Bombay HC Stays ₹1.5 Crore Cost On AAI In 27-Year-Old Dispute With Aer Lingus Over Unpaid Airport Charges

Mumbai: The Bombay High Court has stayed a Rs1.5 crore cost imposed on the Airports Authority of India (AAI) by the city civil court for unnecessarily involving Irish aircraft lessor Aer Lingus Ltd in a 27-year-old commercial dispute over unpaid airport charges.

A bench of Chief Justice Alok Aradhe and Justice M.S. Karnik, on April 25, observed that AAI officials may have been “overcautious” in protecting the authority’s interests by adding Aer Lingus, the aircraft owner, as a party to the suit.

“It may be the officials of the AAI were overcautious in protecting its interest and hence impleaded defendant No.1 (Aer Lingus). In such circumstances, merely because Aer Lingus was made a party and a claim was raised against them, it is not sufficient to impose exemplary costs,” the court said.

The HC was hearing AAI’s appeal against a January 3 order of the Bombay City Civil Court rejecting its claim against Aer Lingus and terming the suit “malicious and vexatious.” The lower court directed AAI to pay Aer Lingus Rs1 crore as exemplary costs and Rs 50 lakh in litigation expenses under the Commercial Courts Act. It also ordered AAI to refund Rs 96.25 lakh towards bank guarantee charges over 27 years, with 9% annual interest.

AAI’s suit sought to recover Rs2.71 crore in unpaid landing, parking, and navigation charges from January 1995 to March 1996, when East West Airlines operated two aircraft leased from Aer Lingus. AAI had added Aer Lingus as a defendant along with East West Airlines and others.

Aer Lingus argued it had no operations in India and had leased the aircraft to East West Airlines for five years starting in 1992. The lease was terminated due to non-payment and lack of insurance. The company claimed no contractual relationship with AAI and no liability for the lessee’s dues.

The civil court accepted this, citing AAI employees’ admissions and an earlier HC ruling exonerating Aer Lingus. It also noted a CAG report that flagged AAI’s acceptance of just Rs 1.75 lakh as security deposit instead of the required Rs 17.5 crore.

While staying the cost order, the HC said the finding of collusion between AAI and East West Airlines appeared “prima facie misconceived.” However, it declined to stay the direction to cancel the 1996 bank guarantee and allowed Aer Lingus to seek withdrawal of the deposited refund.