Professional Documents
Culture Documents
MEMO OF PARTIES
VERSUS
NEW DELHI
DATED:
(PRASHANT BHUSHAN)
ADVOCATE FOR THE PETITIONER
301, NEW LAWYERS CHAMBERS
SUPREME COURT OF INDIA
NEW DELHI-110001
IN THE HIGH COURT OF DELHI AT NEW DELHI
(CIVIL ORIGINAL JURISDICTION)
VERSUS
To,
expansion program.
policies.
Parliamentary Committee.
time-bound manner.
THE PETITIONER
Its founder President was the late Shri V.M. Tarkunde and its Executive
Nariman, Shri Shanti Bhushan, Shri Anil Divan, Shri Rajinder Sachar,
Shri Colin Gonsalves among others. Petitioner No.1 has, in the past,
Board, the transfer of developed oil fields of Panna & Mukta from the
THE RESPONDENTS
which was formed after the merger of Air India and Indian Airlines. This
statutory body set-up to exercise supervision over the vigilance and anti-
Government.
1) Air India and Indian Airliners are our two national carriers. They were
established under the Air Corporations Act, 1953 to provide safe, efficient,
services. Due to the ‘open sky policy’ of the Government since 1990s, civil
many private players including low-cost airlines and foreign airlines, intense
competition has largely benefited consumers. Air India and Indian Airlines both
inevitably lost their monopoly and consequently their market share. Since many
years, there was talk of privatization of both these airlines. The ideas for
privatization were dropped when the UPA government took office in 2004 and
Praful Patel became the Civil Aviation Minister. It was, rightly or wrongly, felt by
the Government that the two airlines need to be revived so that they can
shelved plans for purchase of aircrafts. Earlier there were proposals for
purchase of a few aircraft but were not acted upon due to them being
financially unviable. Director’s report for 2000-01 clearly states that airline
would only go for leasing aircrafts and not purchase. The relevant page of the
said report is annexed and is marked as Annexure P1. Air India had never
showed a profit of even Rs. 150 crores in any financial year. This is clear from
its 10 year financial statistics of the period 1998-2007 as given in its annual
report. The said statistics are annexed and are marked as Annexure P2. The
annual financial statement of Air India in 2007-08 which shows the loss of 2226
P3. The loss, as per conservative estimates, for 2008-09 is Rs. 5439 crores
aircraft. This was the first purchase planned since 1993. A news report on this
is annexed and is marked as Annexure P4. In 2001-02 Air India made a small
profit of Rs. 15 crores. This shows that it did not have the capacity to fund a
purchase of even a single aircraft. This proposal was then modified and Air
India decided to purchase 28 aircrafts, though it was clearly financially
P5. Instead of an earlier proposal, the Ministry ordered the purchase of 111
aircrafts from Boeing (U.S.) and Airbus (Europe) with their cost including
interest payments being pegged at a whopping Rs. 67,000 crores. This was
done at the instance of the Ministry is clear from the Director’s Report 2003-04.
The relevant page of that report is annexed and is marked as Annexure P6.
4) The Management Discussion for 2004-05 states that Air India had
a more than four times jump in expenditure from Rs. 10,000 crores to Rs.
44,000 crores. The said report does not quote any committee recommendation
proposal. The relevant page of the said report is annexed and is marked as
were being altered to favour Boeing (U.S.), Civil Aviation Minister claimed that
his ministry had no role to play in the acquisition program. A copy of the news-
proposal for the said purchase was approved by Air India board which is
cost of the fleet expansion programme was to be met through a loan from US
Exim Bank and the rest 15% from commercial borrowings. The relevant page
of the said report is annexed and is marked as Annexure P10. The first B-737-
800 was delivered in 2006, with the airline taking delivery of 8 airplanes. With
no resources of its own to pay for delivery, the airline borrowed money at
commercial rates from nationalized and foreign banks, and its net secured and
unsecured borrowings increased from Rs 1261 crores to Rs3219 crores, of
which it is thought that the airline had taken an overdraft of Rs 1683 crores to
pay for deliveries (to fund the 15% down payment component). The balance
sheet for 2005-06 is annexed and is marked as Annexure P11. The interest
and depreciation payments for these loans showed up on the balance sheet for
2006-07 as Rs. 985 crores and net losses were Rs. 447 crores. Air India’s
additional borrowing of Rs. 4446 was made in the same financial year. The
payments to Rs 2890 crores. The losses increased to Rs. 5600 crores. The
balance sheet for 2007-08 is annexed and is marked as Annexure P13. NACIL
blamed the global economic slow-down for these losses. A copy of a news
6) Immediately after the payments for the above orders were factored in,
Air India and Indian Airlines started showing huge losses that today exceed
several thousand crore rupees annually. Now the Government, feeling it has no
option left, has recently bailed out the two airlines at a huge cost to the public
Annexure P15. Today, situation is so bad that Air India is on the verge of
losing its national carrier status and shutting down its international operations.
News report dated March 23, 2010 is annexed and is marked as Annexure
P16. Centre for Asia Pacific Aviation, leading provider of aviation analysis, has
said that Air India would require a whopping $ 1 Billion bailout from the
officials of the ministry and top management of NACIL/Air India in the massive
aircraft manufacturers.
7) After the acquisition started in 2005, a major policy decision was taken
in 2007 to merge Air India and Indian Airlines. One of the major reasons for the
merger was that long range aircraft available with Air India and short and
medium range aircraft available with Indian Airlines can be used by the other
airline. This would have been enough to meet the needs for aircraft. Some
more could have been ordered as per the financial capacity of the airline. But
time when the said merger was being contemplated shows a complete non-
application of mind. Planning Commission has said that the airline did not have
a business plan when it made the purchase orders. Due to this, now Air India is
Culture has slammed the government on its aircraft acquisition program. The
transparency.”
Ministry of Civil Aviation despite Air India and Indian Airlines not
Committee.”
ordered an inquiry into Civil Aviation Ministry and Air India’s decision to
purchase 111 aircraft at Rs. 67,000 crore (including interest payments and
depreciation) in 2005 and then persist with it despite its poor financial
condition, falling passenger share and the global recession. A copy of the news
Lok Sabha Members and 7 Rajya Sabha Members have given a detailed and
unanimous report on the financial mess our national carrier is in. The said
report blames the “whimsical” policies and actions of the civil aviation ministry
acquisition.”
orders.”
The report of the said committee is annexed and is marked as Annexure P21.
11) Public-interest weekly Tehelka has slammed the Civil Aviation Minister
for wanting to “sink more money” into Air India. Copy of its report is annexed
and Managing Director, of the daily ‘The Statesman’, which is known for its
credibility and balance, has slammed the Prime Minister for being a mute
committee was not placing some startling new facts before the
bothered to keep his eyes and ears open, he would have known
can a Prime Minister, who wears integrity on his sleeve, not feel
Lease of Aircrafts
12) Apart from the purchase of aircrafts, a large number of aircrafts were
taken on lease by Air India. NACIL (company formed after the merger of Air
India and Indian Airlines) adopted standard lease agreement drafts for taking
acquiring aircraft on lease which did not have an early termination clause. In
view of very low load because of large scale aircraft acquisition, several flights,
especially overseas flights, were running almost empty and at huge loss.
NACIL could not even terminate the lease agreements since in that case
NACIL would have to pay all costs and lease rental differentials.
strategy.
(ii) The Committee observes that aircrafts were dry/wet
(iii) The Committee is of the opinion that it has led NACIL into
the company.
have resulted in such a huge financial loss to the country. The decisions made
by Civil Aviation Ministry have been made without application of mind and its
persistence with the decision despite spiraling losses and debt needs to be
probed.
Loss of Routes and Market Share
15) Routes are allocated by the Civil Aviation Ministry on the petitions of
airlines. On the directions of the Civil Aviation Ministry, Air India withdrew its
services from many profit making routes. Private operators were the biggest
beneficiaries of this decision as they took all those routes and a bigger market
share. Air India, which also has a social responsibility to ply at even non-viable
and non-profit making routes, was the biggest loser as it lost all its profit
making routes to private airlines. Air India also gave away its routes to private
Mumbai-Pune, Pune-Goa are those routes from where Air India has withdrawn
its services. On all these routes private airlines, mainly Jet Airways and
Kingfisher Airlines, are operating and presumably making good profits. In other
recommended:
operators.
guidelines and more and more bilaterals were handed over to the
feels that this move will definitely fill the coffers of private
operators.
recommended:
disadvantage.”
19) The brand name of our domestic carrier ‘Indian Airlines’ was in
December 2005, for a brief period, changed to ‘Indian’. Not only the choice of
the name betrays a complete non-application of mind, the said was done at a
huge cost. Moreover, this was done while the proposal for the merger was
being finalized. Apart from the expenditure involved, it also caused a lot of
repaint its aircrafts. After merger into NACIL, the brand name
‘Indian’ has been replaced with the brand name ‘Air India.
22) All of the above shows that the current financial problems have been
created due the policies of the civil aviation ministry. To escape the blame, the
ministry has constantly been blaming the cost of the salaries of the employees,
high fuel costs and the economic downturn. Actually, major cause for the high
losses and debts are the Government policies. Even if Air India does not pay a
single rupee to all of its employees, it would still make Rs. 2500 crores losses
per year. Parliamentary Committee on Transport has castigated the Ministry for
“The Committee is of the firm view that the turn around of NACIL
shoulders of the employees and/or blaming them for the ills of the
company. The Committee firmly believes that the one and only
way of overcoming the problem is to change the often irrational
same effect:
Despite these admonitions, civil aviation minister has continued to blame fuel
prices and global economic slow-down for the mess in Air India that his policies
has created. His recent interview in Tehelka dated 03.04.2010 is annexed and
23) This entire sad episode also highlights the need of an independent
regulator for the civil aviation sector. This regulator, which is now sorely
in the airline industry and many new airlines including low-cost carriers have
come up. It is essential that this important sector not be micro-managed by the
ministry and like all other major sectors (like telecom, insurance, power,
for both airports and airlines. Petitioner humbly submits that the Government
Incomplete Merger
25) Merger of erstwhile Air India and Indian Airlines, in principal, might not
be a bad idea as the two air lines can leverage each others assets and need
not duplicate many administrative costs and overheads. The merger was to be
completed by 2009. But it is commonly known and has been noted by both
Parliamentary Committees that the said merger only exists on paper. Apart
from having a common CMD, there is nothing on ground which could show that
the two airlines have merged their operations and services. The merger
remains incomplete.
“Any further delay in merger is not going to do any favour for the
ailing public carrier. Although more than two years have lapsed,
as to how the said merger can be effectuated which inter alia include
marketing, finance, ground handling, cargo and training of staff, etc. These
recommendations must be implemented without further delay and in a time
28) The central government appoints Director on the Board of the company.
Directors were appointed for short periods and some even for a few days.
Many officers of the civil aviation ministry without any real expertise were
appointed to the board. Also, in a period of 2 years, NACIL had 4 CMDs which
Directors and a committed CMD is the need of the hour to run the
29) The Petitioner has not filed any other writ, complaint, suit or claim in any
manner regarding the matter of dispute. The Petitioner has no other better
remedy available.
30) The Petitioner seeks liberty from this Hon’ble Court to produce other
proceedings.
GROUNDS
number of expensive aircrafts, without any study, knowing fully well that
Air India is in no position to pay for them, shows a complete non-
B. That such action of the Government has put Air India deep in debt and
has made it incur huge losses. Making good those losses and debts at
the cost of the exchequer shifts the burden to the tax payers. Such
arbitrary and illegal policies have caused a huge loss to the country.
benefited a few private parties but caused huge losses to the national
PRAYERS
In view of the facts & circumstances stated above, it is most respectfully prayed
purchase.
of individuals for giving away the national rights. The inquiry should
be conducted to find out why such a large number of bilateral were
5) the withdrawal from lucrative sectors by NACIL paving the way for
loss to NACIL.
d. Direct the Government to set-up a regulator for the civil aviation sector
g. Issue or pass any writ, direction or order, which this Hon’ble court may
deem fit and proper under the facts and circumstances of the case.
Petitioner
Through