleged in the writ petition. Five companies have been shortlisted as the top players in the duty free retail business in India and world. Though petitioner has experience in establishing duty free shops in India, it did not qualify in the evaluation process, which involve considering merits and demerits of each of the companies who submitted EOIs. The five shortlisted parties have submitted substantially more elaborated procedures than the petitioner, in this view of the
16 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. matter the EOI of the petitioner with its consortium partner AerRianta was rejected from the bid process. The allegation of discrimination is totally denied as unfounded and baseless and further stated that the sole aim of having such a stringent standard was adopted to make sure the best players are alone awarded major concessions. The process of selection has been most transparent and it has not been arbitrary as alleged, in support of the said averments, the BIAL has produced Xerox copies, Annexures-R1 to R8. The respondents have also filed additional statement of objections urging more or less the same facts as has been urged in the original statement of counter.
The petitioner has submitted rejoinder submission on 13.11.2006 traversing the averments made in the statement of counter filed by respondents 3 & 4. The same are not required to be referred to in this order as they are nothing but reiteration of their plea taken in the writ petition with reference to the documents produced along with the writ petition.
The 5th respondent has filed its statement of counter on 17.09.2007 justifying the process adopted in respect of short listing and awarding contract in its favour, it has submitted that the petitioner has been disabled to invoke the jurisdiction of this Court, it is further submitted that, if, the
17 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. prayers of the petitioner were considered and granted, the entire process of tender and exclusion of award contract would result in great hardship, extensive loss and prejudice not only to the 5th respondent, but also to BIAL, as it would have to pay huge 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.
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 the
18 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. criteria to be followed for evaluation of bids submitted by various parties but also to disclose whether such criteria were actually implemented while evaluating the respective bids submitted by the bidders. Further it is stated that the respondents No.6, 7 & 8 despite having been selected in the pre-qualification round, did not opt to participate in the tender process for reasons best known to them. Eventually only two bids were left for evaluation and selection of respondent No.3 namely respondent No.5 and respondent No.9 along with its other counter-part Alpha Airports Group. Further it is stated that with regard to the nature of the functions which are being entrusted to it by the first respondent by entering into the concession agreement which are statutory functions, it is an instrumentality of a “State” as defined under Article 12 of the Constitution of India. In this regard, it has supported the case of the petitioner stating various averments, which are not required to be adverted to in this order.
On the basis of the pleadings and the rival legal contentions urged on behalf of the parties, the following points would arise for consideration:
Whether the functions and duties discharged by the BIAL are statutory/public duties and whether is it a State under Article 12 of the Constitution of India ?
19 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. 2. Whether the nature of duties performed by BIAL at the International Airport and operation of flights is a statutory function under section 12 of Airport Authorities Act, 1994 ?
Whether BIAL is amenable to writ jurisdiction under Article 226 of the Constitution for judicial review ?
Whether the petitioner has got locus standi to file this writ petition and the writ petition is maintainable ?
Whether the petitioner has waived/ acquiesced its right having participated in the selection process ?
Whether the short-listing of tenders in the absence of any guidelines in the letter of expression of interest by the BIAL is reasonable, legal and valid ?
Whether the exercise of administrative power by the BIAL for issuing the tender documents in favour of respondents 5 to 9 by short listing without assigning reasons for ignoring the petitioner is legal and valid and finally awarding contract in favour of 5th respondent is legal and valid in law ?
20 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. 8. Whether the action of BIAL the award of contract in favour of 5th respondent has affected public interest ?
Whether the denial of opportunity to offer financial bid to the 9th respondent requires interference by this Court ?
Whether the denial of opportunity to offer financial bid to the 9th respondent requires interference by this Court ?
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 &
21 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. ANR. And the seven Judges Constitutional Bench decision in PRADEEP KUMAR BISWAS vs. INDIAN INSTITUTE OF CHEMICAL BIOLOGY & ORS. Reported in (2002) 5 SCC 111 and other decisions of the Apex Court reported in 1952 SC 1621 @ 1678 para 152 (1963) 1 SCR 773 UJJAM BAI vs. STATE OF UTTAR PRADESH, 1967 (3) SCR 377 in the case of RAJASTHAN STATE ELECTRICITY BOAD vs. MOHAN LAL 1979 (3) SCC 489 in the case of RAMANA DAYARAM SHETTY vs. INTERNATIONAL AIRPORT AUTHORITY OF INDIA & ORS. In support of his legal submission, he pressed into service the following decisions of the Apex Court to justify his legal contention that the nature of functions/duties performed and discharged by BIAL are statutory therefore it is a ‘State’ in terms of Article 12 of the Constitution of India for the purpose of invoking jurisdiction of this Court under Article 226 of the Constitution of India.
AIR 1995 SC 1811 BIG OF INDIA Vs. CONSUMER EDUCATION & RESEARCH CENTRE & ORS. Para 23 at page 1820, paras 26-27 at page 1021;
1989(2) SCC 691 Paras 17,18,19 at PAGE 699-700 Para 22 at Pg. 701 ANADI MUKTA SADGURU SHREE MUKTAJEE VANDAS SWAMI SUVARNA JAYANTI MAHOTSAV SMARAK TRUST & ORS Vs. V.S.K. RUDANI & ORS.
22 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. BINNY LTD., & ANR. Vs. SADASIVAN & ORS. 2005 (6) SCC 657 Paras 10 & 11 @ Pg.664-666
ZEE TELEFILMS LTD. & ANR. Vs. UNION OF INDIA & ORS. (2005) 4 SCC 649 Paras 31-33 @ Pg. 682-683.
Private bodies performing functions akin to public duties.
Halabury’s Laws of England, 4th Edition 2001 Volume 1(1) (Revised issue). Pg. 116 para 59 BURTON VS. WILLINGTON PARKING AUTHORITY (1951) 6 L.Ed.2D.45 AT 50.
EVANS Vs. NEWTON (1966) 15 L.Ed. 2D. 373 @ 377, 379.
JACKSON Vs. METROPOLITAN EDISON CO. (1974) 49 L.Ed 2D 477 (per Douglas J. dissenting, @ 488, 489, 490).
Further the learned Sr. Counsel submitted that the functions which are being carried on by the BIAL are public functions/statutory duties in view of Section 12 of the A.A.I.A. Act. Therefore, it is a ‘State’ within the meaning of Article 12 of the Constitution of India and therefore, it is amenable to writ jurisdiction of this Court under Article 226 of the Constitution.
The above contentions are rebutted by learned Senior Counsel Sri R.N. Narasimha Murthy on behalf
23 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. of respondents 3 and 4 placing reliance upon the decision of Supreme Court reported in 2002 (5) SCC 111 paras 7 & 8 in the case of Pradeep Kumar Biswas. He submits that in view of the ratio laid down therein by the Seven Judges Bench of the Apex Court 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 public
24 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. functions/duties, which are statutory in nature as it is discharging the enumerated functions of the Airport Authority as provided under section 12 of the A.A.I.A. Act. Therefore, the learned Sr. Counsel submitted that the decision in PRADEEP KUMAR BISWAS paras 40, 43, 45 and 47 would with all force apply in support of BIAL, management and control of the airport absolutely vests with BIAL. As per the terms and conditions of the shareholders agreement, particularly clause-5 pertaining to business of the company and clauses 7(2)(a) and 7.3 percentage of share holding and capital structure of BIAL and State promoters at the ratio of 74% and 26% and the management of the company shall initially consist of up to twelve directors under clause 9.1(ii). As per Clause 9.1(iii) the Managing Director of BIAL shall be appointed by the Board, chairman of the Board shall be appointed by the Board, chairman of the Board shall be elected by the Directors from among State promoters and he has no executive power of Administrative management of BIAL, chairman is not present at a board meeting, the directors who are present may appoint an acting chairman for the purpose of Board meeting. As per clause 9.2(vii) regarding decisions of the board, it shall be made on simple majority with the written consent of each private promoter and each of state promoters in relation to matters enumerated in clause 9.4, clause- 10 pertains to Project Implementation. Clause-18
25 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. Terms of the agreement and Termination. Clause 18.5 relates to private promoter’s material breach and its consequences. Clause 18.5 relates to consequences of termination. Under clause 22, anything shall constitute partnership. Under clause 25.4 sovereign immunity, unconditionally and irrevocably agreed to by first respondent/Union of India to constitute either a private commercial establishment or public or governmental acts, any proceedings should be brought against it or its assets by any party in relation to the agreement. Therefore, it is contended that the nature of functions and duties cannot be at any stretch of imagination termed as public duties/functions, much less statutory in nature. Therefore, contention urged on behalf of the petitioner BIAL is a “State” as defined under Article 12 is wholly untenable. It is not a “State” in terms of Article 12 of the Constitution.
Merely because Chapter V-A, Section 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.
26 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. 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 Court under Article 226 of the Constitution of India.
With reference to the above rival legal contentions urged by the both the learned Sr. Counsel for the parties and learned counsel on behalf of the parties, on careful examination and consideration of the same by us, Points 1 and 2 have to be answered in favour of the petitioner for the following reasons.
(i) As per notification dated 25.04.2005 published by the State Government granting exemption under section 9(1) of Karnataka Stamp Act,
27 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. 1957 for registration of the lease deed executed between BIAL and KSIIDC for establishment of international airport, the KIADB has transferred the lands covered therein to KSIIDC and in turn in favour of BIAL. The registration fee of Rs.25.33 crores is exempted by giving 100% concession under notification dated 15.04.2005. In view of this, the lands acquired by the State Government in favour of Karnataka Industrial Areas Development Board (in short referred to as “KIADB”) for the infrastructure facility defined under the KIADB Act, 1966 for establishing international airport in exercise of its eminent domain powers under section 28(1) and 28(4) of KIADB Act, the vast extent of land nearly four thousand and odd acres was acquired under the KIADB Act, the same was subsequently transferred by KIADB to KSIIDC for establishment of international airport and vast extent of land was leased in favour of BIAL for that purpose, the acquisition of vast extent is for the above public purpose. As per the explanation of section 28 of the A.A.I.A. Act, for removal of doubts, it is declared that for the purpose of aforesaid clause, ‘airport’ includes private airport. The benefit of Chapter V-A of the A.A.I.A. Act is incorporated in the Concession agreement to evict the unauthorized occupants from the premises of BIAL.
28 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. (ii) We are required to examine the nature of functions and duties performed by BIAL. It is necessary for this Court to extract ‘air traffic service’, ‘air transport service’ and the functions of the Airport Authority enumerated in Sections 2(d)(e), (nn) and 12 of A.A.I.A. Act reads as under :
2(d) “air traffic service” includes flight information service, alerting service, air traffic advisory service, air traffic control service, area control service, approach control service and airport control service;
(e) “air transport service” means any service, 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
29 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. 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 by rendering such technical, financial or other assistance which the Central Government may consider necessary for such purpose.”
(b) plan, procure, install and maintain navigational aids, communication equipment, beacons and ground aids at the airports and at
30 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. such locations as may be considered necessary for safe navigation and operation of aircrafts;
(c) provide air safety services and search rescue facilities in coordination with other agencies;
(d) establish schools or institutions or contents for the training of its officers and employees in regard to any matter connected with the purposes of this Act;
(e) construct residential buildings for its employees;
(f) establish and maintain hotels, restaurants and restrooms at or near the airports;
(g) establish warehouses and cargo complexes at the airports for the storage or processing of goods;
(h) Arrange for postal, money exchange, insurance and telephone facilities for the use of passengers and other persons at the airports and civil enclaves;
(i) Make appropriate arrangements for watch and ward at the airports and civil enclaves;
31 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. (j) Regulate and control the plying of vehicles, and the entry and exist of passengers and visitors, in the airports and civil enclaves with due regard to the security and protocol functions of the Government of India;
(k) Develop and provide consultancy, construction or management services, and undertake operations in India and abroad in relation to airports, air-navigation services, ground aids and safety services or any facilities thereat;
(l) Establish and manage heliports and airstrips;
(m) provide such transport facility as are, in the opinion of the Authority, necessary to the passengers travelling by air,
(n) Form one or more companies under the Companies Act, 1956 or under any other law relating to companies to further the efficient discharge of the functions imposed on it by this Act.
(o) Take all such steps as may be necessary or convenient for, or may be incidental to, the exercise of any power or the discharge of any
32 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. functions conferred or imposed on its by this Act;
(p) Perform any other function considered necessary or desirable by the Central Government for ensuring the safe and efficient operation of aircraft to, from and across the air space of India;
(q) Establish training institutes and workshops;
(r) Any other 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
33 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. (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 craft operations or using any aerodrome in the interest of security of India or for securing the safety of air craft operations. Section 11-A of the A.C. Act provides for penalty for failure to comply with the directions issued by him under section 5-A of the Act.
(iv) In view of the aforementioned provisions of the Airports Authority Act and Air Craft Act, on the basis of the agreements referred to supra, the lease deed, the terms and conditions regarding
34 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. constitution of Board of Directors, Appointment of Chairman, Managing Director, BIAL is established. It may be a private airport but nevertheless the provisions of Air Craft Act, Rules framed thereunder and Airport Authorities Act are applicable to it. Though the establishment of airport and its maintenance as per the agreements referred to supra is entrusted to BIAL, it has to discharge the above statutory functions/duties under Section 12-A of the A.A.I.A. Act. In view of these undisputed facts, the Constitutional Bench decisions and other decisions of the Apex Court referred to in the preceding paragraphs relied upon by the learned Senior Counsel Mr. Vinod Bobade, for the petitioner are applicable in support of the claim of the petitioner. The relevant paragraphs of the aforesaid decisions referred to supra in the preceding paragraphs relied upon by the learned Sr. Counsel for the petitioner are extracted as hereunder :
(v) The Constitutional Bench (Seven Judges Bench) of the Apex Court in UJJAM BAI vs. STATE OF UTTAR PRADESH reported
35 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. in AIR 1962 SC 1621 @ 1678 para 152 has held as hereunder :
“152. In the first place, it has to be pointed out that the definition is only inclusive which itself is apt to indicate that besides the Government and the Legislature there might be other instrumentalities of State action which might be comprehended within the expression ‘State’… Again, Article 12 winds up the list of authorities falling within the definition by referring to ‘other authorities’ within the territory of India which cannot obviously be read as ejusdem generis with either the Government or legislature or local authorities. The words are of wide amplitude and capable of comprehending every authority created under a statute and functioning within the territory of India. There is no characterization of the nature of the ‘authority’ in this residuary clause and consequently it must include 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
36 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. 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).”
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
37 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. public corporation set up under a special statute to carry on a business or service which Parliament thinks necessary to be carried on in the interest of the Nation is an agency or instrumentality of the State and would be subject to the limitations expressed in Article 13(2) of the Constitution. A State is an abstract entity. It can only act through the instrumentality or agency of natural or juridical persons. Therefore, there is nothing strange in the notion of the Sate acting through a corporation and making it an agency or instrumentality of the State.”
The governing power wherever located must be subject to the fundamental constitutional limitations. The need to subject the power centres to the control of constitution requires an expansion of the concept of State action …..”
“98. The State may aid a private operation in various ways other than by direct financial assistance. It may give the organization the power of eminent domain, it may grant tax exemptions, or it may give monopolistic
38 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. status for certain purposes. All these are relevant in making an assessment whether the operation is private or savours of State section-(25). 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. Adams, 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.”
(vii) The next noteworthy decision of the Constitutional Bench of the Apex Court in AJAY HASLA & ORS. Vs. KHALID MUJIB SEHRAVARDI & ORS. Reported in (1981) 1 SCC 722 wherein the Apex Court after referring to its decision in ‘International Airport Authority’ case has laid down the law as hereunder:
“11. We may point out that it is immaterial for this purpose whether the
39 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. corporation is created by or under a statute. The test is whether it is an instrumentality or agency of the State and not as to how it has been created. The inquiry has to be not as to how the juristic person is born out why it has been brought into existence. The corporation may be a statutory corporation created by a statute or it may be a Government Company or a company formed under the Companies Act, 1956 or 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
40 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. 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 expansion of ‘State’ at paras 6, 10, 15, 16, 40, 41 and finally it has summed-up at para 98 which relevant paragraphs reads as follows :
‘6. That an 'inclusive' definition is generally not exhaustive is a statement of the obvious and as far as Article 12 is concerned, has been so held by this Court in Ujjani Bai vs. State of U.P. (AIR 1962 SC 1621). The words 'State' and 'Authority' used in Article-12 therefore remain, to use the words of Cardozo (Benjamin Cardozo : The Nature of the
41 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. Judicial Process), among "the great generalities of the Constitution", the content of which has been and continues to be supplied by Courts from time to time.
Keeping pace with this broad approach to the concept of equality under Articles 14 and 16, Courts have whenever possible, sought to curb an arbitrary exercise of power against individuals by 'centres of power', and there was correspondingly an expansion in the judicial definition of 'State' in Article- 12.
The use of the alternative is significant. The Court scrutinised the history of the formation of the three Corporations, the financial support given by the Central Government, the utilization of the finances so provided, the nature of service rendered and noted that despite the fact that each of the Corporations ran on profits earned by it nevertheless the structure of each of the Corporations showed that the three Corporations represented the 'voice and hands' of the Central Government. The Court came to the conclusion that although the
42 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. employees of the three Corporations were not servants of the Union or the State, "these statutory bodies are 'authorities' within the meaning of Article-12 of the Constitution".
Mathew J in his concurring judgment went further and propounded a view which presaged the subsequent developments in the law. He said : (SCC P.449 para-82).
"A State is an abstract entity. It can only act through the instrumentality or agency of natural or juridical persons. Therefore, there is nothing strange in the notion of the state acting through a corporation and making it an agency or instrumentality of the State.."
It is further held by Mathew J. that ;
“The State may aid a private operation in various ways other than by direct financial assistance. It may give the organization the power 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
43 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. 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.”
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
44 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. individual if it were in fact acting as an instrumentality or agency of Government.
The picture that ultimately emerges is that the tests formulated in Ajay Hasia vs. Khalid (1981) 1 SCC 722 at 736 para 9 are not a rigid set of principles so that if a body falls within any one of them it must, ex- hypothesi, be considered to be a State within the meaning of Article-12. The question in each case would be whether in the light of the cumulative facts as established, the body is financially, functionally and administratively dominated by or under the control of the Government. Such control must be particular to the body in question and must be pervasive. If this is found then the body is a State within Article-12. On the other hand, when the control is merely regulatory whether under statute or otherwise, it would not serve to make the body a State.
Coming now to the facts relating to CSIR, we have no doubt that it is well within the range of Article-12, a conclusion which is sustainable when
45 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. judged according to the tests judicially evolved for the purpose.
“98. Simply by holding a legal entity to be an instrumentality or agency of the State it does not necessarily become an authority within the meaning of 'other authorities' in Article-12. To be an authority, the entity should have been created by a statute or under a statute and functioning with liability and obligations to public. Further, the statute creating the entity should have vested that entity with power to make law or issue binding directions amounting to law within the meaning of Article 13(2) governing its relationship with other people or the affairs of other people - their rights, duties, liabilities or other legal relations. If created under a statute, then there must exist some other statute conferring on the entity such powers. In either case, it should have been entrusted with such functions as are governmental or closely associated therewith by being of public importance or being fundamental to the life of the people and hence governmental. Such authority would be the State, for, one who enjoys the powers
46 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. or privileges of the State must also be subjected to limitations and obligations of the State. It is this strong statutory flavour and clear indicia of power - constitutional or statutory, and its potential or capability to act to the detriment of fundamental rights of the people, which makes it an authority; though in a given case, 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
47 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. 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 Board. All functions of the Board are not public functions. The Board is not created by transfer of a government-owned corporation. It is an autonomous body.
(x) The decision of Ujambai referred to supra having regard to changing socio-economic policies in India and variety of methods by which Governmental functions are performed by which the Government carries on trade or business by a society, corporation etc., the functions that would be carried on by BIAL is an instrumentality of the ‘State’ under Article 12 of the Constitution of India. The statutory body-second respondent may be empowered to divest its power and functions wholly or partially in any interest or juridical person or it may act
48 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. generally or in collaboration with the other bodies, public or private, for performing its functions.
(xi) In the case of BURTON vs. WILLINGTON PARKING AUTHORITY (1961) 6 L.Ed.2d. 45 @ 50 after referring to the act of a private lessee to a private authority has held to be State action in violation of 14th amendment as the lessee of the parking authority was operating a restaurant in the automobile parking building and was refusing to serve solely on the ground that he was a negro, the relevant para of the law laid down reads thus:
“Only by sifting facts and weighing circumstances can the non-obvious involvement of the State in private conduct be attributed its true significance.”
“The land and building were publicly owned. As an entity, the building was dedicated to ‘public uses’ in performance of the Authority’s ‘Essential Governmental Functions’.”
Addition of all these activities, obligations and responsibilities of the Authority, the benefits mutually conferred,
49 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. together with the obvious fact that the restaurant is operated as an integral part of a public building devoted to a public parking service, indicates that degree of state participation and involvement in discriminatory action which it was the design of the Fourteenth Amendment to condemn…. By its inaction, the Authority, and through it the State, has not only made itself a party to the refusal of service, but has elected to place its power, property and prestige behind the admitted discrimination. The State has so far insinuated itself into a position of interdependence with Eagle that it must be recognised as a joint participant in the challenged activity, which on that account, cannot 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.”
50 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. (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 of this case, we cannot but conclude that the public character of the park requires it to be treated as a public institution subject to the command of the Fourteenth
51 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. Amendment, regardless of who now has titled under State law.”
(xiii) In another case reported in (1974) 49 L.Ed.2d.477 in the case of JACKSON Vs. METROPOLITAN EDISON CO. which decision has been referred to in the International Airport Authority of India’s case, it is laid down as hereunder: “A particularized inquiry into the circumstances of each case is necessary in order to determine whether a given factual situation falls within ‘the variety of individual state relationships’… The dispositive question in any state-action case is not whether any single fact or relationship presents a sufficient degree of state involvement, but rather whether the aggregate of all relevant factors compels a binding of state responsibility.”
“It is not enough to examine seriatim each of the factors upon which a claimant relies and to dismiss each individually as being insufficient to support a finding of state action. It is the aggregate that is controlling.
52 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. “In the aggregate these factors depict a monopolist providing essential services as a licensee of the State and within a framework of extensive state supervision and control. The particular regulations at issue, were authorized by state law and were made enforceable by the weight and authority of the State. Moreover, the state retains the power of oversight to review and amend the regulations if the public interest so requires. Respondent’s actions are sufficiently intertwined with those of the State, and its termination of service provisions are buttressed by state law, to warrant a holding that respondent’s actions in terminating this house-holder’s service were ‘state action’ for the purpose of giving federal jurisdiction over respondent under 42 USCs. 1983.”
(xiv) From the aforementioned legal principles laid down by the Constitutional Benches of the Supreme Court and American Law, the doctrine of “State Action” would with all force applicable to the facts of the case to come to the conclusion that to provide duty free shops in the BIAL as per the agreement referred to supra is necessary
53 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. in the international airport. The facilities provided therein are in the nature of Statutory functions/public functions by BIAL for the convenience 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.
54 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. 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. If any operation, maintenance, repair or other works necessitate interrupting or suspending the landing or taking-off of any aircraft, or the closure of the Airport, for any period of time, BIAL shall, except in case of an emergency, give to the DGCA and to all affected users of the Airport such prior written notice thereof as the DGCA may from time to time reasonably require.”
(xv) Section 22-A of the A.A.I.A. Act empowers the 2nd respondent to levy and collect development free from embarking passengers under clause (b) for establishment or development of a new airport in lieu of the airport referred to clause (a) or (c) for investment in the
55 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. enquiry in respect of shares to be subscribed by the Authority in companies engaged in establishing, owning, developing, operating or maintaining a private Airport in lieu of the airport referred to in clause (a) or advancement of loans to such companies or other persons engaged in such activities.
(xvi) The effect of exclusion of provisions of Chapter-V-A of the A.A.I.A. Act from the ambit of Rent Control Act from the premises leased to BIAL is that the Government while dealing with the citizens in respect of its property, would not act for its own purpose as a private landlord but would act in public interest. In this regard, the Constitutional Bench of the Apex Court at para 69 in the case of ASHOKA MARKETING LTD. & ANR. Vs. PUNJAB NATIONAL BANK & ORS. after referring to its earlier decision in the case of DWARAKADAS MAKFATIA & SONS vs. BOARD OF TRUSTEES OF THE FORT OF BOMBAY reported in 1989 (3) SCC 293 has laid down the law as under:
56 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. “69. ……every activity of a public authority especially the background of the assumption on which such authority enjoys immunity from the rigors of the Rent Act, must be informed by reason and guided by the public interest. All exercise of discretion or power by public authorities as the respondent in respect of dealing with tenants in respect of which they have been treated separately and distinctly from other landlords on the assumption that they would not act as private landlords, must be judged by that standard.”
(xvii) The assistance provided by both the Union of India and State Government and other statutory authorities in permitting BIAL to establish and maintain BIAL at Devenahalli, without which the airport could not have been established, and Rs.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
57 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. 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 decisions with all force applicable to the case on hand and therefore BIAL is amenable to writ jurisdiction of this Court under Article 226 of the Constitution of India as it has been
58 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. discharging statutory functions/duties in establishing International Airport at Devahanalli as it has undertaken to discharge the statutory functions of the Airport Authority in establishing private Airport and its maintenance.
(xix) The word “person” is with avowed object deliberately used in Article 226 of the Constitution of India, which may be a natural person or juridical person such as Government, Private or Public Limited company, society, body, corporation etc., who will perform public functions/duties in the public interest. They are all amenable to judicial review power of this Court to the legal principle enunciated by the Apex Court in the above referred cases.
(xx) Further as per the decisions in Rohtas Industries, Anadi Mukta and Unnikrishnan referred to supra, the Supreme Court has succinctly held that the scope of High Court power under Article 226 of the Constitution of India is also to issue writs against a private body/person. The words “any person or authority” referred to in Article 226 of the
59 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. Constitution of India is therefore not to be confined only to statutory authorities and instrumentalities of State for issuing writs against any persons. They may cover any person or body performing statutory, public functions and duties. The form of the body is not relevant for the purpose of exercise of power of this Court under Article 226 of the Constitution of India. What is relevant is the nature of functions or duties imposed upon such person and performed by it. As per the development of law, Prof. D. Smith, whose statement is extracted in Anadi Muktas case at paras 17-23, it is stated thus :
“The words ‘any person or authority’ used in Article 226 are, therefore, not to be confined only to statutory authorities and instrumentalities of the State. They may cover any other person or body performing public duty. The form of the body concerned is not very much relevant. What is relevant is the nature of duty imposed on the body…Here again we may point out that mandamus cannot be denied on the ground that the duty to be enforced is not imposed by the
60 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. statute. Commencing on the development of the law, Professor documentary evidence Smith states: “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.”
61 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. “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 of the institutions receiving aid it should be held that it is a public duty. The absence of aid does not detract from the nature of duty.”
(xxii) The learned Sr. Counsel for the petitioner has placed reliance upon the following decisions of the Apex Court wherein the scope of Article 226 is laid down by the Apex Court in BASI REDDY vs. INTERNATIONAL CROPS RESEARCH INSTT. Reported in (2003) 4 SCC 225 @ 237 the Apex Court has laid down the law that “A Writ under Article 226 can be against a ‘person’ if it is a statutory body or performs a public function or discharges a public or statutory duty.’ In the case of ZEE TELEFILMS LTD. vs. UNION OF INDIA referring to Anadi Mukta’s case it has held that ‘thus, it is
62 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. clear that when a private body performs its public functions even if it is not a State, the aggrieved person has a remedy not only under the ordinary law but also under the Constitution by way of a writ petition under Article 226.” Lastly referring to the case of BINNY LTD. vs. SADASIVAH reported in (2005) 6 SCC 657 para 11 reported in (2005) 4 SCC 649 @ 682 para 33 it has held that ‘Article 226 is couched in such a way that a writ of mandamus could be issued even against a private authority… discharging a public function….A body is performing a ‘public function’ when it seeks to achieve some collective benefit for the public or a section of the public and is accepted by the public or that section of the public as having authority to do so. Besides therefore exercise public functions when they intervene or participate in social or economic affairs in the public interest’.
(xxiii) For the foregoing reasons, we answer Point Nos. 1 to 3 in favour of the petitioner.
63 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. Point Nos. 4 and 5 :
The learned Senior Counsel has submitted that the petitioner has got locus standi to file the writ petition as it being the member of the consortium of AerRianta, he has placed strong reliance upon the petition averments contending that the petitioner has entered into consortium agreement with AerRianta International cpt, which is a company incorporated under the laws of Ireland to obtain contract for running duty free retail business with BIAL and the said company is dedicated to International Division of the Dublin Airport Authority. It was the first to start duty free retailing business in the world and it has fulfilled the experience wanted 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,
64 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. 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 clause 3.2 of the invitation. The petitioner did not receive any written communication regarding issuance of tender documents or about its expression of interest being rejected or of any other decision of BIAL not to issue tender documents to it in the rejoinder statement, petitioner has reiterated its stand taken in the writ petition.”
As the very same grounds on which this Tribunal has held that BIAL is not a statutory body, have been considered by the Hon’ble High Court and have been accepted that it is a statutory body. Therefore, respectfully following the Hon’ble jurisdictional High
65 ITA.No.1160/Bang/2012 M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Bangalore. Court Order, we do not see any reason to interfere with the Order of the CIT(A).
In the result, Revenue’s appeal is dismissed. Since the Revenue’s appeal is dismissed, and the alleged ambiguity mentioned in the M.A. of the Revenue is also removed, we find that M.A. has become infructuous. Accordingly it is dismissed.
Order pronounced in the open Court on 5.10.2015.
Sd/- Sd/- (JASON P. BOAZ) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Dated 5th October, 2015. VBP/- Copy to 1. ACIT, Circle 12(1), 14/3, 4th Floor, Rastrothana Parishath Bhavan, (Opp. RBI), Nrupathunga Road, Bangalore – 560 001. 2. M/s. Menzies Aviation Bobba (Bangalore), P. Ltd., Plot No.C-041, Bangalore International Airport, Devanahalli, Bangalore – 560 300. 3. CIT(A)-III, 6th Floor, HMT Bhavan, Ganganagar, 59, Bellary Road, Bangalore – 560 032. 4. CIT-III, Bangalore 5. D.R. ITAT ‘B’ Bench, Bangalore 6. Guard File