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Association of Outsourcing Professionals (AOP) alleges monopolistic practices against BIAL – Bangalore International Airport Ltd.
The Association of Outsourcing Professionals complained before the Monopolistic & Restrictive Practices Commission, alleging monopolistic practice of BIAL. The Union Government's concession creates a huge unproductive monopoly. No new airport can come up within 150 km of the BIAL for the next 25 years. This draconian concession made for a private company does not serve any public interest, and in fact will destroy Bangalore's preeminent position as the Knowledge Capital of the World.
Bangalore creates over 150,000 knowledge jobs and 750,000 indirect jobs every year. The GE research center in Bangalore employs over 2500 PhDs. The city has over 106 R&D centers. Since the past several years, the city has attracted at least one foreign company each week. The city has thousands of companies in the fields of biotechnology, nanotechnology, chip designing, telecom software, systems software, application software and more. The new airport monopoly would destroy the competitive advantage of Bangalore.
Any city's growth shows up in air traffic numbers. Bangalore Airport passengers have grown from 4 million in 2005 to over 10.1 million in March 2008. The BIAL has however designed the airport to handle just 4 million passengers. Its master plan signed with the state government proves this. The state has helped create this monopoly by giving BIAL over 4000 acres of land worth Rs 20,000 crores, stamp duty, entry tax and other tax concessions worth crores of rupees and additional cash support of over Rs 300 crores. In return, the BIAL has invested just Rs 300 crores in equity capital and has produced a highly inadequate airport. The airport has eight aero bridges for the present traffic in Bangalore. For similar traffic, London has provided 30 gates and Singapore has over 23 gates. They have provided less than 300 seats in the waiting area for passengers. The old HAL airport area has almost 700 seats. They have allocated most of the waiting are for luxury shopping. The Indian Air Force has rejected the plea for the second runway for the BIAL, implying that BIAL would hit capacity constraint of a single runway in 2009.
A middle class resident of Jayanagar or a student of IIM Bangalore or a professional with Infosys or Wipro may take over 3 hours to reach airport in normal traffic conditions. For the 80-minute flight to Mumbai, a passenger will have to spend over 6 hours in traffic without counting the time in security checkup and other formalities. With just eight gates, the passengers will not get any real international experience in the airport. The Knowledge business depends on travel and meetings between people, but the new airport prevents citizens from enjoying their rights under Article 301 of the Constitution and is hence illegal.
AOP is not against opening of the new BIAL airport. However, it demands that the old airport continues to function and both compete naturally as envisaged in the Competition Act of the Union of India.
The legal position is very clear too. The Government of India has signed a concession agreement. Under article 5.2, no new airport can come up within 150 km radius for the next 25 years. Bangalore ahs grown from 4 million to 10.1 million last three years. For such growth we may need many more airports. The second point is article 18.13. According to this section the GOI has signed agreement as a commercial party and not as government. The article clearly says the act is not a public or governmental act.
A middle class resident of Jayanagar or a devotee of Art of Living, or a resident of Raja Rajeshwari nagar or a student of IIM Bangalore or a professional with Infosys or Wipro may take over 3 hours to reach airport in normal traffic conditions. For the 80-minute flight to Mumbai, a passenger will have to spend over 6 hours in traffic without counting the time in security checkup and other formalities. The Knowledge business depends on travel and meetings between people, but the new airport prevents citizens from enjoying their rights under Article 301 of the Constitution.
AOP is not against opening of the new BIAL airport. However, it demands that the old HAL airport continues to function and both compete naturally as envisaged in the Competition Act & The Monopolies and Restrictive Trade Practices Commission (MRTPC) of the Union of India.
The BIAL Concession Agreement was signed between Government of India (GOI) and BIAL on July 5, 2004. According to section 5.2 of this agreement, no new or existing airport will be permitted to operate as a domestic or international airport within 150 kilometers for next 25 years.
5.2 Exclusivity
5.2.1 International
No new or existing airport shall be permitted by GOI to be developed as, or improved or upgraded into, an international Airport within an aerial distance or 150 kilometres of the Airport before the twenty-fifth anniversary of the Airport Opening Date.
5.2.2 Domestic
No new or existing airport (except for Mysore and Hassan airports shall be permitted by GOU to be developed as, or improved or upgraded into, a Domestic Airport within an aerial distance 150 kilometers of the Airport before the twenty-fifth anniversary of the Airport Opening Date.
As per the MRTP Act Section 3, which extends to the whole of India except Jammu and Kashmir,
Unless the Central Government otherwise directs, this act shall not apply to:
Any undertaking owned or controlled by the Government Company,
Any undertaking owned or controlled by the Government,
Any undertaking owned or controlled by a corporation (not being a company established by or under any Central, Provincial or State Act,
Any trade union or other association of workmen or employees formed for their own reasonable protection as such workmen or employees,
Any undertaking engaged in an industry, the management of which has been taken over by any person or body of persons under powers by the Central Government,
Any undertaking owned by a co-operative society formed and registered under any Central, Provincial or state Act,
Any financial institution.
BIAL does not come under any of the above mentioned entities nor Central government has passed any directions regarding allowing a private company to enjoy the monopoly, the concession agreement clearly violates the MRTP Act.
The agreement also violates, Section 32 of MRTP Act
Section 32 of MRTP Act states:
MONOPOLISTIC TRADE PRACTICE TO BE DEEMED TO BE PREJUDICIAL TO THE PUBLIC INTEREST EXCEPT IN CERTAIN CASES
For the purposes of this Act, every monopolistic trade practice shall be deemed to be prejudicial to the public interest, except where -
(a) such trade practice is expressly authorised by any enactment for the time being in force, or
(b) the Central Government, being satisfied that any such trade practice is necessary -
(i) to meet the requirements of the defence of India or any part thereof, or for the security of the State; or
(ii) to ensure the maintenance of supply of goods and services essential to the community; or
(iii) to give effect to the terms of any agreement to which the Central Government is a party, by a written order, permits the owner of any undertaking to carry on any such trade practice.
It is clear that section b(iii) applies to the case of BIAL. The central government in the Civil Aviations Ministry could sign a monopolistic agreement with a written order under b(iii). The written order has to be passed by the authorized ministry namely the Ministry of Corporate Affairs in this case. Such an order has not been produced at all. Even if with a written order, the signing of the concession agreement is in any case illegal in view of section 18.13 of the concession agreement.
As per the section 18.13 of concession agreement as mentioned below, the GOI had agreed unconditionally and irrevocably to give up its status as sovereign entity. The government clearly says it has signed the contract as a private player and not in public interest as government. When the contract is signed as a private party in commercial interest, the clause b(iii) stated above is not applicable. The agreement is hence unlawful and against the public interest.
18.13 Sovereign Immunity
GOI unconditionally and irrevocable:
18.13.1 agrees that the execution, delivery and performance by it of this Agreement and those agreements and other documents comprising the Security to which it is a party constitute private and commercial acts rather than public or governmental acts;
18.13.2 agrees that, should any proceedings be brought against it or its assets in relation to this Agreement or any transaction contemplated by this Agreement, no sovereign immunity from such proceedings shall be claimed by or on behalf of itself or with respect to its assets;
For the purposes of this Article 18.13, "assets" shall be taken as excluding present or future "premises of the mission" as defined in the Vienna Convention on Consular Relations signed in 1963, military property or military assets or property or assets related thereto of GOI, premises and offices of the constitutional authorities of India and National heritages.
Finally the concession agreement that has consideration that is illegal under another act, namely MRTPC Act is deemed illegal under Indian Contracts Act under section 23.
Section 23 of Indian Contract act states,
What consideration and objects are lawful, and what not
The consideration or object of an agreement is lawful, unless -It is forbidden by law; or is of such nature that, if permitted it would defeat the provisions of any law or is fraudulent; of involves or implies, injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy.
In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void.
So it is clear that the concession agreement itself is void and based on this argument AOP approached Karnataka High Court. After the hearing, the High Court on Monday, June 9, 2008, directed the MRTP Commission New Delhi, to dispose off this case before July 3 but not later than July 10, 2008.
ORDER - NRTP
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