HC relief to MIAL on payments to AAI can impact PPP deals overall: Legal experts

Ashwini Phadnis New Delhi | Updated on December 02, 2020

The Delhi High Court’s November 27 interim relief to Mumbai International Airport Limited in the case with the Airports Authority of India regarding payments by private parties during a force majeure event could have far reaching consequences experts feel.

The case relates to MIAL seeking pre-arbitral interim relief against making payments to AAI during the Covid lockdown period.

Impact on PPP

According to Anubha Singh, Advocate, Innovatus Law, “In this case, MIAL was able to show that as a result of the Covid-19 pandemic and the restrictions and lockdowns, no activity at Mumbai Airport was going on thereby having adverse financial effects on MIAL. This is a situation of force majeure which led to the obligations under the contract being suspended.”

Jagannarayan Padmanabhan, Director - Transport, CRISIL Infrastructure Advisory points out that the interim relief to MIAL can set the tone for other PPP contracts which have been impacted significantly due to the pandemic. “(It)Will come as a relief to other affected PPP developers who are finding it difficult to even run their operations and are currently under a daily cash burn. The situation is quite nebulous and a more pragmatic view will be the need of the hour,” he said.

Petrushka Dasgupta, Partner, IndusLaw says that the judiciary has been astute in its determination and interpretation as to what constitutes force majeure, specifically in relation to Covid-19, as well as non-fulfilment of obligations due to restrictions imposed by the government, lockdown and travel restrictions.

According to Ish Jain, Aerospace Arbitrator and Senior Partner, Regius Legal LLP the court has taken a prima facie view in favour of MIAL that its obligations under the Operations, Management and Development Agreement with AAI and the Government of India stood suspended till MIAL could reach a level of activity prior to the force majeure event or the Covid-19 situation. Hence, the court directed MIAL to deposit 38.7 per cent of its actual payments in the proceeds account and restrained AAI from transferring any funds from this account to the AAI fee account or the Surplus Account.

Adds Dasgupta, “This has also created transparency with respect to the relief provided which includes that such proceeds received by MIAL cannot be used by AAI and this amount has to be deposited in the account maintained by State Bank of India and utilised for day-to-day operations and maintenance by MIAL. The utilisation of this amount will be submitted to AAI and SBI under the monthly account statement.”

According to Dasgupta if private players in the market enter into a similar joint venture arrangement with the government, this decision safeguards their interests in the event a force majeure situation arises. “This also ensures the applicability of force majeure events equally to both private and government entities,” he said.

Published on December 01, 2020

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