The Novartis Case: A Sui Generis Decision That Does Not Jeopardize Pharmaceutical Patent Protection In India.

abaindialawnews 2013 - Summer, ALL

By: V. Lakshmikumaran
Editors’ Note: The recent patent law decision of the Supreme Court of India on April 1, 2013 (Novartis A. G. v. Union of India & Others, Civil Appeal No. 2706-2716 of 2013), involving the Novartis-manufactured cancer drug, Gleevac (to treat leukemia), made headlines around the world and heightened concerns in the international pharmaceutical industry that India would not provide adequate patent protection for innovative drugs. But when looked at closely, the court’s decision turned on the facts of this particular case, and the meaning of Section 3(d) of India’s Patent Act of 1970, as amended in 2005, under which a new form of a known substance is not patentable, unless the applicant can show that the new form significantly enhances the known efficacy of the known substance. As Mr. Lakshmi Kumaran, a preeminent Advocate, who has argued frequently before the Supreme Court, lays out in this article, any inference that the decision spells weak future patent protection in India is misplaced.

Novartis filed for a patent in 1998 in India for a “beta crystal” form of imatinib mesylate, a drug designed to treat leukemia. Novartis had been marketing this drug under the brand names Gleevec™ and Glivec™. Novartis claimed the “beta crystal” form was a new version of a previously patented version of imatinib mesylate and, therefore, entitled to a patent. Twelve years later, in April 2013, the Supreme Court of India upheld the decisions of the Controller of Patents and Designs, as well as of the Intellectual Property Appellate Board, both of which had held that the new version was not patentable because Novartis had failed to demonstrate that the new version had “increased efficacy” as required Section 3(d) of the Indian Patents Act, 1970, as amended in 2005.

The key questions before the Court included the interpretation of Section 3(d) and its relationship to the concept of “inventive step.” “Inventive step” is a foundational principle in patent law that an invention must be sufficiently inventive or non-obvious, in order to be patented. In other words, the invention must be an adequate distance beyond or above the state of the art. While the Supreme Court’s decision gives significant insight into Section 3(d), to the relief of many (and the dismay of a few), the decision falls short of providing a clear interpretation of the section. Instead, the Court chose to dispose of the case on its sui generis facts. Still, the decision does provide certain useful clarifications on the scope of Section 3(d) and its relationship with concept of “inventive step.”

Section 3(d) was designed to prevent the “ever-greening” of patents. As a matter of public health policy, ever-greening is seen in India as inhibiting the expeditious entry of lower priced generics into a market desperate for low cost drugs. The statute sought to prevent patenting of trivial modifications of currently patented inventions, the effect of which in pharmaceuticals, for example, is to extend a monopoly in the market. Section 3(d) reads, in relevant part:

3. What are not inventions – the following are not inventions within the meaning of this Act…

(d) the mere discovery of a new form of a known substance which does not result in increased efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such process results in a new product or employs at least one new reactant.
Background Facts

Novartis filed a patent application in India on July 17, 1998, claiming priority based upon a Swiss patent application dated July 18, 1997. At the time of filing of the application, Indian patent law did not allow product patents. Under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) of the World Trade Organization (WTO), however, India had until 2005 to phase in product patent protection. Applications prior to that date could be filed in a “mailbox” for consideration after 2005. This is what Novartis did. As long as the application remains in the mailbox and the patent is not granted, generic manufacturers can freely produce the drug without fear of legal action. Once the patent is granted, however, generic manufacturers will either have to obtain a voluntary license from the patent-holder, or a compulsory license from the Patent Office, and pay royalties to the patent-holder. In the absence of either, generic manufacturers must stop production. Novartis had also applied for and received Exclusive Marketing Rights (EMR), for Glivec, under Section 24A of the Patent Act, pending a decision on its patent application. Notably, the increased efficacy requirement of Section 3(d) had not yet been enacted when Novartis made its mailbox filing of its patent application in 1998 for the beta crystal form of imatinib mesylate. That provision was not enacted until 2005. Whether or not the beta crystal form of imatinib mesylate was patentable turned to a large extent on the meaning of “efficacy” in Section 3(d). Did “efficacy” mean “therapeutic efficacy” or “physical efficacy?”

Novartis’s application was examined after 2005 when the Indian Patents Act was amended to fully comply with the TRIPs requirements. However, prior to examination of the patent application, five pre-grant petitions opposing the application had been filed under section 25(1) of the Patents Act. In response, Novartis filed affidavits relating to the beneficial physio-chemical properties of the new form over known substances. Novartis also referred to the 30% increased bioavailability of the new form. Bioavailability is the degree to which a drug or other substance becomes available to the target tissue after the drug has been administered. Here, again, the question was whether increased bioavailability would suffice for overcoming the increased ‘efficacy’ requirement in Section 3(d).

On January 25, 2006, the Assistant Controller of Patents and Designs rejected Novartis’s application for grant of the patent on the several grounds, including anticipation by US Patent 5,521,184 (the patent that had been granted to one of the inventors, Jurg Zimmermann for imatinib derivatives), and the lack of “inventive step” in view of the Zimmermann patent and the knowledge of a person skilled in the art. The rejection was also based on Novartis’s failure to demonstrate that the beta crystalline form of imatinib mesylate satisfied the requirements of Section 3(d). The concept of anticipation in patent law disqualifies an invention from patent protection if the invention is already disclosed earlier such that they may not be considered new or novel—novelty being a requirement for patentability. Thus, “anticipated” inventions are not patentable. The “inventive step” (non-obviousness) threshold, a feature present in most patent laws, requires that an invention should be sufficiently inventive — i.e., non-obvious — in order to be patented. Under Indian law, the Applicant is also required to identify the feature that involves a technical advance or economic significance over prior art. The Assistant Controller granted the applications of those who had opposed awarding Novartis the patent.

Novartis appealed the decision of the Assistant Controller and on June 26, 2009, the Intellectual Property Appellate Board (IPAB) reversed the findings of the Assistant Controller on the issues of anticipation and lack of inventive step. The IPAB, however, affirmed the Assistant Controller’s finding that the product was non-patentable under Section 3(d).

Novartis appealed the IPAB order to the Supreme Court of India. The Supreme Court rejected the patent application holding that it did not fulfill the requirements of Section 2(j) (definition of “invention”), 2(ja) (definition of “inventive step”) and 3(d) of the Act. (Novartis should have first approached the High Court first, but the Supreme Court exercised its discretion to hear the matter on an exceptional basis in view of certain special circumstances, including the importance of the legal issues involved. However, the Court strongly discouraged future litigants from side-stepping the High Court by appealing directly to the Supreme Court.)
Questions Presented to the Supreme Court of India

The critical issue before the Supreme Court was how to interpret Section 3(d). The Court broke down its analysis into three broad questions: First, how must the terms “efficacy” and “increased efficacy” be interpreted? Second, was Section 3(d)’s “increased efficacy” something more than the recognized patent law principle of “inventive step?” Third, what was “known substance,” and “known efficacy,” and had Novartis provided sufficient evidence to prove that the new version had “increased efficacy” over the “known substance.”
“Efficacy”

Looking at legislative intent, the Court noted that Section 3(d) was amended during the process of allowing product patents in all fields of technology. The court recited a detailed account of the parliamentary debates on Section 3(d) and the circumstances under which it was enacted. The Court even referred to the communications issued by third parties, such as the WHO to the concerned Indian Minister. The Court concluded that Parliament’s underlying legislative intent was to ensure fair access to medicines. The Court observed that Section 3(d) was amended, as it stands today, in order to allay concerns that the pharmaceutical product patent regime would undermine public health considerations. The provision was intended to prevent patent monopolies from being unfairly extended or prolonged, thereby affecting access to medicines. This led the Court to make the following finding:

“[We have] no doubt that the amendment/addition made in section 3(d) is meant especially to deal with chemical substances, and more particularly pharmaceutical products.”

After thoroughly reviewing the background behind the introduction of the provision, the Court, in accordance with recognized principles of statutory interpretation, went by the ordinary meaning of the term “efficacy,” i.e., “the ability to produce a desired or intended result.” The Court also noted that the application of the definition/meaning would vary based on the product under consideration. Having found that the provision was intended to deal with chemical substances, and more particularly pharmaceutical products, the Court held:

“Therefore, in the case of a medicine that claims to cure a disease, the test of efficacy can only be “therapeutic efficacy.””

The Court went on further to hold that“With regard to the genesis of section 3(d), and more particularly the circumstances in which section 3(d) was amended to make it even more constrictive than before, we have no doubt that the “therapeutic efficacy” of a medicine must be judged strictly and narrowly.”

Various propositions were presented to the Court, in terms of defining how exactly this can be proved. For instance, one proposition was that increased bioavailability can never be sufficient for the purposes of overcoming Section 3(d). Another proposition was that “efficacy” and proving “enhanced efficacy” were to be kept flexible, such that safety or significantly reduced toxicity should also be taken into account. However, the Court did not render a finding on these propositions since, in its view, it was not necessary to rule on them to adjudicate the matter.
Section 3(d) is a Distinct and Independent Criteria

Novartis had argued that to the extent a ruling had already been made that the claimed product possessed an inventive step, it could not be considered as a “mere discovery of a new form of a known substance,” and hence, should not be rejected under Section 3(d). Section 3(d) was only inserted, Novartis argued, out of abundant caution to make it legislatively clear that such mere discoveries are not to be granted patents.

The Court, however, rejected this argument. While noting that the argument made sense in terms of the existing scheme of the legislation, the Court held that it nonetheless missed an important distinction–the distinction between “invention”, which subsumes “inventive step” and “patentability,”. “Invention means new product or process involving an inventive step and capable of industrial application.” Section 2(1)(j). “Inventive step means a feature of an invention that involves technical advance as compared to the existing knowledge or having economic significance or both and that makes the invention not obvious to a person skilled in the art.” Section 2(1)(ja). Section 3, on the other hand, defines what are not ‘inventions’.

The Court was of the view that “if clause (d) is isolated from the rest of section 3, and the legislative history behind the incorporation of Chapter II in the Patents Act, 1970, is disregarded, then it is possible to see section 3(d) as an extension of the definition of ‘invention’ and to link section 3(d) with clauses (j) and (ja) of section 2(1).” However, in a further analysis of the parliamentary history, the Court found no evidence of a legislative intent to enact Section 3(d) out of “abundant caution.” Rather, the Court was of the view that the legislative history confirms the intent to keep the requirements of ‘patentability’ under Section 3 separate from the concept of ‘invention’ under Section 2(1)(j).

The Court concluded that under the scheme of the Act, an applicant must satisfy the twin tests of “invention” and “patentability” for grant of a patent.
The Decision on Facts

A. The “Known” Substance

Section 3(d) requires comparison of known efficacy of the claimed product with a known substance. The “known” efficacy in this case was not in dispute–the molecules had anti-cancer properties. However, there was extensive debate on what the “known substance” in this case was. While Novartis was of the view that “imatinib free base” was the “known” substance, the opposition regarded “imatinib mesylate” as the known substance. To rule on this issue, the Court analyzed the coverage and disclosure of the cited prior art document – Zimmerman patent. (“Prior art” is all prior publically disclosed information about the product.)

The Zimmerman patent had a large “Markush” claim and even referred to “pharmaceutically acceptable salts” in the claim. A Markush claim, named for the U.S. Patent case of Ex parte Markush, 1925 C.D. 126 (Comm’r Pat. 1925), typically occurs in chemical patent claims and enables the protection of a class of compounds rather than a few specific structures; in other words, a single claim covers alternative chemical structures. Referring to claim scope and extracts of the Zimmerman patent, the Court noted that imatinib free base was itself disclosed and mesylate salt was disclosed as one of the salt forms in which imatinib can be used. Based on this, the Court held that the Zimmerman patent disclosed “imatinib mesylate.” The Court even referred to a finding issued by the Board of Patent Appeals in the U.S. on the corresponding U.S. application for the beta crystalline form, which had concluded that the earlier Zimmerman patent did “teach” “imatinib mesylate”, but stops short of teaching its beta crystalline form. (“Teach” in patent law means to inform and instruct using the documents making up the prior art. The teaching is done by referring to the technology disclosed or revealed by the prior art.)

Going further, the Court also referred to the conduct of the patent applicant as that conduct had a material bearing on the issue. Throughout the entire history of the F.D.A. approval process behind its drug, the applicant had consistently taken the stand that the Zimmerman patent covered “imatinib mesylate.” The patent applicant had also sought an extension of the term for the Zimmerman patent citing the regulatory approval time for Gleevec™. The Court even referred to a legal notice issued by the patent applicant in the U.K., where infringement of the Zimmerman patent was alleged against a generic drug whose active ingredient was “imatinib mesylate.” Based on these facts, the court concluded that mesylate salt was clearly disclosed and claimed in the Zimmerman patent. The patent applicant attempted to argue that in reality, while “imatinib mesylate” was covered within the scope of the earlier claim, it was not disclosed in an enabling manner in this prior art patent. Rejecting this argument, the Court held:

“…Under the scheme of patent, a monopoly is granted to a private individual in exchange of the invention being made public so that, at the end of the patent term, the invention may belong to the people at large who may be benefited by it. To say that the coverage in a patent might go much beyond the disclosure thus seem to negate the fundamental rule underlying the grant of patents.”

“We certainly do not wish the law of patent in this country to develop on lines where there may be a vast gap between the coverage and the disclosure under the patent; where the scope of the patent is determined not on the intrinsic worth of the invention but by the artful drafting of its claims by skillful lawyers, and where patents are traded as a commodity not for production and marketing of the patented products but to search for someone who may be sued for infringement of the patent.”

B. Enhanced Efficacy:

Having found that the “known” compound in this case was “imatinib mesylate”, to overcome the barrier of Patentability under Section 3(d), it was now imperative for Novartis to prove that beta crystalline form of Imatenib mesylate had enhanced therapeutic efficacy over “imatinib mesylate”.

Novartis had relied on two factors to support its patent application vis-à-vis Section 3(d): the first being that the better physio-chemical properties of the new form (better flow properties, better thermodynamic stability, and lower hygroscopicity) made it easier to make, process and store the drug; and the second being that the new form had 30% more bioavailability as compared to previous known forms. The Supreme Court rejected the first argument since better physio-chemical properties were not shown to have anything to do with therapeutic efficacy.
In response to the argument on increased bioavailability, the Supreme Court stated:

“…the position that emerges is that just increased bioavailability alone may not necessarily lead to an enhancement of therapeutic efficacy. Whether or not an increase in bioavailability leads to an enhancement of therapeutic efficacy in any given case must be specifically claimed and established by research data.”

That was not shown in this case. The Court declined to hold that increased bioavailability can never be used for the purposes of Section 3(d).
Conclusion

Throughout the Novartis judgment, the Supreme Court took considerable pains to note that its decision is limited to the facts of the case. The following quote summarizes the attitude of the Court:

“We have held that the subject product…does not qualify the test of Section 3(d) of the Act but that is not to say that Section 3(d) bars patent protection for all incremental inventions of chemical and pharmaceutical substances.”

The Court made it very clear that Section 3(d) was only intended to “check any attempt at repetitive patenting or extension of the patent term on spurious grounds” and is not to be interpreted so as to “undo the fundamental change” under the Indian law to allow product patents for pharmaceuticals. The rejection of the patent application in this case relates more to Novartis’s failure to produce research data connecting the increase in bioavailability to an increase in the therapeutic efficacy.

In sum, the Court’s holding in Novartis sets forth two broad principles: First, Section 3(d) was intended to apply especially for chemical substances, particularly to pharmaceutical products. Second, Section 3(d) can only be overcome by showing an enhancement of “therapeutic efficacy.” By declining to rule on how to establish increased efficacy the Court gave patent applicants sufficient flexibility. The Court’s conclusion that “[w]hether or not an increase in bioavailability leads to an enhancement of therapeutic efficacy in any given case must be specifically claimed and established by research data,” goes to show that the application of the provision is to be evaluated on a case-to-case basis, rather than taking a one-size-fits-all approach. Finally, while the Novartis decision is a reminder that patent applicants must address Section 3(d) with care and finesse, by no stretch of imagination can the decision be construed to be the death-knell of pharmaceutical patenting in India.

V. Lakshmikumaran is the Founder and Managing Partner of Lakshmikumaran & Sridharan (L&S), a full service law firm which he founded in 1985. Based in the firm’s New Delhi office, Lakshmikumaran is an Advocate and Patent Agent. He has advised several leading companies in India and abroad on managing IP portfolios in India, on licensing agreements, valuation of IP assets, and litigation strategy. He is also an authority on the TRIPS agreement and has advised on its interpretation and application. He has handled several high profile cases in the Supreme Court of India. His clients include many well known Fortune-500 companies and leading Indian corporations. He can be reached atvlakshmi@lakshmisri.com

Briefly Noted: Supreme Court of India Trenchantly Criticizes the Doctrine of Adverse Possession

abaindialawnews 2013 - Summer, ALL

By Amitabh Tewari and Gayatri Chadha

The doctrine of adverse possession states that a person in possession of property for a certain period of time and subject to the requirements of law acquires a good title to the property, if the owner does not initiate any action within the prescribed limitation period. The Supreme Court of India, in the case of State of Haryana v. Mukesh Kumar [2011 (10) SCC 404], criticized the law of adverse possession by calling it an “archaic law” which needs to be re-examined to prevent injustice.

The State of Haryana, on behalf of Gurgaon’s Superintendent of Police, filed suit in the Court of the Civil Judge for declaratory judgment granting the State adverse possession of certain property adjoining a police station. The ground of the claim was that the police had been in possession of the property for approximately 55 years. The court, on considering various precedents, revenue records of the property and other documentary evidence, dismissed the government’s suit stating that the defendants were the true owners of the property. The court held, first, that the ostensible possession by the police was not for a continuous period of 55 years. Moreover, the court found that not only had the property been acquired recently but the acquisition had been affected by forceful means. The State of Haryana State appealed to the Additional District Judge and thereafter to the High Court. Both courts affirmed the decision of the Civil Judge. The State of Haryana then filed a special leave petition before the Supreme Court of India (equivalent to a petition to the U.S. Supreme Court for a writ of certiorari).

The Supreme Court dismissed the special leave petition on the grounds that it lacked merit. The Court noted that here the instrumentalities of the government, including the police, attempted to possess land adversely. “This, in our opinion, [is] a testament to the absurdity of the law and a black mark upon the justice system’s legitimacy. The Government should protect the property of a citizen – not steal it. And yet, as the law currently stands, they may do just that.”
If the protectors of law become the grabbers of the property (land and building), then, people will be left with no protection and there would be a total anarchy in the entire country.

It is indeed a very disturbing and dangerous trend. In our considered view, it must be arrested without further loss of time in the larger public interest. No Government Department, Public Undertaking, and much less the Police Department should be permitted to perfect the title of the land or building by invoking the provisions of adverse possession and grab the property of its own citizens in the manner that has been done in this case.
Noting the development of the doctrine in England and the U.S., the Court stated that the doctrine was now “baffling” and “illogical” in the Indian context because it gave sound title to persons illegally in possession of land for a period of 12 years.

The doctrine of adverse possession arose in an era where lands were vast particularly in the United States of America and documentation sparse in order to give quietus to the title of the possessor and prevent fanciful claims from erupting. The concept of adverse possession exits to cure potential or actual defects in real estate titles by putting a statute of limitation on possible litigation over ownership and possession. A landowner could be secure in title to his land; otherwise, long-lost heirs of any former owner, possessor or lien holder of centuries past could come forward with a legal claim on the property. Since independence of our country we have witnessed registered documents of title and more proper, if not perfect, entries of title in the government records. The situation having changed, the statute calls for a change.

In order to remedy the problem, the court suggested that Parliament should increase the time period from a mere 12 to 50 years and should abolish “bad faith” adverse possession. The court also stated that the adverse possessor should compensate the owner according to the prevalent market rate of the property.
The law of adverse possession, as it exists at present, is extremely harsh on the true owner and provides a windfall to a dishonest person who is in illegal possession of the property. The Court has called upon Parliament to take a “serious re-look” at this “archaic” and inequitable law and it is hoped that proposed legislation will soon be introduced in Parliament to amend it.

Amitabh Tewari and Gayatri Chadha are fifth year students at Government Law College, Mumbai University. They can each be reached at amitabh16tewari@gmail.com and gayatrichadha@gmail.com.

A Survey of the Challenges Faced by Indian Women Advocates in Litigation

abaindialawnews 2013 - Summer, ALL

Swagata Raha and Sonal Makhija

The Indian legal industry has witnessed unprecedented growth post-economic liberalization in the 1990s. The deregulation and opening up of the Indian market for private investments and international trade led to growing demand for legal services. The growth in the number of law firms is directly correlated to this.. In the last decade, the legal sector claims to have transformed from a family-based partnership model to an industry that is based on merit. The adoption of a “professional” hierarchal structure in law firms, international clients and an emphasis on rankings and branding has followed this trend. But how does this burgeoning legal industry retain its women lawyers? Why do women lawyers disappear as they move up the proverbial corporate food chain?

This question was a starting point for our study Challenges Faced by Indian Women Legal Professionals , on women lawyers in Delhi, Mumbai, and Bangalore. In the past decade, the number of women and men graduating from premier National Law Schools has been almost evenly split, but female numbers dwindle after a few years of practice.

Our nine-month study on the legal profession and interviews with 81 women lawyers of which 29 women were litigators unearthed some unsurprising and anticipated findings. Our study, found that women litigators now still cope with the same issues: lack of adequate sanitation facilities, overcrowded women’s bar rooms in courts, and in many cases lesser fees than their male colleagues. Moreover, clients often prefer male lawyers with less experience than women with more experience or skill.

Biases at Work

Women senior advocates widely acknowledge that a woman lawyer’s professional ability and soundness of advice arouses skepticism and doubt. Women lawyers are quick to be labelled aggressive, not serious, or frivolous. As per Senior Advocate Pinky Anand, “If a woman raises her voice to make a point, she is discerned to be cantankerous, not assertive. At times, this perception overshadows her merit and results in her being labelled aggressive.” The recent response by a Bangalore High Court judge asking a woman lawyer arguing a family law matter if she was married is a case in point. The judge labelled her as unfit to argue the case. “You are unfit to argue this case. You do not know real life. Why are you arguing like this? He is your (client’s) partner, not a stranger. Family matters should be argued only by married people, not spinsters. You should only watch…”

This inherent bias against women has meant that women have to constantly prove themselves. Women litigators in our survey admitted having to constantly prove their mettle and outperform their male peers in order to command equal, if not higher fees. The fact that women are not seen as primary bread winners further encourages clients to get away by paying less to women lawyers.

“When I was practicing in courts, as a woman, a certain tone in argument was often an implicit prerequisite to being given a fair hearing. When I started working part-time after my children were born, clients and colleagues outside my firm perceived me as not a ‘serious’ or a ‘real’ lawyer,” said a partner of a law firm based in Bangalore.

In litigation particularly, networking and socialising with almost entirely male clients proves tougher for women. Even the clients are, in certain circumstances, uncomfortable while working with women. In some cases, clients specifically choose women lawyers based on the assumption that they would command lesser fees than their male contemporaries. This inevitably affects women’s reputation and earnings. Not surprisingly, women lawyers have to fight hard for their rightful fees, which their male counterparts easily command.

Work-Life Balance

Unlike in the corporate legal sector, litigation offers a degree of independence, flexibility and an opportunity to participate in legal maneuvering and challenging legal issues. For many it is the thrill of practice and the need for quick thinking that attracts them to litigation. Also, the absence of a structured rigid nine-to-five routine allows women to juggle professional and personal commitments with some ease. Many independent practitioners work from home or convert parts of their homes into office spaces. One Delhi lawyer who practiced at the Supreme Court moved her residence closer to the court and her office, to keep a watch on her son and to make trips home during the day. According to her, “[l]itigation is more than a job really- it is a ‘junoon’ (passion) for lack of a better word to adequately describe it- I could never opt out, but I think of it often enough!”

Not surprisingly then, fort-five percent of women in our study felt confident of being able to strike a work-life balance. Thirty-one percent felt that work-life balance may be difficult and twenty-four percent shared that they had not even considered this aspect before opting for litigation.

Women who stayed the course in litigation practice eased the pressure through different creative approaches. One respondent opted to draft documents for other litigating lawyers who were short on time. Independent practitioners hired juniors and other legal support staff to assist them in meeting the demands of their work. Others have moved closer to court or converted their homes into offices, hired support staff to manage their homes, and yet some others have life-partners who are in the profession, making the family-professional tug easier to manage. For some others, it has meant limiting the areas of practice or the courts in which they practice.

Structural Inflexibilities

Unlike women lawyers in law firms and companies, the majority of women lawyers in litigation do not receive any maternity benefit and thus there is often greater financial pressure to return to work. Emphasizing the need for a supportive and encouraging spouse or family, Senior Advocates Pinky Anand, Geeta Luthra, and Advocate Pratibha Singh, cited a supportive partner and family as a pre-requisite for a successful career in litigation. Conversely, the absence of family support has an adverse impact on one’s career. A reliable support system at home is a privilege that many do not enjoy.

About seventy-nine percent of respondents took a break after childbirth. The duration of the break ranged from six weeks to six years. Approximately forty-one percent took 6 weeks to 6 months off while forty-four percent took a break of 1-2 years. The reasons for the break were mostly to look after their child, nurse the child, and to avoid stress associated with litigation. Seven percent of the respondents cited the lack of understanding and flexibility on the part of senior lawyers and the absence of day-care within the court premises as reasons why they chose to delay returning to work. Fourteen percent of them mentioned that they had to delay returning to work as there was no support available at home to look after the child. Fifty-nine percent of the women found the transition from maternity leave to work difficult owing to various factors, such as travelling on work, an unaccommodating senior, pressure to leave the organisation, and their commitment to work being questioned. The break between work, especially in an area like law, also made re-acquainting with work a challenge.

The impact of the pregnancy, maternity break, and motherhood is severe owing to structural inflexibilities that fail to include support measures that promote equality in employment. One respondent had to discontinue work at the onset of the fourth month of her pregnancy because of the long working hours, the lack of adequate or separate elevators, unsanitary rest rooms, and the bad conditions of roads. Respondents who were attached to a senior or a law firm complained of inflexible policies and the necessity of being present in office at all times that led them to quit during their pregnancy.

For approximately fifty-nine percent, pregnancy led to fewer clients and work, as it affected their visibility in courts. In litigation, most networking happens in courts where court gossip and trade skills are exchanged. Advocate Haripriya Padmanabhan shared her story – “I used to leave court immediately after my cases and rush to my baby. This meant that I was not ‘seen around’ in court where it mattered– namely, the coffee shop. Till date, many lawyers ask me if I am back to work full time when they run into me—largely, because they have not ‘seen me around’ too much. Unfortunately, part of the drill of being successful in our profession is the visibility factor.”

Fifty-two percent of women surveyed admitted that the maternity break had an adverse impact on their career. Those who found the return to practice after maternity break easy cited family support, child-care help, having an independent practice, and a relatively short break from work as reasons. Those who found it difficult attributed it to the absence of reliable childcare support, fatigue, concern for the well-being of the child, and having lost touch with practice.

Working mothers in litigation lost out on clients who preferred to opt for lawyers who were available. Their absence from chambers affected their earnings. In the words of one of the respondents, “…the work flow was cut as clients were not sure whether I would be able to manage work. There was a perception that I would not be regular in court, which I had to combat by simply being in court even when there was really nothing much to do.” Another respondent said, “[f]or about a year and odd after the baby, I was in court only when I was needed, due to which there was a perception that I was not serious about my practice. Lack of a proper crèche was a big problem during this period…So, I used to bring her in the car with me and the child would be in the car parking lot [with a nanny] for hours when I had to be in Court. Some of my other colleagues, who had babies, also followed the same routine.”

Role of the Bar Council of India in Promoting a Conducive Working Environment

In her autobiography, titled On Balance, Justice Leila Seth described how “a musty storeroom” was passed off as the women’s washroom. More than five decades later, most High Courts and lower courts have abysmal working conditions, especially with respect to sanitation, making it impossible for women to negotiate the court halls. Women’s rest rooms in most courts not only lack in sanitation, but are too few in number.

Ninety-three percent of respondents strongly agreed that sanitary toilets for women on each floor of the court premises were necessary to make courts more accessible to women lawyers. Seventy-two percent of the respondents agreed that a crèche facility accessible to all within the court precincts would make the profession a lot more conducive for women. It would also encourage male lawyers to partake in their parental responsibilities while shuttling between courtrooms. Not only would it aid in curtailing the exodus of young women lawyers from the practice, but it would also bring about equity in parental responsibilities for most working couples.

Additional facilities, such as baby changing-rooms and a room where women could breastfeed their children, were considered important infrastructural requirements by respondents. Ninety-three percent of women lawyers felt that judges being accommodating and sensitive to pregnant women would make courts more conducive. Seventy-nine percent of women lawyers felt that the sensitivity of their colleagues at the time of pregnancy, which could include assisting in taking adjournments or handling matters in courts, would also help.

Section 7 of the Advocates Act, 1961 mandates the Bar Council of India to safeguard the rights, privileges, and interests of lawyers. The State Bar Councils are also required to safeguard the interests of advocates on its roll and conduct seminars. Senior Advocate Pinky Anand has recommended that the Bar Council of India should extend support to young women lawyers at the start of their careers by encouraging the empanelment of women by organisations. In furtherance of their statutory mandate, the Bar Council of India and State Bar Councils should undertake measures to support the entry and growth of women in litigation.

Sonal Makhija has an Masters of Science in Law, Anthropology, and Society from the London School of Economics and Political Science. She is presently pursuing her doctoral studies at the University of Helsinki. She can be reached at sonal.makhija@gmail.com.

Swagata Raha graduated from the West Bengal National University of Juridical Sciences and is a human rights law researcher based in Bangalore. She can be reached at swagataraha@gmail.com.

India Passes a New Bill for The Protection of Women in the Workplace

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By: Sheetal Parkash

India has recently grabbed the wrong kinds of headlines, mostly having to do with the prevention and prosecution of sexual assaults and rapes of Indian and foreign women. But there is another battle being fought which escapes media attention, particularly outside India. That is the fight for protection of women against sexual harassment in the workplace.

Over the years, women in and out of the workplace have been and continue to be objectified by men who take liberties with remarks laced with sexual innuendo and even go to the extent of outright demands for sexual favors. Binding guidelines to protect women from sexual harassment in the workplace have been the law of the land ever since the Supreme Court’s decision in Vishaka vs State of Rajasthan (1997 SCR 3011). Vishaka established that each incident of sexual harassment was a violation of a woman’s constitutional right to equality and dignity in all workplaces and institutions. Lofty sentiments expressed in the Constitution, statutes and case law, however, are often lax in the enforcement. The guidelines were never effectively implemented let alone enforced. Thus, the focus of efforts to prevent and punish acts of sexual harassment shifted to employers, requiring them to enforce mechanisms to protect their women employees from sexual harassment in the workplace. The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act of 2013 (Sexual Harassment Act), effective April 22, 2013, imposes upon the employer the responsibility to prevent a hostile work atmosphere for its women employees.

Sexual harassment is a violation of the fundamental rights of a woman to equality as guaranteed under Articles 14 and 15 of the Constitution of India, her right to life and to live with dignity as per Article 21 of the Constitution and right to practice or to carry on any occupation, trade or business under Article 19(1) (g) of the Constitution, including the right to a safe working environment.
The ambit of the act is wide enough to make it applicable in the organized as well as the unorganized sectors. The definition of “workplace” includes all government bodies, private and public sector organizations, non-governmental organizations, organizations carrying on commercial, vocational, educational, entertainment, industrial, financial activities, hospitals and nursing homes, educational institutes, sports institutions and stadiums used for training individuals. “Employees” include daily wage basis laborers and contract laborers, who either directly or through an agent, work with or without the knowledge of the principal employer, whether for remuneration or on a voluntary basis, or whether the terms of employment are express or implied. The term “employee” includes co-workers, probationers, trainees, and apprentices. A woman of any age subjected to any form of sexual harassment whether at the workplace or a dwelling house is covered by the Act. Sexual harassment includes unwelcome physical or verbal contact, showing of pornography, demands for sexual favors as well as sexually colored remarks. Every offence is treated as non-cognizable. (A non-cognizable offence under Indian criminal law requires a court-ordered warrant in order for the police to make an arrest.)
Section 19 of the Act requires the employer to provide a safe working environment by displaying conspicuously at the workplace the criminal consequences of acts constituting sexual harassment. The composition of the Internal Complaints Committee in the workplace, workshops and awareness programs at regular intervals to sensitize employees on such issues, are some of the measures required by the Act. Sexual harassment is misconduct of a serious nature and the offender risks prosecution and punishment. Where an employer fails to comply with the provisions of the Act, it imposes a penalty of up to INR 50,000 (U.S. $830 based on the official exchange rate in June/July 2013, or roughly $2,500 on a purchasing power parity basis).

The Act also requires the employer to timely address grievances of sexual harassment in the workplace and to initiate action against the complainant in case of a malicious complaint. This provision is designed to deter false allegations against co-workers.

Due to the growing awareness of the need for an enforcement mechanism, Section 354A has been added to the Indian Penal Code, 1860, which lists the acts constituting the offence of sexual harassment that are punishable with imprisonment for a term of one-to-three years, or a fine, or both. Thus, the amendment criminalizes all acts of sexual harassment against women and imposes harsh penalties upon the convicted offender.

India’s economic liberalization has continued to bring with it unprecedented social and demographic mobility for men and women. That mobility has laid bare the ostensible conflict between traditional and modern values. Paradoxically, Indian mythology and folklore typically place mothers and sisters on a pedestal, but only if they play their assigned roles as mothers and sisters within a patriarchal system. Moving from deifying women in the traditional sense to simply treating them with respect and dignity in the workplace should not be difficult. Apparently, it is, and women have had no option but to advocate for moves by Parliament to criminalize sexual harassment as the most important component of a campaign to restore civility in the workplace.

It is to be hoped that the threat of prison and fines under the legislation of 2013 will at last reduce, if not eliminate, the scourge of sexual harassment. A typical working woman may finally see herself treated with respect in the workplace, and accepted not as one with goddess-like characteristics or some mythological ideal of “woman,” but just as a woman who is an equal member of society deserving of the same respect, dignity and freedom as any man.

Sheetal Parkash is an advocate with LawQuest, a Mumbai-based law firm. Her practice includes corporate law, civil law, property law, litigation and intellectual property rights. She can be reached at sheetal@lawquestinternational.com.

About The Issue – Fall 2013

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India represents one of the largest markets for civil aviation in the world – but one that also possesses unique legal and business challenges. Between October 29 – 31, a U.S.-India Aviation Summit will be held in Washington, D.C., to examine such topics as air traffic management,aircraft environmental issues, safety certification, airport sustainability and general aviation development, among other subjects that are critical to an expanding aviation infrastructure.

Because India is a market of opportunity, but also challenge, there are many subjects that require attention of policy makers, legislators, regulators and lawyers. These include subjects such as taxation and import policies, limitation on foreign direct investment, land acquisition, concession arrangements with airport operators, public-private partnerships, regulatory strategy, aviation safety administration, and the relationship between India’s national and state governments. The articles here provide an introduction to many of these subjects as well as focused insight on several of the most pressing concerns.

In addition to guest editing this issue of India Law News, we have each contributed an article on different aspects of civil aviation in India. One article, The Many Challenges Facing Civil Aviation in India (Robert S. Metzger), is intended to cover the broad landscape of legal, business and regulatory issues that concern civil aviation in India. The second article, Greenfield or Brownfield—Green is the only option (Atul Sharma), looks specifically at the acute questions of how to reconcile necessary infrastructure growth with environmental protection. We thank also Dr. Vivek Lall, who heads the aviation enterprise of Reliance Industries, for his authorship of the introduction to this issue with an article entitled Civil Aviation in India—The View From 30,000 Feet. Our other articles focus on infrastructure issues and are contributed by distinguished Indian lawyers with active practices involved in aviation regulation and infrastructure. William Vivian John and Sumithra Suresh of Luthra&Luthra discuss regulatory challenges affecting airport development economics for private sector participation. Yogesh Singh, Pia Singh &Aditya Alok of the law firm Trilegal have written on obtaining land for airports and infrastructure. Amitabh Chaturvedi and Sumita Chauhan of Mine & Young discuss legal restraints on infrastructure development in the aviation sector.

We hope you find the above articles interesting and useful.

Robert S. Metzger is a shareholder at the law firm of Rogers Joseph O’Donnell, P.C., and is based in Washington, D.C. Mr. Metzger counsels leading U.S. and international companies in aviation and defense matters. He is a member of the Defense Executive Committee of the U.S.-India Business Council and has published several articles in international journals on the subject of the U.S.-India aerospace and defense industrial relationship. Mr. Metzger was a Research Fellow at the Center for Science & International Affairs, Harvard University Kennedy School of Government, and is a member of the International Institute of Strategic Studies (London). He can be reached at rmetzger@rjo.com.

Atul Sharma is the Managing Partner of Legal Link, a New Delhi-based law firm. He has over 30 years of experience in civil and commercial litigation and arbitration in various sectors, including aviation, infrastructure, real estate, telecom and banking. He has wide experience in dispute resolution procedures and domestic and international arbitration. Atul has advised and represented clients in shareholder disputes arising out of the acquisition and sale of companies, as well as contentious regulatory matters, insolvency proceedings, and real estate and tender-related disputes. He also specializes in the infrastructure sector and has advised developers and contractors. In the last five years, Atul has advised on projects at airports in Istanbul, Turkey and Male’, Maldives, and four major airports in India—Delhi, Mumbai, Bangalore and Hyderabad, in addition to other infrastructure projects like ports, transportation, power and water. Atul can be reached at atul@linklegal.in.

Regulatory Challenges Affecting Airport Development Economics For Private Sector Participation

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By William Vivian Johan and Sumithra Suresh

The recent transformation of the Indian airport sector and modernization of significant Indian airports represents the culmination of more than a decade of effort by successive Indian Governments to upgrade airport infrastructure in India. Recognizing the need to keep pace with steep traffic growth and the changing expectations and profile of the Indian air traveler, the Government undertook several initiatives to revamp the legal framework to encourage private participation and reduce entry barriers for foreign investment into the nation’s airport infrastructure. These initiatives resulted in the privatization and modernization of key Indian airports. While this journey has brought with it many lessons, there is still a long way to go, with several new airport projects remaining to be developed and older airports requiring an overhaul in their functioning, management and infrastructure.

We shall seek to examine what we believe were, and continue to be, key challenges in the legal framework, which affect airport economics and should be re-evaluated, to continue to incentivize private sector investment into future airport projects. These challenges relate to the relatively recent Indian airport economic regulatory regime and the legal framework governing privatization of airports owned by the Government of India-controlled statutory corporation, the Airports Authority of India (“AAI”).

To set the context for this discussion: the preferred vehicle for modernization of Indian airports has been the Public-Private Partnership (“PPP”) model, the essence of which is a ‘concession’. In simple terms, a concession is the grant of a right to undertake an activity (frequently a public function discharged by a government authority) and collect the revenues generated by such activity, in consideration of payment of a ‘concession fee’ to the grantor (frequently the government authority that is responsible for that function). Under the PPP model, a concession is typically granted by a government authority, the ‘public’ side of the partnership, to a private party selected typically through a tender process, the ‘private’ side of the partnership, which discharges the concessioned functions within a framework defined by the public side. The private side leverages its strengths and resources to undertake the project and the public side circumscribes, regulates and supports the project and hence, the ‘partnership’.

In the case of airport infrastructure in India, while any person could apply for an aerodrome license and establish an airport, historically, airports in India were set up by the Government of India and eventually came to be vested in AAI. Private participation in airports is a relatively recent phenomenon with Cochin International Airport being the first Indian airport to be set up by a private entity in 1999. In 2003, the Airports Authority of India Act, 1994 (“AAI Act”), the parent statute governing the establishment, powers and functions of AAI, was amended to permit AAI to grant concessions in respect of airports owned by it, to private parties for their operation and development. Subsequently, concessions to establish and operate an airport under the PPP model were granted to private parties in consideration of a concession fee determined as a percentage of the gross revenue of the airport. In 2004, the concessions to establish new international airports at Bangalore and Hyderabad were granted by Government of India. These airports were set up as greenfield projects at new locations on the outskirts of their respective cities, with the older AAI-run airports, which were by the time landlocked with little room for expansion in the heart of these cities, being closed down. Then in 2006, the Delhi and Mumbai airports which were operated by AAI, were concessioned to private parties as brownfield projects for their expansion and modernisation.

The attractiveness of airport concessions, and indeed any other concession, for private participation lies in the difference between what you make, i.e., the revenue the concession can generate, and what you pay for the concession, i.e., the concession fee. The revenue that can be generated from the concession is typically subject to regulation because most infrastructure projects are natural monopolies.

What is interesting to note is that while the concession fees (arrived at through tendering process) in case of Bangalore and Hyderabad airports, was 4% of the gross revenue, in case of Mumbai and Delhi airports, the concession fee was an unexpected 38.7% and 45.99%, respectively, of the gross revenue. One obvious reason for this difference would have been that Delhi and Mumbai were operating airports, with steady revenue streams compared to Bangalore and Hyderabad, which would yield revenues only after the construction phase. The other reason would have been the relatively higher potential for real estate development (an integral part of the airport concessions), in these two cities, with the airports being located in the heart of the cities, and the relatively higher importance of Delhi and Mumbai as travel destinations (one being the national capital and the other the ‘financial capital’ of the country), compared to Bangalore and Hyderabad.

In case of airport concessions, revenue arises from two types of sources and is broadly classified as aeronautical and non-aeronautical. Aeronautical revenue may be understood as that which arises directly from the airport’s operations, such as landing and parking charges paid by airlines using the airport. Non-aeronautical revenue on the other hand is that which arises from incidental activities such as the operation of food and beverage and retail outlets, lounges and car parks at the airport. While the global trend has been of higher non-aeronautical revenue, in the range of 40-60% of total revenue, in India, non-aeronautical revenue potential was long under exploited, with non aeronautical revenue constituting only 30-35% of the total revenue; a trend that is being reversed only in recent years in privatized airports.

The tangible benefits of airport privatization in India have been many. These include new, improved and modern facilities, evidenced by the significant rise in rankings of privatized airports by Airport Council International (“ACI”), a global airports body, and increase in revenues to Government; the revenue share to AAI from the Mumbai and Delhi airports has steadily increased and has contributed significantly to its ability to invest in infrastructure development at its other airports. On the other hand however, privatized airports have faced flak in recent times for increasing the costs to passengers, airlines and service providers operating at the airport. It is against this background that we discuss two issues, which can have a significant impact on airport economics, viz., the single till v. dual till debate and the issue of land use at AAI airports.

One of the distinguishing features of an airport concession compared to those in other sectors such as roads or ports is that a significant portion of its revenue arises from non-core activities, i.e. non-aeronautical operations. It is in this context that these two issues become extremely significant.

Single Till Versus Dual Till
Independent economic regulation of Indian airports came into effect after the privatization of the Bangalore, Hyderabad, Mumbai and Delhi airports, with the establishment of the Airport Economic Regulatory Authority (“AERA”) in 2008. Soon after its establishment, AERA, after consultation with various stakeholders, issued regulations for fixation of tariffs at airports, under which it, inter alia, proposed to set airport tariffs on the single-till model as opposed to the dual-till model. These regulations were challenged almost immediately by the privatized airports on several counts before the appellate authorities and the issues raised in these appeals are yet to be conclusively determined.

Before we can understand ‘till’ in this context, we may briefly delve into the capital asset pricing model which forms the basis for airport economic regulation. Airport tariffs are set under this model, in very simplistic terms, as follows. The capital expenditure in creating fixed assets is determined – referred to as the Regulatory Asset Base (“RAB”). A fair return is allowed to the airport operator in the form of a fair rate of return determined by the regulator and applied to this asset base. The aggregate revenue requirement (“ARR”) for the airport is then determined as a sum of the fair return, depreciation on assets, operation and maintenance expenditure and tax, and the tariffs to be charged are derived from the ARR. It is at the stage of arriving at ARR that the concept of till becomes relevant.

‘Till’ in airport economics is used in the sense of a money drawer. The fundamental question of till is whether when ARR is determined, the non-aeronautical revenues of the airport should be set-off to lower the ARR and correspondingly lower the aeronautical tariffs. In other words, should non-aeronautical revenues subsidize the airport project? If this question is answered in the affirmative, the model is referred to as the ‘single till’ model i.e., one money drawer for all airport revenues aeronautical and non-aeronautical. If answered in the negative, the model is referred to as the ‘dual till’ model, i.e. aeronautical and non-aeronautical revenues are kept separate.

There are convincing arguments for both models. Proponents of single-till argue that the airport project is one, and that non-aeronautical revenues are a by-product of the aeronautical operations of the airport. The customer visits the airport bookstore because he was brought to the airport by the aeronautical services he wishes to utilize. The arguments for dual till on the other hand are centered around incentivizing investments into airport infrastructure and that the reduction in airport charges to airlines (which it is argued in any case do not form an appreciable part of the airlines fare) due to adoption of single till, will not necessarily be passed on to passengers by airlines, more so in congested airports, where air fares are determined by the scarcity value.

The Capital Asset Pricing Model and single and dual till are visually depicted in Figure 1:
A third model, which lies between the above two, referred to as the ‘shared’ or ‘hybrid’ till is where not all non-aeronautical revenues, but only a certain part of it is used to subsidize airport tariffs. This has been followed in the case of Mumbai and Delhi airports, because the concession agreements for these airports, which anticipated the coming of airport economic regulations, included an obligation on the Government to make reasonable endeavors to ensure that aeronautical tariffs will be set on the basis of the hybrid till model elaborated in the concession agreements. This turned out to be more favorable for these airports, compared to the cases of Bangalore and Hyderabad, where the concession agreements merely stated that tariff fixation should be consistent with ICAO (“International Civil Aviation Organisation”) policies, as a consequence of which these airports were subjected to the single till model.

From the perspective of encouraging private sector investment into airport infrastructure, we are of the view that having a dual or hybrid till will attract private investors as these models allow the developer to benefit from the upside of non-aeronautical revenues – which acts as a hedge against the uncertainties and volatilities air traffic demand in a growing aviation market like India. Also from the perspective of increasing revenue to government, in the tenders for future airport projects, if the return to investor is to be capped by regulation, there will be limited flexibility for a bidder to propose a unique value proposition and make a better financial proposal than its competitors. This issue gains significance in the context of upcoming projects such as Navi Mumbai Airport, which has already seen several delays, and environmental and land acquisition issues drive the estimated project cost up to about US$ 2 billion.

Land Use At AAI Airports
The other issue that would have an impact on non-aeronautical revenues relates to the extent to which airport land can be used for non-aeronautical purposes. This is relevant in case of AAI airports, because AAI being a creature of statute cannot do more than what is permitted under its parent Act. And since concessions to private parties are granted by AAI under the Act, the private party concessionaire cannot do more than what AAI could have done.
The question therefore is what AAI can do under the statute. This question first arose when the Mumbai and Delhi airports, were privatized. Initially, in the concession agreements for these airports it was proposed to permit the concessionaire to develop on the airport land: commercial offices, business parks, golf courses, shopping complexes, sports complexes and other similar facilities. However, there was a difference of opinion within the Government on whether this was permitted and opinions on the matter were sought from the legal advisors to the Government of India. Two views emerged from this. One view essentially was that one of the functions expressly permitted to be undertaken under the statute by AAI was the carrying out of ‘any other activity at the airports… …in the best commercial interests of the Authority’, and therefore that AAI could undertake these activities. The other, contrary view was essentially that from the context of the statute, ‘airport’ is meant to include only passenger facilities and therefore ‘any other activity’ that AAI was empowered to undertake under the above function was confined only to passenger facilities. This was the view that the Government eventually took and consequently the list of permitted commercial activities under the concession agreements for Delhi and Mumbai were curtailed to exclude the activities referred above. The current concession agreements for these airports include only facilities relating to passenger services, such as hotels, restaurants, bars, refreshment facilities. Other facilities such as retail shops, business centres and conference centres are permitted, but only if they are located within the terminals.

Without going into the merits of the view finally taken, it can be stated that the result of this approach is that a very limited set of real estate development activities have been permitted on airport land. Between Mumbai and Delhi airport, about 400 acres of land was available for real estate development. It is also telling that when this view was taken some of the bidders, who were real estate firms, dropped out of the tendering process for the Mumbai and Delhi airports.

At present both Delhi and Mumbai airports have tendered out several sub-concessions for real estate development, which are almost entirely for hotels. Given the number of hotels already in the vicinity of these airports, it remains to be seen whether there will be sufficient demand for the new hotels and whether the sub-concessionaires will be able to fruitfully exploit their hotel sub-concessions. This is manifest in concerns recently by the Delhi airport concessionaire about the need to expand permitted land uses beyond the limited activities like hotels and warehousing, as there were already a significant number of hotel projects on the lands developed so far.

Also relevant to this discussion is the concept of ‘aerotropolis’ – a form of urban development centered around, and fuelled by, an airport – that is being heard of increasingly in the context of airport development projects. This development is seen as arising out of the advantages afforded by the location of certain types of industries and commercial activities near airports, such as offices for business people who travel frequently by air, time-sensitive manufacturing, logistics, hotels, retail outlets, entertainment complexes and exhibition centers. Another observed effect is the increase in real estate prices in the vicinity of an expected greenfield airport development.

It is in this context that we submit: should the airport project, the very anchor for these developments, be prevented from partaking in this growth in real estate value? Should not the legal concepts of ‘airport’ and ‘passenger facilities’ be re-examined in light of the emerging concept of aerotropolis?
The need for re-considering these questions becomes relevant in the context of AAI’s stated intention to concession Chennai, Kolkata and other airports run by it, for what is expected to primarily be city-side development. The necessity for statutory amendments should remain an impediment for airports being able to derive and appropriate some part of the value that they bring to the urban economic landscape to which they contribute.
In conclusion, we believe that the favourable resolution of the two issues highlighted above by suitable policy intervention can dramatically improve the viability and attractiveness of airport development projects for private sector participants, and bring long term benefits to the government, the AAI and other stakeholders.
The importance of encouraging private sector participation in airport infrastructure cannot be overstated in light of Government of India estimates that Indian airports would require investments of about US$ 12 million (close to 75% of which is expected from the private sector) to meet the traffic growth projections, during the 12th Five Year Plan (2012-2017). More immediately, global tenders for the overdue new airport at Navi Mumbai along with six significant AAI-run airports including two in the metro cities of Chennai and Kolkata, is imminent.

William Vivian John is a Partner in the Infrastructure Practice of Luthra & Luthra Law Offices, specializing in the Airport sector. Prior to this he was in-house counsel at GVK’s Airports Business, where he was closely involved with the Mumbai airport development and modernization project. William can be reached at wjohn@luthra.com.
Sumithra Suresh is an Associate in the Infrastructure Practice of Luthra & Luthra Law Offices, and a graduate of NALSAR University of Law. He can be reached at sumithras@luthra.com.

The Many Challenges Facing Civil Aviation in India

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By Robert S. Metzger
India has experienced extraordinary growth in civil aviation over the past decade and is forecast to be on of the world’s largest aviation markets in just a few years. To achieve (and afford) the promise of civil aviation, India faces challenges posed by national and state policies, law, regulation and practice. Crucial questionsare presented to policy makers, regulators, business leaders and to lawyers who advise them.

Civil aviation in India may be taken as a study in contrasts. Despite extraordinary growth in traffic, most of India’s airlines are in a precarious condition. Despite forecasts that India will add more than a thousand transport aircraft to civil fleets in the two next decades, India has too few airports and today lacks the aviation safety infrastructure required to handle the growth.

AKPMG report in 2012 citeda 15.6% increase in the Compound Annual Growth Rate (CAGR) in domestic passenger throughput over the five year period concluding in FY 2011, and KPMG forecast domestic throughput of 293 million passengers by FY 2020, up from 106 million (actual) in FY 2011, and 51 million (actual) in FY 2006. Late in 2012, the International Air Transport Association (IATA) predicted that India’s domestic air traffic would experience double-digit growth between 2012 and 2016. For air cargo, India was forecast by IATA to be among the five fastest growing international freight markets.

For a variety of reasons, however, growth has slowed. IATA reported that domestic air traffic had dropped 9.1% in February 2013 versus February 2012.The growth rate of India’s Gross Domestic Product (GDP) has eased and disposable incomes have been pressured by inflation and the declining value of the rupee. Airline costs have been rising in part because of the reduced currency valuation, very high charges for aviation fuel levied by Government Public Sector Undertakings (PSUs) and high sales taxes imposed by state governments. (One recent news article asserts that the overall cost of airline operations increased by 20% in just three months in 2013 because of jet fuel prices and rupee devaluation.) The Indian domestic air travel market is clearly sensitive to pricing. Some of the growth in air travel has been fueled by a “middle class” willing and financially able to fly. There also may be price elasticity given the availability of travel by rail, as India enjoys one of the world’s largest rail networks.
Irrespective of the recent dip, Boeing’s 2013 commercial aviation forecast, covering the period between 2013 and 2032, estimates that Asia Pacific airlines will need 12,820 new airplanes, valued at $1.9 trillion, over the next 20 years. Late in 2012, Boeing forecast that India would have the highest passenger traffic growth in the world – higher than China’s – and predicted the Indian market itself would require 1,450 new aircraft worth $175 billion by 2031.
But the Boeing forecast also cautions that India is one of several regions where “aviation growth outpaces planned infrastructure development.”

Today, most of the civil air carriers in India are in a financially distressed condition. India’s leading airlines posted a combined loss of $1.65 billion between 2012 and 2013, according to one report. The government-owned carrier, Air India, has a total debt of $6.4 billion (at the exchange rates as of this writing) and is expected to post a net loss of nearly $625 million in the current financial year. Just a few years ago, exploding demand brought several new, low-cost carriers to the India market, leading to the purchase or lease of several dozen modern single-aisle transport aircraft. The financial results, taken as a whole, are discouraging. Only one Indian carrier, IndiGo, is expected to be profitable in 2013. Several of the budget carriers (Kingfisher, Paramount and MDLR) have ceased operation.

At the same time, however, interest remains keen among prospective entrants to join the Indian market, especially in the wake of Government decisions allowing increased investment by foreign airlines in Indian carriers. (See below.) The Tata Group has announced its return to civil aviation. Through a link-up with AirAsia, a new budget carrier, AirAsia India, is expected to start flying domestic routes in January 2014.The Tata Group also has announced an intention to partner with Singapore Airlines (SIA) to create a new, full-service airline, Tata SIA Airlines Ltd., with Tata Sons as the majority partner with a 51 per cent stake. These developments show confidence on the part of the airline industry that there is as-yet unmet demand for air traffic to be served to and from and within India.

Air carriers face other challenges in the web of national and state regulation and taxation. Indian airlines operate with some of the highest fuel costs in the world. India imports a huge percentage of Aviation Turbine Fuel (ATF) from foreign sources and prices are set by Government-owned PSUs that exclude competition from private sources. State surcharges on fuel vary widely, from 4% to 30%,and are not under effective control by the national Government. Further pressure is a consequence of the fall in the value of the rupee relative to the dollar; according to some estimates, as much as 70% of the costs of airline operations in India are dollar-based.
The negative movement of the rupee may prove transitory. The central Government knows of the financial difficulties of Indian airlines and may show forbearance from new charges and efforts to mitigate existing levies. Also, there are some signs of restraint on the part of state governments. Five states reportedly have agreed to reduce their taxes to as low as 4% and Bengal recently announced a 3-year sales tax waiver on ATF and a sales tax reduction as an incentive to bring more flights to the Kolkata airport.

Apart from the distressed financial condition of most of India’s air carriers, and the availability of cheap rail transport, another constraint on the growth of civil air passenger traffic and cargo operations is the relatively small size of the aircraft fleet available for domestic routes or international destinations. One source reports that the total fleet size for commercial airlines in India was 371 as of February 2013. In recent years, India has seen a dramatic increase in the number of transport aircraft owned and operated by domestic air carriers, and more are on order. Nonetheless, actual capacity compares unfavorably with other countries in South Asia whose domestic airlines own many more aircraft to serve smaller populations. Indonesia, with a population of 240 million, about 20% that of India’s, has a substantially larger fleet in being and many more aircraft on order.

The not yet resolved status of Kingfisher aircraft affects the ability of Indian carriers to lease aircraft or obtain financing for purchase. India in 2008 ratified the so-called “Cape Town” agreement (formally, the “Convention on International Interests in Mobile Equipment” adopted in Cape Town, South Africa, in 2001). The Cape Town agreement is intended to assure financiers that they will have prompt ability to repossess collateral, such as airplanes, in the event of financial default. Kingfisher Airlines, which leased Airbus A320 aircraft from several lessors, suspended operations in 2012. Several lessors have encountered stiff legal and bureaucratic obstacles in recovering the airplanes, in part because of demands by local airport and tax authorities for payments Kingfisher failed to make. As a consequence of Kingfisher’s default and the obstacles encountered by aircraft lessors, the financiers now are demanding a premium from the hard-pressed Indian carriers to cover added risks. However, all but two of the controverted airplanes have been recovered as of this writing. The Government of India reportedly has agreed to consider legislative and rule changes to expedite the ability of lenders to take possession of aircraft. Until the Government completes these actions, however, the problems exemplified by Kingfisher will constrain the financing of aircraft fleet growth.

At the level of the national Government, India sometimes has exhibited an ambivalent and contradictory attitude towards civil aviation. Periodically, the Government has acted to increase charges upon carriers and passengers as a revenue-generating device. But Civil Aviation Minster Ajit Singh said, in May 2013, that the Government is looking to reduce charges to land and park planes at 80 smaller airports in India. The Government also indicated it is re-examining a long-standing rule that Indian airlines are prohibited from flying internationally unless they have five years of domestic operations and a minimum of 20 aircraft.

For some time, the national Government has pledged to take necessary steps to replace the Director General of Civil Aviation (DGCA), criticized as lacking in authority and resources, with a new and more powerful central aviation administration, the Civil Aviation Authority (CAA). CAA would have independent funding and improve upon recruitment and retention of trained aviation personnel. Though the Union Cabinet has approved the proposal to replace DGCA with CAA, and the commercial aviation community has expressed widespread support for this change, it will take several years to occur. DGCA has taken several positive steps recently, however. Most important is the decision to extend by one year the term of Arun Mishra, the head of DGCA. DGCA also has announced it intends to hire 100 airworthiness officers to improve its staffing of safety oversight.

Problems with DGCA figure into new concerns that raised by international authorities about India’s attention to air safety. Late in the summer of 2013, a delegation from the International Civil Aviation Organization (ICAO) conducted fact-finding in India, and its scrutiny was followed by an audit by the U.S. Federal Aviation Administration. It is expected that these reviews will place pressure upon India to shore up its aviation oversight,answer shortages of trained aviation specialists and improve supervision of aircraft repairs. There are indications that the Government is responding promptly. If its efforts are not sufficient, then India’s status among countries in the aviation schema could be downgraded and there would be restrictions on the ability of Indian carriers to add flights to international destinations. This would be especially harmful to Air India, which has announced intentions to use its growing fleet of Boeing 787 passenger aircraft on new international routes.

India’s approach to foreign investment in its domestic air carriers also has exhibited ambivalence, uncertainty and inconsistency. In 2012, the Indian Government announced that it would relax limits on foreign airline direct investment (FDI) in Indian carriers, allowing a new maximum of 49%. Realization of the benefits of the change has been beset by competing bureaucracies and frustrating delays. Early in April 2013, UAE-based Etihad Airlines announced its intention to buy a 24% stake in Jet Airways. The subsequent processing of that investment has been tortuous, with allegations of impropriety as well as various interventions by multiple government agencies and bureaus, among them the Prime Minister’s Office, the Central Vigilance Commission (CVC), the Securities and Exchange Board of India (SEBI), the Foreign Investment Promotion Board (FIPB), the Department of Industrial Policy & Promotion (DIPP), the Competition Commission of India(CCI) and the Cabinet Committee on Economic Affairs (CCEA).All have been involved in the route to approval and many have intervened to require changes to the commercial deal.However, it appears that this deal will be concluded in the near future and the lessons learned should be instructive. Despite the trevails of the Etihad-Jet Airways deal, the recently announced plans for AirAsia India and Tata SIA Airlines suggest that the Government’s FDI changes are working to bring foreign airline capital to India’s carriers.

There are many analysts who advocate further relaxation of FDI limits on civil aviation. There are several sectors encompassed within civil aviation – among them domestic airlines, ground handling, setting up new airports and non-scheduled operations – that have different FDI limits. India, like many sovereign nations, naturally has a strong desire to assure that its nationals have an active role, if not controlling authority, in these vital commerce sectors. Due recognition of these national interests is India’s right, of course. However, India’s present experience is one where the pace of foreign investments has fallen and where the current account deficit has risen, together contributing to the decline in the rupee’s value. Liberalizing FDI in all sectors of civil aviation should encourage greater inflow of capital and could help India to increase carrier fleets, improve carrier operations and profitability, and enhance infrastructure.Stronger air carriers should bring more competition for domestic and international travel.

Infrastructure remains a continuing challenge and potentially is the critical restraint upon the growth of India’s civil aviation. Only 21 airports in India served more than 1 million passengers in 2012, according to figures published by the Airports Authority of India (AAI) and some of these do not match Western standards. Six airports dominate the traffic statistics – Delhi, Mumbai, Chennai, Bengalaru, Kolkata and Hyderabad. Considering a “middle class” population variously estimated at between 300 million and 600 million, India is woefully short of airports.The potential demand for domestic air travel in India will not be realized without massive improvements in airport infrastructure and there are reasons to question whether that can be accomplished on the scale required or in time to answer demand.

Despite the impressive recorded growth in domestic traffic, measured over the past ten years, air travel “penetration”in India (total domestic passengers divided by total population) has been reported at about 5%, far behind developed countries and one-fifth the domestic traffic of China (which is only 10% larger). A 2009 DeloitteReport on India aerospace cites infrastructure limitations as “the weakest link in the chain” and indicates that only 45% of the major city pairs in India have direct connectivity by air. The situation is even worse for the many “Tier II” and “Tier III” cities – which have adjacent populations numbering into the hundreds of millions. The problem of un-served or under-served smaller cities has drawn attention at the highest level of the central Government. Prime Minister Manmohan Singh, in late September, pledged that India would have 100 airports in small towns by 2020. The strategy to achieve this goal will be to privatize more of the larger airports so that the Government can focus on smaller facilities.

There has been considerable public discussion, in recent months, over new airport initiatives, as would be led by the Airports Authority of India (AAI). Various strategies have been promoted, including privatizing more airports and promoting more private-public partnerships for airport modernization and new airport development. Earlier this summer, the “Mayaram Committee” recommended 100% FDI in existing airport projects. Also under consideration are reduced landing, route navigation and security charges for air services to Tier II and III cities.
A critical problem is in the limited availability of land, except where unused land can be found and dedicated for “greenfield” projects. The process to acquire land is rendered daunting under the present legal regime, though the newly enacted Land Acquisition Bill may help to abate the problem. Another problem is that the national and state governments have imposed sizable fees and concession demands upon private airport operators, raising a question as to whether a business case for investment can succeed. It remains to be determined whether the private sector will answer calls for new airport privatization initiatives without wholesale reform in the way in which the national and state governments regulate and tax airport operations and economics. There is no doubt, however, that the private sector remains very much interested in opportunities to invest in the modernization of India’s airports. Eleven companies, including several industry leaders, recently responded to a call for expressions of interest in projects to modernize airports at Chennai, Lucknow, Kolkata, Ahmedabad, Guwahati and Jaipur.

Apart from the challenge to provide the necessary airports, air traffic management and security infrastructure, today the fleets of India’s civil carriers are optimized for high density passenger transport between primary city pairs. Although regional aircraft, especially turboprops, offer advantages in operating efficiently with short runways and from relatively less improved facilities, India’s air carriers today have relatively few regional aircraft (whether jets or turboprop). With uncertain demand and doubtful basic infrastructure, Indian air carriers have been reluctant to purchase aircraft optimized for regional service. However, Government officials have spoken of intentions to conduct a trial to subsidize airlines to increase regional service.Air India has announced an intent to lease turboprop aircraft to enhance connectivity to non-metro cities.

India has not clearly articulated policies to promote business and general aviation, and various DGCA actions imposefrustrating operational and regulatory barriers. India’s use of rotary-winged aircraft is surprisingly small, considering the utility of helicopters and their ability to serve areas lacking airports suitable for conventional, fixed-wing aircraft. Pawan Hans Helicopters Limited, a PSU, is reported to have less than 50 helicopters in its fleet.In 2012, the fleet size of helicopters operated by private concerns actually fell from 293 to just 266, according to a report published in September 2013. The root causes are said to include high import duties and the regulatory environment, where complex rules frustrate helicopter operation and add costs. The central Government has said it recognizes the need for more heliports, in part to aid in disaster response, and has expressed an intent to improve training of helicopter pilots. Until these changes are accomplished, the rate of induction into private service of new private sector helicopters likely will remain very low.

In recent months, the Prime Minister’s office announced an intention that India develop, indigenously, a 70-90 seat medium range turboprop aircraft, ostensibly to answer presently underserved demand, and to assist the Indian military in tactical airlift. The project also is intended to build up a domestic airframe and support industry. This is a commendable goal – but its commercial viability and technical realism are open to question. The notional turboprop transport would face tough competition from ATR and Bombardier, that already have products in this space and are working on larger capacity, even more efficient aircraft. Moreover, the Indian medium range civil aircraft could face aggressive competition from regional jets newlyavailable from Russia and models soon to come from Japan, Canada, Brazil and China.

Realism should temper national aspirations. India’s track record in the domestic development of civil or military aircraft is not distinguished. There is no establishedprivate sector resource with the necessary competencies (or technology) to lead a new aircraft development program, much less to produce a civil aircraft in quantity that meets world-class safety and reliability standards. Unless the Indian Government agrees to underwrite the development program, there is not likely to be sufficient assured demand to justify the risk and expense of private development.

Indian leadership would benefit from assessmentof the experience of other “BRIC” nations in the development of national civil aerospace programs. Embraer in Brazil, of course, stands out as a shining example of how much can be accomplished. That experience took decades to achieve, however, and may not be replicable. China’s experience is instructive and should serve to caution India. Creation of a domestic air transport industry has been a matter of high national policy, priority and investment. But China, despite the expenditure of billions of dollars and years of effort, has experienced continuing frustration and delays in three new civil aircraft that its state-supported enterprises have sought to bring to market: the XIAN MA60 turboprop, the Comac ARJ21 regional jet and the new Comac C919 single-aisle transport.

There should be no question that India has the capacity to develop and sustain a civil aviation industry. The nation’s world-class accomplishments in many technology-driven areas speak to its inherent abilities and the potential of its highly educated workforce. India has announced it will open an aviation university in September 2014. But India should not underestimate the difficulty of “going it alone” to achieve the desired result. India should actively promote aeronautics in the private sector andencourage foreign investment. So long as India limits FDI, and presents an opaque maze of regulations and approvals, it denies itself the opportunity to form successful ventures with accomplished Western companies to plan, design, develop and sustain a capable Indian civil aviation industry.

To foster a successful civil aviation industry will take decades. A coherent and consistent national policy is needed. India should welcome rather than frustrate foreign partnerships; its domestic industry will succeed only if it has access to technology and technical assistance from accomplished foreign partners. Those foreign partners will not put at risk their enterprise-critical technology without a high degree of assurance of return on their investment and without confidence they can do business in India without threat to their intellectual property or compromise to their business integrity. Continuing vigilance to eradicate routine governmental corruption is essential to attract ethical global partners.

If development of new aircraft is a long-term objective, India can focus with higher confidence of near-term success on creation of an aviation supply chain, e.g., specialized service and manufacturing. India should harness its prodigious information technology and software development capabilities to contribute to the design, development, manufacturing and sustainment objectives of the major players in the global aviation industry. Certainly, India should facilitate and promote national resources for maintenance, repair and overhaul(MRO) of civil aircraft. All of these areas today are subject to rules, regulations, policies, taxes and levies that frustrate accomplishment. For example, very high tariffs now inhibit original equipment manufacturers from importing into India the parts that are needed for MRO operation.These barriers should be removed and replaced with a responsible, businesslike, predictable administration of civil aviation matters. Senior government officials recognize the huge opportunity for MRO operations in India to service Indian aircraft, but coordination of the necessary actions among involved ministries will be difficult, particularly when the Finance Ministry may be asked to reduce taxes and tariffs to promote the long term opportunity.

Moreover, and most important, India needs to give national attention to civil aviation and should establish a holistic national policy to promote both the industry and infrastructure needed. There exists a correlation between the effectiveness of civil aviation – both passenger transport and cargo – and growth of the national economy. Stronger civil air carriersand a better aviation infrastructure will contribute to GDP growth. Successful nurturing of a civil aviation industry will add manufacturing jobs for India’s enormous population of skilled, younger workers. Over the longer term, a credible aerospace supply chain will enable India’s airlines to buy aviation supplies and services from domestic sources, and this will help to reduce the pressure on currency accounts by reducing outflows to foreign sources. Aircraft that are operated in Indiashould receive MRO within India.Indeed, the devaluation of the rupee increases the appeal of Indian-sourced supplies and services where costs are in rupees and receipts are in U.S. dollars.

For several years, much attention has been paid to refinement to the Defence Procurement Policies and the accompanying “offset” obligation that foreign sellers must buy from or invest in Indian sources in an amount equal to 30% of the equipment sale value. India has been disappointed with the results from the offset program, as growth of indigenous capability has been slower than hoped. Better results would be obtained if India opens up its offset program to permit discharge by more transactionsin the civil aviation sectors, including “dual use” projects where a product or service could be used either for military or commercial purposes. Credit against offset obligations should be granted for work done by India-based aerospace companies with more than 26% foreign ownership. A fundamental restraint upon the willingness of India’s domestic companies to invest in military aerospace is that the size of the market is limited and the certainty of purchases is inherently in doubt. In contrast, the market for civil aviation is larger by orders of magnitude and its duration is essentially indefinite. The national Government would be well-counseled to devote more of its attention and energies to promotion of a civil aviation industry and infrastructure in India. Benefits to India’s national defense will follow.

The U.S. and India are natural partners in the promotion of civil aviation in India. Since 2007, the U.S.-India Aviation Cooperation Program (ACP) has operated as a private-public partnership to promote the growth of the civil aerospace sector in India. In July 2011, the countries signed a Bilateral Aviation Safety Agreement (BASA) in July 2011, to facilitate reciprocal safety and certification activities, and explicitly to promote an indigenous aircraft and aeronautical products industry with U.S. cooperation and technical aid. Through the ACP, the U.S. Government and leading American companies are cooperating and assisting Indian counterparts for the advancement of civil aviation across a broad spectrum. Several key opportunities are on the horizon for coordination of public and private sector initiatives between the countries. A U.S.-India Aviation Summit, sponsored by the U.S. Trade and Development Agency and the Government of India, is to be held on October 29-31, 2013 in Washington, D.C. Planning now is underway for the 4th International Exhibition & Conference on Civil Aviation to be held on March 12-16, 2014, in Hyderabad.

Growth of Airports and Their Environmental Impact – The India Perspective between Greenfield and Brownfield—Green Is The Only Option

abaindialawnews 2013 - Fall, ALL

By Atul Sharma

The rate of growth of air transport is often seen as an indicator of the economic development of a country. India is no exception to this rule and has witnessed an explosion in the number of people who use air transport services alongside its economic growth over the last 23 years. The civil aviation sector has benefited not only by increased patronisation from existing air travelers but also from converts who are increasingly taking to the skies. This is a remarkable feat for the young Indian civil aviation sector, especially considering the fact that the India boasts of one of the widest and most reliable rail networks in the world that has been providing cheap and reliable transport to the masses for over one hundred fifty years.

Open Skies-Impact on airlines and airports

India had its tryst with Open Skies in 1995 when several Indian Private Airlines set up operations in collaboration with well known international carriers. While some of these joint ventures flourished, others met a cruel fate for many reasons, some of which were attributable to government policies and a hangover from the protectionist regime which survived until 1990.

While airlines continued to grow and extend their reach to tier-II cities, the Airports Authority of India (AAI) – the sole custodian and operator of airport assets in India – failed to keep pace with the increasing expectations of air passengers, cargo operators and the air service providers. Indian airports were constantly rated amongst the least efficient in the world, which caused great embarrassment to an otherwise progressive nation. It took the Government almost 15 years after liberalisation to implement reforms in the civil aviation sector. In 2004, the Government for the first time decided to adopt the Public-Private Partnership (PPP) model by granting concessions for development and management of two greenfield airports at Hyderabad and Bengaluru (then called Bangalore). The PPP model was thereafter replicated and adopted for the modernization of the two brownfield airports at Delhi & Mumbai. The new policy spurred the growth of the civil aviation sector, and for the first time India was afforded the opportunity of building and maintaining world class airports. While these airports have achieved international recognition since their privatisation, they also threw up novel challenges . One of these challenges concerns the environment and juggling the exponential growth in aviation infrastructure while protecting India’s diverse natural assets.

In this article, I intend to highlight two recent issues pertaining to environment protection:the need to balance the scales between aviation related infrastructure growth and protection of the environment from the effects of such growth.

The Delhi Airport And Noise Pollution

In 2009, the residents of localities surrounding the Indira Gandhi International Airport (IGI Airport)at Delhi filed certain class action Petitions in the High Court of Delhi alleging infringement of their rights including their right to sleep in peace, held to be a part of the all encompassing right to life guaranteed by the Constitution of India. The Petitioners raised many issues and alleged that overflying aircrafts were routinely breaching the prescribed noise norms thereby depriving these residents of peaceful sleep and a reasonable quality of life.

The Environment (Protection) Act of 1986 is the fountainhead of most environment related legislation in India and, in addition to addressing various environmental issues, enables the Central Government, by notification in the Official Gazette, to make rules for carrying out the purposes of the said Act. In exercise of such powers, the Central Government notified the Noise Pollution (Regulation and Control) Rules (the “Rules”) in 2000. In addition to other benchmarks, the Rules laydown ambient air quality standards in respect of noise. The Rules recognize the need for different noise levels in industrial, commercial and residential areas, including silence zones (hundred meters around hospitals, educational institutions etc.). While the Rules prescribe an outer limit of 75 dB(A) Leq and 70 dB(A) Leq during day time and night time respectively in industrial areas (being the highest permissible noise standards amongst the four categories mentioned above), they do not envision an airport zone or a separate set of norms for such zones, as in certain other jurisdictions.

During the pendency of the aforesaid action, various brainstorming sessions were held between all the stakeholders including the petitioners, AAI and the Delhi International Airport Pvt. Ltd. (the Airport operator). In order to reduce the impact of aircraft noise, a basket of noise mitigation measures were implemented by the Airport operator in collaboration with the AAI, the aviation regulator-Directorate General of Civil Aviation (DGCA) and the airlines. These measures included introduction of runway mixed mode operations, phasing out noisy Chapter 2 aircrafts, utilization of all available runways simultaneously to evenly distribute aircraft noise, adoption of low power-low drag landing procedures etc. While these measures collectively reduced the noise impact considerably,the residents consistently demanded clamping of a comprehensive night curfew on Runway 29/11– the primary runway at the IGI Airport.Although initially, the night curfew was implemented by the DGCAon a trial basis, it could not be sustained on a long term basis for operational reasons and was subsequently withdrawn.

Pertinently,many jurisdictions do not consider a night curfew on an airport’s primary runway as a viable operational alternative, least of all at airports located in developing countries which witness departure and arrival of international flights during the night hours due to different time zones. In its studies, the International Civil Aviation Organization (ICAO) has observed that unilateral night curfews imposed by certain European countries are not conducive to international air transportation. ICAO has noted that the need to continue with any kind of night restriction is questionable in light of improvement in aircraft noise standards over the years and that current aircraft engines are quieter than earlier ones. Airports with night curfews are generally capacity constrained during the day and restrict the ability to open up new slots of traffic, which creates opportunity costs to airlines. This is all the more relevant for India, as air travel is even more expensive considering the high prices of Aviation Turbine Fuel. Another relevant factor which militates against imposition of night curfew is the fact that the establishment of the aviation industry in Europe pre-dates by several years India’s development in the sector. India’s aviation industry is in its infancy as the Open Skies Policy was initiated recently. This has led to a situation where most flights originate from Europe and the United States during the day and arrive at night at Indian airports. Any restriction on runway usage would restrict such movement of aircraft from such countries and would prove detrimental to the growth of civil aviation in India. This could also possibly encourage foreign airlines to use neighbouring countries as their hub in preference over India.

As per a report prepared by Deccanaires Ltd., an independent aviation consultant, while a few airports impose some form of restriction on night-time operations, very few airports across the world impose comprehensive night curfews on aircraft operations. Further, while some airports including Heathrow, Gatwick and Standsted have some form of night restrictions, many other airports have refrained from curbing night time operations as the same has proven to be detrimental to civil aviation. Interestingly, in various international fora including ICAO, India has taken a stand opposing unilateral implementation of night time curfews by a few European countries.

Recognising the need to have in place airport-zone specific noise norms, the Central Pollution Control Board (CPCB), a body entrusted with various environmental functions in its role as technical consultant to the Ministry of Environment and Forests,has commenced the exercise of formulating noise norms for airports zones and is in the process of defining noise contours at various Indian airports for implementation of such norms. As the exercise initiated by the CPCB is a time consuming one, the High Court of Delhi while hearing the Petitions, felt it necessary to implement interim norms pending the outcome of CPCB’s study and consequent implementation of its findings. Pursuant thereto, the High Court directed the aviation regulator DGCA to notify interim noise limits, which limits were implemented by the DGCA by way of an Aviation Environment Circular. The Circular issued by DGCA fixes the interim noise limit at 105 dB(A) and 95 dB(A) during day time and night time respectively and is the existing noise benchmark at the IGI Airport.

While the Supreme Court of India and the various High Courts routinely adjudicate matters concerning the environment, the Parliament enacted the National Green Tribunal Act (NGT Act) in 2010, which envisages setting up of a specialised National Green Tribunal which shall have the exclusive jurisdiction to hear and decide disputes pertaining to the environment. The NGT Act empowers the National Green Tribunal to decide all civil cases where a substantial question relating to environment is involved, provided such question arises out of the implementation of the enactments specified in Schedule-I of the NGT Act. Schedule-I to the NGT Act includes various legislations including the Environment (Protection) Act of 1996 (deriving power from which the Rules of 2000 have been notified). Pursuant to the National Green Tribunal coming into place, the Supreme Court of India in another environmental dispute in the case of Bhopal Gas Peedith Mahila Udyog Sangathan & Ors. v. Union of India & Ors., I.A. No. 62-63/2011 in Civil Appeal No. 3187-88/1988, vide its Order dated August 09, 2012 directed that “cases filed and pending prior to coming into force of the NGT Act, involving questions of environmental laws and / or relating to any of the seven statutes specified in Schedule-I of the NGT Act, should also be dealt with by the specialized Tribunal, that is the NGT, created under the provisions of the NGT Act. The Courts may be well advised to direct transfer of such cases to the NGT in its discretion, as it will be in the fitness of administration of justice.”

In furtherance of the direction of the Supreme Court in Bhopal Gas Peedith Mahila Udyog Sangathan case (Supra), the High Court of Delhi sought to transfer the pending Petitions to the National Green Tribunal. The transfer was opposed by the Airport operator on the ground that the interim norms implemented by the DGCA hold the field as far as the noise norms at the IGI Airport are concerned. The Airport operator also contended that as these interim norms have not been implemented under any of the enactments specified in Schedule-I of the NGT Act (but under the various powers vested in the DGCA under other legislations), the National Green Tribunal does not have the jurisdiction to decide the said dispute and the transfer is bad in law.The High Court of Delhi, despite the opposition by the Airport operator, directed transfer of the class action Petitions to the National Green Tribunal. The Airport Operator challenged the Order of transfer of the High Court of Delhi before the Supreme Court of India, which directed an interim stay of the transfer and is presently seized of the matter.

The Setting Up Of A Second Airport At Mumbai

Mumbai, the financial capital of India,is also one of the most congested cities in the world. The Chatrapati Shivaji International Airport (CSI Airport) is undergoing a major upgrade which will involve a substantial capacity increase. However, due to severe constrains of availability of land at the Airport site, the CSI Airport operates under severe limitation and is unlikely to be able to accommodate any further expansion. Demand for a second airport to cater to Mumbai has been getting louder and louder over the years. Setting up of a second airport in Mumbai has been in contemplation for a considerable period.

While nobody denies the need for a second airport, a long debate has ensued as to whether the chosen site is appropriate for building a world class airport. The proposed site falls in the middle of a mangrove forest comprising of trees and shrubs that grow in saline coastal sediment habitats. Environmentalists have argued that dislocation of the mangroves is likely to have an irreversible effect on the ecology of Mumbai and its surrounding areas which will have far reaching environmental consequences. In the face of stiff opposition from various quarters, the Ministry of Environment and Forests (the body responsible for providing environmental clearances for such projects) has dragged its feet on the subject.

After prolonged contemplation, the Forest Advisory Committee of the Ministry of Environment and Forests in June of 2013 has finally recommended that the project be cleared. However, the Forest Advisory Committee has attached various caveats to its clearance. For starters, the clearance is contingent upon afforestation of mangrove species over an area equivalent in extent to the mangrove forest area being diverted. Such area would have to be raised and maintained by the concerned “user agency” (read airport developer)at its own cost. Further, as the proposed site is located near the a bird sanctuary, the Forest Advisory Committee has mandated that no proposal for extension of the project for extension of the project towards the bird sanctuary shall be entertained. In addition, the concerned government has been directed to ensure that settlement of persons displaced by the project must not take place on forest land. To ensure constant and continued compliance with the conditions based on which the clearance is proposed to be given, a specially constituted committee of experts shall monitor compliance with and shall submit its report every six months.

While Mumbai desperately needs another airport, the cautious approach of the Ministry of Environment and Forests and the Government of India shows the resolve to manage expectations of growth while ensuring that no damage is caused to the environment. The stringent conditions imposed by the environment watchdog is likely to have severe financial ramifications on the project which are likely to affect its viability and ability to compete with the existing airport.

In the context of the above, the conflict between the environmentalists and the protagonists of development of aviation in India becomes apparent. It is a settled principle of Constitutional jurisprudence that a balance be struck between the larger public interest (read: the need for aviation infrastructure for growth and development of the economy and the country, at large) and the environment. Indian judicial pronouncements include a large number of precedents where the Indian courts have played a pragmatic role and have acted like stakeholders in the economic growth of the county. It will be a challenge for the policy makers and the Indian judiciary to do the fine balancing act when considering development projects like airports viz-a-viz their impact on the environment.

Atul Sharma is the Managing Partner of Link Legal -India Law Services, a full service law firm with offices in New Delhi, Mumbai, Bengaluru, Hyderabad and Chennai. He has over 30 years of experience in civil and commercial litigation and arbitration in various sectors, including aviation, infrastructure, real estate, telecom and banking.  He has wide experience in dispute resolution procedures and domestic and international arbitration. He specializes in the infrastructure sector and has advised developers and contractors.  In the last five years, Atul has advised on projects at airports in Istanbul, Turkey and Male’, Maldives, and four major airports in India—Delhi, Mumbai, Bangalore and Hyderabad, in addition to other infrastructure projects like ports, transportation, power and water. He currently focuses on policy and regulatory issues in various sectors in India including civil aviation. Atul can be reached at atul@linklegal.in.