NEW DELHI: The Delhi High Court recently upheld an arbitral award exempting Delhi International Airport Limited (DIAL) from paying annual fees to the Airports Authority of India (AAI) during the COVID-19 pandemic.
The ruling, delivered by Justice Dinesh Kumar Sharma, not only reinforces the principle of force majeure (extraordinary event negating contractual obligations) but also extends DIAL’s operational tenure by two years, acknowledging the catastrophic financial impact of the pandemic on the aviation industry.
The court’s ruling marks a significant victory for DIAL, which operates the Indira Gandhi International (IGI) Airport. The pandemic had triggered unprecedented collapse in global air travel, crippling revenue and plunging airport operators into financial distress. Citing these extraordinary circumstances, the arbitral tribunal ruled that DIAL’s obligation to pay AAI 45.99% of its revenue as annual fees was rendered unfeasible.
“It is a matter of common acknowledgement that during Covid, it had materially and adversely effected the function of the business,” the bench noted, backing the tribunal’s findings.
“The arbitral tribunal (AT) taking into account the terms of the contract and the trade and usages along with the commercial sense has taken a holistic view in extending the tenure of the contract. The findings of the learned AT are based on these facts, and the court does not find any perversity in them,” the high court said.
With passenger footfall plummeting and government-imposed travel restrictions paralysing operations, DIAL argued that it was financially impossible to meet contractual obligations. The arbitral tribunal, in a ruling in December 2023 recognised COVID-19 as a force majeure, relieving DIAL of its financial burden from March 19, 2020, to February 28, 2022.
However, AAI pushed back hard against this interpretation. It contended that the pandemic did not meet the contractual definition of force majeure and pointed out that DIAL had continued payments in the initial months of the crisis.
According to AAI, this demonstrated that DIAL was capable of fulfilling its contractual obligations and that the plea for exemption was opportunistic rather than justified.
However, the court dismantled AAI’s arguments, affirming that the tribunal had acted well within its legal framework in granting relief to DIAL.
The court noted that the purpose of a force majeure clause is to prevent undue losses in extraordinary circumstances.
‘Exemption not just reasonable, necessary’
The high court said the tribunal rightly concluded that when shutting down the airport was not an option, and expenses were greater than revenue, exemption from annual fees was not just reasonable but necessary.The AAI itself had noted the pandemic’s adverse impact in its annual reports, the court said, pointing out a contradiction in AAI’s stance