DELHI INTERNATIONAL AIRPORT LTD. versus AIRPORT ECONOMIC REGULATORY AUTHORITY OF INDIA & ORS.

ABCDEFGH869869 [2022] 11 S.C.R. 869DELHI INTERNATIONAL AIRPORT LTD.v.AIRPORT ECONOMIC REGULATORY AUTHORITY OF INDIA& ORS.(Civil Appeal No.8378 of 2018)JULY 11, 2022[SANJAY KISHAN KAUL AND M.M. SUNDRESH, JJ.]Airports Economic Regulatory Authority of India Act, 2008 –ss.2(a) and 13(1)(a) – Privatisation of airports – Contractual andRegulatory Framework – Tariff and other charges for aeronauticalservices rendered at airports – Determination of – Revenue sharingformula – Judicial Review qua decision of a regulatory body – Scope– Joint Venture agreement between GMR Consortium and AirportsAuthority of India (AAI) for Delhi International Airport Limited(DIAL), and on similar pattern between GVK Consortium and AAIfor Mumbai International Airport Limited (MIAL) – AAI holding 26per cent shareholding in each of the JVs – DIAL and MIAL enteredinto Operation, Management and Development Agreement(‘OMDA’) with AAI and executed other project agreements includingState Support Agreement (‘SSA’) – Airport Operator Agreementsigned – DIAL and MIAL handed over management of respectiveairports in Delhi and Mumbai – DIAL and MIAL both broadly earntheir revenue from two sources, viz., Aeronautical and Non-aeronautical – While they are free to fix charges towards the latter,the former component is controlled by the Airports EconomicRegulatory Authority of India (AERA), which regulates tariff andother charges for aeronautical services rendered at airports –Dispute over different aspects of tariff fixation, viz. treatment ofFuel Throughput Charges (FTC); calculation of HypotheticalRegulatory Asset Base (HRAB); revenue from Disallowed Area;calculation of tax for determining Target Revenue; DevelopmentFee (DF) and levy of User Development Fee (UDF) – Held: It wouldnot be fair to examine these aspects under the microscope – Differentaspects towards determination of Project Cost were examined byAERA, and AERA carried out its responsibility while granting a littleleeway for the pioneering effort in an untested field in the country– It does not really lie with this Court to superimpose a view which ABCDEFGH870SUPREME COURT REPORTS[2022] 11 S.C.R.was not found feasible in the given conspectus of the large numberof reports and documents before the AERA as well as the TDSAT –What is required to be seen by this Court is that the readings arereasonably supported by evidence as judicial review is really notconcerned with matters of economic policy and the endeavourcertainly cannot be to substitute its view for that of the legislatureor to supplant the view of the expert body – Moreover, in the givenfactual scenario there is something more which is required to beaddressed – Before the complete legislative structure was set in place,operations were proceeded on the understanding of the agreementbetween the parties and the legislative intent is also apparent –This provides for due honour and consideration being given to theaforesaid intent as per provisions of s.13 of the Act – The objectiveis that all parties who have operated in what may be called apioneering effort in the field of civil aviation in India should not betaken by surprise affecting their commercial viability as it woulddiscourage private participation in such economic activitiesperceived to be essential by the Government – Clause (vi) of sub-section (1) of s.13 of the Act clearly stipulates that in determinationof tariff for aeronautical services, one of the considerations, isconcession offered by Central Government in any agreement ormemorandum of understanding or otherwise – Thus, the principlethat legislative intent must prevail over any prior agreement wouldnot really apply in the present scenario as the legislative intent itselfincorporates and requires prior agreements to be taken intoconsideration albeit along with certain other parameters /requirements – All aspects in the appeals and cross-appeals, exceptone aspect which arose from terminology and its definition, rejected– Impugned order accordingly modified to that extent – Appeal fromRegulatory Authority.Contract – Interpretation of – Plain construction – Held: Thereis no reason why explicit grammatical connotation should not beapplied to a contract unless it results in some absurdity – On facts,the contract was negotiated by experts and they were expected toknow all the ramifications of the language they use.Doctrines / Principles – Principle of Reddendo Singula Singulis–Sentence – Complex sentence – It is only when a complex sentencehas more than one subject and more than one object that a ABCDEFGH871construction may be required to render each to each by reading theprovision distributively.Nabha Power Ltd. (NPL) v. Punjab State PowerCorporation Ltd. (PSPCL) & Anr. (2018) 11 SCC 508– distinguished.Shri Sitaram Sugar Company & Anr. v. Union of India& Ors. (1990) 3 SCC 223: [1990] 1 SCR 909 –followed.Modern Dental College and Research Centre v. Stateof M.P. (2016) 7 SCC 353 and Akshay N. Patel v.Reserve Bank of India & Anr. (2022) 3 SCC 694 –relied on.Rajendra Diwan v. Pradeep Kumar Ranibala & Anr.(2019) 20 SCC 143 and Consumer Online Foundation& Ors. v. Union of India & Ors. (2011) 5 SCC 360 :[2011] 5 SCR 911 – referred to. Case Law Reference(2019) 20 SCC 143referred toPara 14(2016) 7 SCC 353relied onPara 15(2022) 3 SCC 694relied onPara 16[1990] 1 SCR 909followedPara 17(2018) 11 SCC 508distinguishedPara 53[2011] 5 SCR 911referred toPara 120CIVIL APPELLATE JURISDICTION : Civil Appeal No.8378of 2018.From the Judgment and Order dated 23.04.2018 of the TelecomDisputes Settlement & Appellate Tribunal, New Delhi in AERA AppealNo.10 of 2012.WithCivil Appeal Nos.10902/2018, 6658-6659/2019, 7331 and 7334/2021, 5401 and 5738/2019, 3675/2020, 145/2021.DELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMICREGULATORY AUTHORITY OF INDIA ABCDEFGH872SUPREME COURT REPORTS[2022] 11 S.C.R.Arvind Datar, Sajan Poovayya, Dr. Abhishek Manu Singhvi,Krishnan Venugopal, Sr. Advs., Hemant Sahai, Ms. Amrita Narayan,Ashwin Rakesh, Ms. Nikita Bhardwaj, Ms. Manisha Handa, RajulShrivastav, Mohit D. Ram, Ms. Milanka Chaudhury, Ms. Naina Dubey,Ms. Abhilasha Sharma, Ravneet Singh, Gaurav Ray, Ms. DeepanshiIshar, Ms. Pallavi Srivastava, Alok Tripathi, Buddy Ranganadhan, Ms.Nishtha Kumar, Prantar Basu Chaudhury, Sahil Tagotra, Ms. NeelamRathore, Lovekesh Aggarwal, Nikilesh Ramachandran, Shubham Seth,Ms. Sanya Dhingra, Mrinal Chaudhary, Alok Dhir, Gaurav Singh, RiteshKumar, Karan Batura, Nitin Dahiya, Mohit Kumar, Ravi Kumar Tomar,Ms. Ashly Cherian, Ms. Harshita Agarwal, Anil Kathuria, Ms. RenuGrover, Dr. Kedar Nath Tripathy, Balaji Srinivasan, Ms. Pallavi Sengupta,Sheshadri Sekhar Ray, Pranay Ranjan, Apoorv Kurup, Ritwiz Rishabh,Amith J., Amrish Kumar, B. V. Balaram Das, A. K. Sharma, ArjunMahajan, Sumit R. Sharma, Raghvendra Budholiya, Advs. for theappearing parties.The Judgment of the Court was delivered bySANJAY KISHAN KAUL, J.1. The economic liberalisation of the 1990s brought in many regimechanges. One of the sectors which required a re-look was civil aviationinfrastructure. Modernisation of airports all over the world required Indiato also step up in its efforts towards the development of internationallevel airports. One can say with some pride that this modernisation efforthas raised the status of the airports in India not only to an internationallevel but has also resulted in them being rated as amongst the best in theworld.2. In furtherance of the modernisation effort, the Government ofIndia introduced the Airport Infrastructure Policy in 1997 with the objectiveof augmenting India’s airport infrastructure and with a view towards itsmodernisation, development and upgradation. The policy promoted privatesector participation by way of Public Private Partnership Model and infurtherance of the same, the Airports Authority of India Act, 1994(hereinafter referred to as the ‘AAI Act’) was amended with effectfrom 01.07.2004 to enable the setting up of private airports and leasingof existing airports to private operators.3. A new policy on airport infrastructure was introduced in 2002.The Airports Authority of India (for short ‘AAI’) initiated a competitive ABCDEFGH873bidding process, which culminated into the award for the operation,management and development of the Indira Gandhi International Airport(for short ‘IGIA’) and Chhatrapati Shivaji Maharaj International Airport(for short ‘CSIA’) to consortiums led by GMR and GVK respectively.4. A Joint Venture (for short ‘JV’) agreement was executedbetween the GMR Consortium and the AAI for Delhi International AirportLimited (for short ‘DIAL’), and on similar pattern between the GVKConsortium and the AAI for Mumbai International Airport Limited (forshort ‘MIAL’). These agreements were executed simultaneously onthe same date with the AAI holding 26 per cent shareholding in each ofthe JVs. DIAL and MIAL thereafter entered into the Operation,Management and Development Agreement (for short ‘OMDA’) dated04.04.2006 with AAI and executed other project agreements includingthe State Support Agreement (for short ‘SSA’) dated 26.04.2006. Thefee sharing was, however, different in view of economic logistics and,thus, DIAL was required to pay AAI an annual fee of 45.99 per cent ofthe revenue received by DIAL while MIAL was required to pay AAI anannual fee of 38.7 per cent of the revenue received by MIAL. An AirportOperator Agreement was signed on 01.05.2006 and in pursuance of thesame, DIAL and MIAL were handed over management of the respectiveairports in Delhi and Mumbai and operations commenced on 03.05.2006.For the purpose of this judgment, DIAL and MIAL shall collectivelybe referred to as “Airport Operators”.5. It was only after a hiatus period of about three years that theAirports Economic Regulatory Authority of India Act (hereinafter referredto ‘said Act’) came into force on 01.01.2009 with the exception ofChapters III and VI, which were made effective from 01.09.2009.Contractual and Regulatory Framework:6. In order to appreciate the controversy being dealt with by us, itis necessary to appreciate the contractual and regulatory framework.DIAL and MIAL both broadly earn their revenue from two sources,viz., Aeronautical and Non-aeronautical. While they are free to fix chargestowards the latter, the former component is controlled by the AirportsEconomic Regulatory Authority of India (for short ‘AERA/the Authority’),which regulates tariff and other charges for aeronautical servicesrendered at airports. Aeronautical services are defined in Section 2(a)of the said Act and are enumerated in Schedule 5 of the OMDA. TheDELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMICREGULATORY AUTHORITY OF INDIA [SANJAY KISHAN KAUL, J.] ABCDEFGH874SUPREME COURT REPORTS[2022] 11 S.C.R.calculation of tariff was to be carried out in accordance with Section 13of the said Act, which inter alia provided that the determination of tariffhad to be made in accordance with the concession offered by the CentralGovernment in any agreement or Memorandum of Understanding. Thiswas obviously with the objective of having continuity of process inprotecting the terms on which the project began.7. It is not in dispute that the SSA and the OMDA are in thenature of ‘concessions’ offered by the Central Government. As perSchedule I of the SSA, the AERA was required to observe certainprinciples in determining tariff, which include having regard to followingan incentives based approach, adopting a consistent method ofdetermination, and recognising the need for DIAL and MIAL to generatesufficient revenue and earn a reasonable return on their investment.Schedule I of the SSA also contained the tariff determination formulawhich was based on an Inflation - X Price Cap Model. The formulacontained multiple components which pertained to various aspects ofaeronautical assets and aeronautical services of DIAL and MIAL. Fromthese components, an element ‘S’ has to be subtracted, which reflects30 per cent of the gross revenue generated by the JVC from RevenueShare Assets (viz., non-aeronautical assets and assets required forprovision of aeronautical related services). This is known as the ‘sharedtill’ or the ‘hybrid till’ model, as a portion of non-aeronautical revenuesurplus is used to cross-subsidize aeronautical costs. The objectiveapparently was to ensure that at least a fixed percentage of the revenuewould flow to the authorities before different calculations are made.This was in consideration for both land and other assets which werehanded over to DIAL and MIAL. The algebraic formulation for calculatingthe Target Revenue (for short ‘TR’) as provided in Schedule 1 of theSSA is reproduced below:TRi = RBix WACCi + OMi + Di + Ti - Siwhere TR = target revenueRB = regulatory base pertaining to Aeronautical Assets and anyinvestments made for the performance of Reserved Activitiesetc. which are owned by the JYC, after incorporating efficientcapitai expenditure but does not include capital work in progressto the extent not capitalised in fixed assets. It is further clarifiedthat working capital shall not be included as part of regulatory ABCDEFGH875base. It is further clarified that penalties and Liquidated Damages,if any, levied as per the provisions of the OMDA would not beallowed for capitalisation in the regulatory base. It is further clarifiedthat the Upfront Fee and any pre-operative expenses incurred bythe Successful Bidder towards bid preparation will not be allowedto be capitalised in the regulatory base.WACC = nominal post-tax weighted average cost of capital,calculated using the marginal rate of corporate taxOM = efficient operation and maintenance cost pertaining toAeronautical Services. It is clarified that penalties and LiquidatedDamages, if any, levied; as per provisions of “Provisions of theOMDA would not be allowed as part of operation and maintenancecost.D = depreciation calculated in the manner as prescribed in ScheduleXIV of the Indian Companies Act, 1956. In the event, thedepreciation rates for certain assets are not available in theaforesaid Act, then the depreciation rates as provided in the IncomeTax Act for such asset as converted to straight line method fromthe written down value method will be considered. In the event,such rates are not available in either of the Acts then depreciationrates as per generally accepted Indian accounting standards maybe considered.T = corporate taxes on earnings pertaining to AeronauticalServices.S = 30% of the gross revenue generated by the NC from the“Revenue Share Assets”. lbe costs in relation to such revenueshall not be included while calculating Aeronautical Charges.Revenue Share Assets” shall mean (a) Non-Aeronautical Assets;and (b) assets required for provision of aeronautical relatedservices arising at the Airport and not considered in revenuesfrom Non-Aeronautical Assets (e.g. Public admission fee etc.)i = time period (year) iRBi= RBi-l - Di+ IiWhere: RB0 for the first regulatory period would be the sum totalof (i) the Book Value of the Aeronautical Assets in the books ofthe JVC andDELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMICREGULATORY AUTHORITY OF INDIA [SANJAY KISHAN KAUL, J.] ABCDEFGH876SUPREME COURT REPORTS[2022] 11 S.C.R.(ii) the hypothetical regulatory base computed using the thenprevailing tariff and the revenues, operation and maintenance cost,corporate tax pertaining to Aeronautical Services at the Airport,during the financial year preceding the date of such computation.I= investment undertaken in the period.8. In a nutshell, AERA is required to compute the tariff using theformula and keeping in mind the principles listed in Schedule I. Whatappears to be only an algebraic formulation was and is obviously capableof generating controversy and interpretations which is what we facetoday.History of the litigation:9.The belief in the requirement of specialised authority andappellate tribunal gave rise to establishment of regulatory and judicialfora for determination of any dispute forming subject matter of the fieldin consonance with the said Act.10. Although airport operations had commenced earlier, the FirstControl Period commenced from 01.04.2009 for a period of five years,i.e., up to 31.03.2014. AERA determined aeronautical tariffs for theFirst Control Period with respect to DIAL on 20.04.2012 and for MIALon 15.01.2013 (referred to as the DIAL and MIAL Tariff Orderrespectively). DIAL was aggrieved and it filed AERA Appeal No.10 of2012 under Section 18(2) of the said Act challenging various decisionstaken by AERA in the DIAL Tariff Order. MIAL preferred a similarappeal vide AERA Appeal No.4 of 2013. The history to these appeals iswhat ought not to have been. This is more so as the operations of theAirports were an important part of the economic agenda of governmentspast and present. Over a period of three years from 2012 to 2015 variousbenches of the erstwhile Airports Economic Regulatory AuthorityAppellate Tribunal (for short ‘AERAAT’), constituted under the saidAct considered various aspects but on account of the composition of theTribunal changing from time to time it never worked out. Finally, aNotification was issued on 07.09.2015 whereby the Chairman and twomembers of the National Consumer Disputes Redressal Commission(for short ‘NCDRC’) were given additional charge to function as theAERAAT. Once again, when the process of hearing was on, aNotification was issued on 26.05.2017 by the Ministry of Finance notifyingthat Part XIV of Chapter VI of the Finance Act, 2017 had come into ABCDEFGH877force and the Telecom Disputes Settlement and Appellate Tribunal (forshort ‘TDSAT’) was designated as the appellate tribunal under the saidAct. Thus, the grievances of the parties were aggravated as half a decadepassed in this process. There was obviously an uncertainty created bythere being no quietus to the dispute. The scenario was such that tariffdetermination took place even for the Second Control Period withoutthere being any finality to the First Control Period. This Court had tostep in and pass order dated 03.07.2017 in Civil Appeal No.8394/2017filed by Air India Limited pertaining to tariff determination for the SecondControl Period, and the TDSAT was directed to conclude hearing forthe appeals filed by DIAL relating to the First Control Period within twomonths from the date of the said order.11. MIAL’s endeavour for listing its appeal was not successful asthe TDSAT refused its request and commenced hearing DIAL’s appealfrom August, 2017. This was predicated on the deadline of two monthsfixed by this Court. However, TDSAT gave liberty to MIAL to makesubmissions on important questions of law before concluding the hearingfor DIAL’s appeal.12. The TDSAT made its order dated 23.04.2018 with respect toDIAL. There were four issues which survived and these were decidedvide order dated 15.11.2018 in an appeal preferred by MIAL. Theendeavour of MIAL to seek review for limited issue relating todetermination of Hypothetical Regulatory Asset Base was rejected on17.01.2019. Apart from these, AERA Appeal No. 03 of 2013 and AERAAppeal No. 05 of 2013 were also filed before the TDSAT whereinimposition of Development Fee (for short ‘DF’) by DIAL and MIALrespectively were challenged. AERA had allowed the said imposition ofDF and thus appeals were filed before the TDSAT. These came to bedecided by the TDSAT vide order dated 20.03.2020 and 16.07.2020(for short ‘DF orders’) respectively for DIAL and MIAL wherein theTDSAT agreed with the view taken by AERA. All these five orderspassed by the TDSAT are impugned before us in these Civil Appeals.13. In the aforesaid appeals, Federation of Indian Airlines (forshort ‘FIA’), Lufthansa German Airlines (for short ‘Lufthansa’) andAERA are also before this Court as respondents in appeals filed byDIAL and MIAL and there are appeals filed by FIA, Lufthansa andothers on similar issues in respect of the said impugned orders.DELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMICREGULATORY AUTHORITY OF INDIA [SANJAY KISHAN KAUL, J.] ABCDEFGH878SUPREME COURT REPORTS[2022] 11 S.C.R.Appeals from Regulatory Authority:14. One may observe at this stage that in effect this Court hasbeen made a court of second appeal in similar matters arising out ofmany such tribunals. This has resulted in a number of contentious mattersrequiring consideration by this Court. The scenario is different from the‘SLP jurisdiction’ where no re-appreciation of evidence is really requiredunless extraordinary circumstances exist, while an appeal of this naturestands on a different footing and is a continuation of the originalproceedings.115. This Court in Modern Dental College and Research Centrev. State of M.P.2 has eloquently summarised the onset of the modernregulatory era:“87. Regulatory mechanism, or what is called regulatoryeconomics, is the order of the day. In the last 60-70 years, economicpolicy of this country has travelled from laissez faire to mixedeconomy to the present era of liberal economy with regulatoryregime. With the advent of mixed economy, there wasmushrooming of public sector and some of the key industries likeaviation, insurance, railways, electricity/power, telecommunication,etc. were monopolized by the State. License/permit raj prevailedduring this period with strict control of the Government even inrespect of those industries where private sectors were allowed tooperate. However, Indian economy experienced major policychanges in early 90s on LPG Model, i.e. liberalization, privatizationand globalization. With the onset of reforms to liberalize the Indianeconomy, in July 1991, a new chapter has dawned for India. Thisperiod of economic transition has had a tremendous impact on theoverall economic development of almost all major sectors of theeconomy.”........................89. With the advent of globalization and liberalization, though themarket economy is restored, at the same time, it is also felt thatmarket economies should not exist in pure form. Some regulationof the various industries is required rather than allowing self-regulation by market forces. This intervention through regulatory1 Rajendra Diwan v. Pradeep Kumar Ranibala & Anr., (2019) 20 SCC 143 (ConstitutionBench).2 (2016) 7 SCC 353. ABCDEFGH879bodies, particularly in pricing, is considered necessary for thewelfare of the society and the economists point out that suchregulatory economy does not rob the character of a marketeconomy which still remains a market economy. Justification forregulatory bodies even in such industries managed by privatesector lies in the welfare of people. Regulatory measures are feltnecessary to promote basic wellbeing for individuals in need. It isbecause of this reason that we find regulatory bodies in all vitalindustries like, insurance, electricity and power, telecommunications,etc.”16. The contours of judicial review by this Court qua the decisionof a regulatory body have evolved. In Akshay N. Patel v. ReserveBank of India & Anr.3 a notification of the Reserve Bank of Indiaprohibiting the export of PPE kits during the Covid-19 pandemic wasassailed. It was observed therein that adelicate role is played by thisCourt in reviewing the actions of independent regulatory bodies:“64. .... In liberalized economies, regulatory mechanisms representdemocratic interests of setting the terms of operation for privateeconomic actors. This Court does not espouse shunning of judicialreview when actions of regulatory bodies are questioned. Rather,it implores intelligent care in probing the bona fides of such actionand nuanced deference to their expertise in formulating regulations.A casual invalidation of regulatory action in the garb of upholdingfundamental rights and freedoms, without a careful evaluation ofits objective of social and economic control, would harm the generalinterests of the public.”17. The liberalised era from 1990s has seen enunciation of limitsof judicial intervention in such appeals from decision of regulators. AConstitution Bench of this Court in Shri Sitaram Sugar Company &Anr. v. Union of India & Ors.4 made some relevant observations toemphasise that what is required to be seen by this Court is that thereadings are reasonably supported by evidence as judicial review is reallynot concerned with matters of economic policy and the endeavour certainlycannot be to substitute its view for that of the legislature or to supplantthe view of the expert body. The relevant observations are reproducedhereunder:3 (2022) 3 SCC 694.4 (1990) 3 SCC 223.DELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMICREGULATORY AUTHORITY OF INDIA [SANJAY KISHAN KAUL, J.] ABCDEFGH880SUPREME COURT REPORTS[2022] 11 S.C.R.“56. The court has neither the means nor the knowledge to re-evaluate the factual basis of the impugned orders. The court, inexercise of judicial review, is not concerned with the correctnessof the findings of fact on the basis of which the orders are madeso long as those findings are reasonably supported by evidence.In the words of Justice Frankfurter of the U.S. Supreme Court inRailroad Commission of Texas v. Rowan & Nichols OilCompany [311 US 570, 575 : 85 L ed 358, 362] :“Nothing in the Constitution warrants a rejection of these expertconclusions. Nor, on the basis of intrinsic skills and equipment,are the federal courts qualified to set their independentjudgment on such matters against that of the chosen Stateauthorities.... When we consider the limiting conditions oflitigation — the adaptability of the judicial process only to issuesdefinitely circumscribed and susceptible of being judged bythe techniques and criteria within the special competence oflawyers — it is clear that the Due Process Clause does notrequire the feel of the expert to the supplanted by an independentview of judges on the conflicting testimony and propheciesand impressions of expert witnesses”.This observation is of even greater significance in the absence ofa Due Process Clause.57. Judicial review is not concerned with matters of economicpolicy. The court does not substitute its judgment for that of thelegislature or its agents as to matters within the province of either.The court does not supplant the “feel of the expert” by its ownviews. When the legislature acts within the sphere of its authorityand delegates power to an agent, it may empower the agent tomake findings of fact which are conclusive provided such findingssatisfy the test of reasonableness. In all such cases, judicial inquiryis confined to the question whether the findings of fact arereasonably based on evidence and whether such findings areconsistent with the laws of the land. As stated by JagannathaShetty, J. in Gupta Sugar Works [1987 Supp SCC 476, 481] :“... the court does not act like a chartered accountant nor actslike an income tax officer. The court is not concerned with anyindividual case or any particular problem. The court only ABCDEFGH881examines whether the price determined was with due regardto considerations provided by the statute. And whetherextraneous matters have been excluded from determination.”58. Price fixation is not within the province of the courts. Judicialfunction in respect of such matters is exhausted when there isfound to be a rational basis for the conclusions reached by theconcerned authority. As stated by Justice Cardozo in MississippiValley Barge Line Company v. United States of America [292US 282, 286-87 : 78 L ed 1260, 1265] :“The structure of a rate schedule calls in peculiar measure forthe use of that enlightened judgment which the Commission bytraining and experience is qualified to form.... It is not theprovince of a court to absorb this function to itself.... The judicialfunction is exhausted when there is found to be a rational basisfor the conclusions approved by the administrative body.”18. We may, however, add that in the given factual scenario in thedispute before us there is something more which is required to beaddressed. Before the complete legislative structure was set in place,operations were proceeded on the understanding of the agreementbetween the parties and the legislative intent is also apparent. Thisprovides for due honour and consideration being given to the aforesaidintent as per the provisions of Section 13 of the said Act. The objectiveis that all parties who have operated in what may be called a pioneeringeffort in the field of civil aviation in India should not be taken by surpriseaffecting their commercial viability as it would discourage privateparticipation in such economic activities which have been perceived tobe essential by the Government. To that extent, we are inclined to considerthat some aspects of the agreements have pre-legislative features and,thus, there is a requirement to look into them. Section 13 of the said Actforming part of Chapter III deals with “Powers and Functions of theAuthority” and reads as under:“CHAPTER IIIPOWERS AND FUNCTIONS OF THE AUTHORITY(1) The Authority shall perform the following functions in respectof major airports, namely:—DELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMICREGULATORY AUTHORITY OF INDIA [SANJAY KISHAN KAUL, J.] ABCDEFGH882SUPREME COURT REPORTS[2022] 11 S.C.R.(a) to determine the tariff for the aeronautical services taking intoconsideration—(i) the capital expenditure incurred and timely investment inimprovement of airport facilities;(ii) the service provided, its quality and other relevant factors;(iii) the cost for improving efficiency;(iv) economic and viable operation of major airports;(v) revenue received from services other than the aeronauticalservices;(vi) the concession offered by the Central Government in anyagreement or memorandum of understanding or otherwise;(vii) any other factor which may be relevant for the purposes ofthis Act:Provided that different tariff structures may be determined fordifferent airports having regard to all or any of the aboveconsiderations specified at sub-clauses (i) to (vii);(b) to determine the amount of the development fees in respect ofmajor airports;(c) to determine the amount of the passengers service fee leviedunder rule 88 of the Aircraft Rules, 1937 made under the AircraftAct, 1934 (22 of 1934);(d) to monitor the set performance standards relating to quality,continuity and reliability of service as may be specified by theCentral Government or any authority authorised by it in this behalf;(e) to call for such information as may be necessary to determinethe tariff under clause (a);(f) to perform such other functions relating to tariff, as may beentrusted to it by the Central Government or as may be necessaryto carry out the provisions of this Act.(2) The Authority shall determine the tariff once in five years andmay if so considered appropriate and in public interest, amend,from time to time during the said period of five years, the tariff sodetermined. ABCDEFGH883(3) While discharging its functions under sub-section (1) theAuthority shall not act against the interest of the sovereignty andintegrity of India, the security of the State, friendly relations withforeign States, public order, decency or morality.(4) The Authority shall ensure transparency while exercising itspowers and discharging its functions, inter alia,—(a) by holding due consultations with all stake-holders with theairport;(b) by allowing all stake-holders to make their submissions to theauthority; and(c) by making all decisions of the authority fully documented andexplained.”19. Clause (vi) of sub-section (1) of the said Act clearly stipulatesthat in the determination of tariff for the aeronautical services, one ofthe considerations, is the concession offered by the Central Governmentin any agreement or memorandum of understanding or otherwise. Thus,the principle that legislative intent must prevail over any prior agreementwould not really apply in the present scenario as the legislative intentitself incorporates and requires the prior agreements to be taken intoconsideration albeit along with certain other parameters/requirements.20. We would now like to turn to the different aspects of tarifffixation which have formed a debate before us and we consider itappropriate to deal with them as per the aspects raised, which are reallycommon to the appeals in a larger perspective.Treatment of Fuel Throughput Charges:21. The fuel supply chain at the airport begins from entry ofAviation Turbine Fuel (for short ‘ATF’) into the airport premises andextends up to fuelling the aircraft. Fuel Throughput Charge (for short‘FTC’) is a fee collected by the airport operators from Oil MarketingCompanies (for short ‘OMCs’) for providing fuel to the aircraft. If FTCis treated as an aeronautical revenue, it would be covered within the TRand in case it is treated as non-aeronautical revenue, only 30 per cent ofthe fee recovered from FTC will be covered in the TR. Thus, thecontroversy as it appears before this Court is whether FTC is a serviceor an access fee and if FTC is a service, whether FTC falls within thecategory of aeronautical services.DELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMICREGULATORY AUTHORITY OF INDIA [SANJAY KISHAN KAUL, J.] ABCDEFGH884SUPREME COURT REPORTS[2022] 11 S.C.R.22. The opinion of the AERA, in the DIAL tariff order dated20.04.2012 is that the FTC should be treated as aeronautical revenue asSection 2(a)(vi) of the said Act defines ‘aeronautical service’ to meanany service provided “for supplying fuel to the aircraft at an airport.”Further, Entry 17 of Schedule 5 of the OMDA mentions “common hydrantinfrastructure for aircraft fuelling services by authorised providers” asan aeronautical service, whereas fuel supply finds no mention in Schedule6 of the OMDA which lists non-aeronautical services. FTC was, thus,held to be a charge in respect of provision of an aeronautical service,namely, supply of fuel to the aircraft and washence considered anaeronautical charge, which is to be determined by the Authority underSection 13(1)(a) of the said Act.23. Another aspect considered by AERA in the MIAL tariff orderdated 15.01.2013 was that the mere establishment of common hydrantinfrastructure alone does not comprise any service unless the concernedfuel hydrant infrastructure gets appropriate fuel into it. Since the entryof fuel into the CSI Airport, Mumbai is entirely in the control of MIAL,it was held that MIAL became a service provider in the chain of supplyof fuel to the aircraft. There is nothing in Schedule 6 of OMDA to indicatethat FTC is a non-aeronautical charge or revenue but on the other handSchedule 5 of OMDA clearly provides for aircraft fuelling services.Entry 11 of Schedule 5 of OMDA states that “any other services deemedto be necessary for the safe and efficient operation of the airport” meansprovision of an aeronautical service, and Entry 17 of the said scheduleprovides that the common hydrant infrastructure is an aeronauticalservice. Thus, merely labelling it as “fuel concession fee” or any othernomenclature does not change the nature of the aeronautical serviceand as this part is provided by the Airport Operator, the revenues arisingfrom such aeronautical service in the hands of the Airport Operator arereckoned as aeronautical revenues. SSA and OMDA clearly indicatethe intention of the Government to establish an independent regulator, soit could not be said that the bidders were unaware that tariff determinationwould be impacted in the future.24. The relevant provisions to appreciate this reasoning read asunder:Section 2(a)(vi) of the AERA Act:“2. Definitions.—In this Act, unless the context otherwiserequires,— ABCDEFGH885(a) “aeronautical service” means any service provided—xxxxxxxxxxxxxxxxxxxx(vi) for supplying fuel to the aircraft at an airport; and”....................OMDA:“CHAPTER IDEFINITIONS AND INTERPRETATION1.1 DefinitionsIn this Agreement, unless the context otherwise requires:“Aeronautical Services” shall have the meaning assigned heretoin Schedule 5 hereof.”....................“SCHEDULE 5AERONAUTICAL SERVICES“Aeronautical Services” means the provision of the followingfacilities and services:xxxxxxxxxxxxxxxxxxxx11. any other services deemed to be necessary for the safe andefficient operation of the Airport.xxxxxxxxxxxxxxxxxxxxA more detailed list of the above facilities and services wouldinclude the following:xxxxxxxxxxxxxxxxxxxx17. Common hydrant infrastructure for aircraft fuelling servicesby authorised providers”“SCHEDULE 6NON-AERONAUTICAL SERVICES“Non-Aeronautical Services” shall mean the following facilitiesand services (including Part I and Part II):DELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMICREGULATORY AUTHORITY OF INDIA [SANJAY KISHAN KAUL, J.] ABCDEFGH886SUPREME COURT REPORTS[2022] 11 S.C.R.Part I1. Aircraft cleaning services2. Airline Lounges3. Cargo handling4. Cargo terminals5. General aviation services (other than those used for commercialair transport services ferrying passengers or cargo or a combinationof both)6. Ground handling services7. Hangars8. Heavy maintenance services for aircrafts9. Observation terracePart II10. Banks / ATM*11. Bureaux de Change*12. Business Centre*13. Conference Centre*14. Duty free sales15. Flight catering services16. Freight consolidators/forwarders or agents17. General retail shops*18. Hotels and Motels19. Hotel reservation services20. Line maintenance services21. Locker rental22. Logistic Centers*23. Messenger services24. Porter service ABCDEFGH88725. Restaurants, bars and other refreshment facilities26. Special Assistance Services27. Tourist information services28. Travel agency29. Vehicle fuelling services30. Vehicle rental31. Vehicle parking32. Vending machines33. Warehouses*34. Welcoming services35. Other activities related to passenger services at the Airport, ifthe same is a Non-Aeronautical Asset.* These activities/ services can only be undertaken/ provided, ifthe same are located within the terminal complex/cargo complexand are primarily meant for catering the needs of passengers, airtraffic services and air transport services.”25. The aforesaid determination, not being favourable at all toDIAL or MIAL, was assailed before the TDSAT. Insofar as the DIALtariff order dated 22.04.2018 is concerned, submissions of both DIALand MIAL were appreciated. MIAL submitted that revenue fromaeronautical services like cargo, ground handling and FTC must alwaysbe treated as non-aeronautical revenue. It was further submitted that ifthe service provider is DIAL, the revenue will be a fee for services butonce it outsources an aeronautical service, the fee for such outsourcingshould be treated as non-aeronautical revenue because in such a case,DIAL is not rendering any service. This plea did not find favour with theTDSAT, which held that even when the airport operator engages inproviding an aeronautical service through its servants or agents, theservice must be deemed to be one provided by the airport operator. Thecolour of revenue from aeronautical service cannot get changed to thatof revenue from non-aeronautical service by an act of delegation orleasing out by the concessionaire. The TDSAT also dealt with the MIALtariff order dated 15.11.2018. One may say that there appears to besome conflict limited to the extent that while dealing with the MIALDELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMICREGULATORY AUTHORITY OF INDIA [SANJAY KISHAN KAUL, J.] ABCDEFGH888SUPREME COURT REPORTS[2022] 11 S.C.R.order it was observed by the TDSAT that while they are alive to thecontention made on behalf of MIAL, they had not taken a view or rendereda finding on the aspect of FTC in the DIAL order. We say this as theMIAL tariff order while observing so had recorded in para 4 that onlyfour aspects were required to be examined. FTC was mentioned as oneof the four aspects and, thus, did survive before the TDSAT despite itsearlier opinion dated 12.04.2018, which had dealt with the aspect ofFTC.26. Be that as it may, turning to the opinion of the TDSAT in theMIAL tariff order, it was observed that in case of FTC, one monopoly(airport JVCs having monopoly over airport access) was granting aconcession to another monopoly (of oil companies having monopoly overmarketing of fuel). Since both monopolies had enough market power,the fact of one monopoly agreeing to pay a concession fee to another(without passing it on to the end consumer) would mean that it is providingsome extra tangible or intangible ‘facilities’ or ‘services’. This wasnotwithstanding MIAL’s submission that it was willing to submit anundertaking that it will not increase FTC beyond a certain limit.27. The TDSAT turned to Section 2(a) of the said Act, whichdefined “aeronautical service” to mean “any service” thereby providingfor a wide range of functions, which also included supply of fuel toaircraft at the airport. Thus, there was no reason to give a restrictiveview to what constitutes a “service”, but rather the same should begiven the widest import. To support this conclusion, it was opined thatthis has to be read along with the object of the said Act, which as per thePreamble of the Act is “to provide for the establishment of an AirportsEconomic Regulatory Authority to regulate tariff and other charges forthe aeronautical services rendered to airports and to monitor performancestandards of airports and for matters connected therewith or incidentalthereto”.In view of the aforesaid Preamble, it was observed that themeaning of “service” should be read as an economic activity pertainingto specified functions of significant import, irrespective of label, source,nature or history.28. The appellate authority took note of the submissions of AERAthat the International Civil Aviation Organisation (for short ‘ICAO’)guidelines specifically give examples of aviation fuel supply services as ABCDEFGH889having an “aeronautical character”, whereas MIAL had relied upon“Glossary of Terms” of ICAO Documents to treat “concessions grantedto Oil companies to supply aviation fuel and lubricants…” as non-aeronautical revenue. It was held that first reliance must be placed onthe said Act and agreements as reflected in SSA and OMDA ratherthan on the ICAO guidelines and no reason was found to interfere withthe AERA’s decision on treatment of FTC for purposes of TargetRevenue formula wherein AERA had relied upon Schedules 5 & 6 ofthe OMDA.Submissions on the aforesaid aspects before the SupremeCourt:29. The Airport Operators sought to urge that the FTC was anaccess/concession fee and that they were not providing any serviceofany nature for supplying fuel to an aircraft nor were the OMCs sellingor marketing or providing any service to the airlines. There was also nodelegation or leasing out of any service as OMCs sell fuel which theAirport Operators are not authorised to sell. The definition of“aeronautical services” in Section 2(a)(vi) of the said Act would notinclude FTC. The word “means” limits the scope of the definition andprovides an exhaustive list of services that are to be treated asaeronautical services.30. It was urged that the FTC was not relatable to any AeronauticalServices or Non-Aeronautical Services under Schedule 5 or 6 of theOMDA. The reliance placed by AERA on Entry 17 of Schedule 5 of theOMDA was untenable as FTC was independent of the facilities orservices provided by third parties by use of the common hydrantinfrastructure, charges for which are already regulated by the AERA.Entry 11 of Schedule 5 was urged to be read with in conjunction withEntries 1 to 10, which also do not refer to any fuelling activities. Anadditional plea was that the FTC had been discontinued by the Ministryof Civil Aviation (for short ‘MOCA’) pursuant to a direction dated08.01.2020. Thus, it was urged that this was not a service necessary forsafe and efficient operation of the airport as required by Entry 11, andthe subsequent interpretation should be read for the purposes of the pastas to how FTC should be construed. The two services related to supplyof fuel, i.e., the charge of the company that owns the common hydrantinfrastructure at IGIA under Entry 17 of Schedule 5 of OMDA, and thecharges of “into-plane” fuel service providers who transfer fuel fromDELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMICREGULATORY AUTHORITY OF INDIA [SANJAY KISHAN KAUL, J.] ABCDEFGH890SUPREME COURT REPORTS[2022] 11 S.C.R.the common hydrant infrastructure to the aircraft, were regulated byAERA.31. The character of FTC was pleaded to be relatable to RevenueShare Assets which are assets required for provision of aeronauticalrelated services and are not considered in revenues from Non-Aeronautical Services. As an illustration, “public admission fee” is a feefor the right given to a person to enter into the airport. This is consideredas revenue from aeronautical related services as per the definition ofRevenue Share Assets as it has a correlation with the usage ofAeronautical Assets by virtue of gaining access to the airport building.An analogy was sought to be drawn to the fee in the form of FTC,which is charged by the Airport Operators to the oil companies for theprivilege of access to the IGIA.32. An important aspect sought to be emphasised was that thebidders had made their bids based on FTC not being an AeronauticalCharge as per the clarification given by the AAI in response to pre-bidqueries. The AAI had only stated that the OMCs had in principle agreedto pay FTC but the exact quantum was not decided and, thus, the AirportOperators would have the freedom to negotiate with the fuel companies.The FTC was in the nature of pre-existing charges and not part ofaeronautical charges. Airport Operators’ obligation in Clause 5.2(b) ofOMDA to novate all existing contracts entered into by the AAI withthird parties and to get the same transferred to the name of the AirportOperators has resulted in them continuing to levy FTC and the samewas not done as an obligation to perform aeronautical or non-aeronauticalservices. The FTC was, thus, perceived to be a pre-existing charge andnot a part of aeronautical charge as defined in Schedule 1 of the SSA.The Airport Operators also turned to the ICAO documents to submitthat FTC is a non-aeronautical activity and revenue therefrom is non-aeronautical revenue.33. It was submitted by the Airport Operators that for instance,FTC features under the heading above para 4.18 of ICAO Doc 9562,which expressly states ‘Revenue from non-aeronautical activities’.Similarly, para 5.34 falls under the chapter titled “Development andManagement of Non-Aeronautical Activities’ and provides undersubheading ‘D’, i.e. ‘Setting Fees and charges for Non-AeronauticalActivities’, that where FTC is imposed, it should be recognized by airportentities as being concession charges of an aeronautical nature. Paras ABCDEFGH8915.4 and 5.5, under subheading B of Chapter 5 titled “Non-AeronauticalActivities- Types and Operational Responsibilities”, which is furthercategorized under types of concessions and rentals, clearly provide thatconcession fee by aviation fuel suppliers is revenue from non-aeronauticalactivities.34. On the other hand, AERA urged that if fuel throughput serviceis a complete service in itself and the Airport Operators are merelydelegating the service to OMCs and taking a concession fee. Thecommercial arrangement between the Airport Operators and the OMCsdoes not change the colour of the revenue. It was urged that the fuelthroughput service is an aeronautical service as it is a service for providingfuel to the aircraft on tarmac through common hydrant infrastructureand into-plane agents. It would thus fall under Schedule 5 of OMDA. Areading of Schedule 5 of OMDA dealing with “aeronautical services”would mean the provision of “facilities” and “services”. It was urgedthat the word “facilities” is ejusdem generis with the word “services.”The Schedule provided a more detailed list of facilities and servicessuch as ‘Airfield’, ‘airfield lightning’, ‘Air Taxi Services’, ‘Air TaxiServices’, ‘Airside and land access roads and forecourts including writing,traffic signals, signage and monitoring” and “common hydrantinfrastructure for aircraft fuelling services by authorised providers”. Thus,there were ample elements of facilities used by fuel suppliers that couldbe attributed to the FTC. There is no mention of any service pertainingto fuel supply in Schedule 6 of the OMDA and FTC was completelydisconnected to the services mentioned therein.35. On the aspect of giving meaningful construction to the saidAct in the context of prior OMDA and SSA, it was urged that there wasnothing in the agreements to indicate that FTC was a non-aeronauticalservice but the same was clearly mentioned in Entry 17 of Schedule 5 ofthe OMDA. Thus, it was urged that FTC was clearly covered underSection 2(a)5(ii)6,(iv)7&(vi)8 of the AERA Act.36. The consequence arising from a contrary view, it was urged,would be a tendency to charge a higher fee as concession, which the5 Section 2(a) of the AERA Act defines “aeronautical service”.6 Service provided for the landing, housing or parking of an aircraft or any other groundfacility offered in connection with aircraft operations at an airport.7 Service provided for ground handling services relating to aircraft, passengers and cargoat an airport.8 Service provided for supplying fuel to the aircraft at an airport.DELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMICREGULATORY AUTHORITY OF INDIA [SANJAY KISHAN KAUL, J.] ABCDEFGH892SUPREME COURT REPORTS[2022] 11 S.C.R.OMCs would simply pass on to the Airlines and only 30 per cent of FTCwould be covered in the TR. This would result in huge benefits for theAirport Operators at the cost of several stakeholders. The subsidy offeredin the calculation of Target Revenue to the tune of 30% of non-aeronauticalrevenue is already a concession offered to the Airport Operators.37. A reference was also made to the Parliamentary StandingCommittee on Airport Economic Regulatory Authority Bill, 2007, whichhad recommended that the non-aeronautical services be also broughtunder the ambit of the then proposed regulator, along with the fuel supplyinfrastructure..38. The international scenario was also referred to in the contextof the Australian Competition and Consumer Commission having heldthat imposition of a fuel throughput levy is an ‘abuse of market power’and that there was a strong case that such airports have market powerin the market for refuelling service. It was further held that contractualagreements are not a valid reason to justify introduction of such levies.39. Lastly it was urged that in principle even the ICAO had heldthat fuel throughput service is an aeronautical service. The ICAOguidelines were referred to in this behalf to contend that the AirportOperators were cherry-picking certain lines and paragraphs from themout of context to suit their own interests. The ICAO had indicated thatFTC was a non-aeronautical revenue only for accounting purposes.40. FIA supported the submissions of AERA and urged that thequestion of FTC being aeronautical in nature was settled by AERA byits Order No.7/2010 dated 04.11.2010, which was never challenged byDIAL and was also upheld by the TDSAT in its order dated 15.11.2018.Our Rationale:41. We have examined this controversy carefully and find noreason to interfere with the concurrent views taken by the AERA andthe appellate tribunal. The principles we have enunciated at the thresholdqua the contours of judicial review towards the decision of regulatorybodies squarely come into play [Modern Dental College and ResearchCentre9; Akshay N. Patel10; Shri Sitaram Sugar Company & Anr11].9 (supra)10 (supra)11 (supra) ABCDEFGH89342. The mere fact that the FTC has been discontinuedsubsequently from 2020 would not give rise to an interpretation that itwas a non-essential service and was thus also a non-aeronautical service.The AERA is right in its submissions that all that has been done is thatthe Airport Operators are delegating the service to provide fuel to theOMCs and are taking a concession fee and pocketing the same. Thesignificance of supply of fuel to be provided to the aircraft on tarmaccannot be lost sight of. Obviously, the aircraft does not work withoutfuel. It is being provided through a common hydrant. There is no mentionof FTC in Schedule 6 of OMDA and thus, there is a complete lack ofconnection between FTC and services mentioned therein as non-aeronautical services. Once we accept this proposition then it is easy tofind connect between some of the aspects mentioned as aeronauticalservices with the aspect of FTC.43. We are not confronted with a situation where there is conflictbetween the OMDA/SSA and the said Act, requiring recourse to Section13(1)(a)(vi). A reading of the OMDA/SSA does not give rise to anyview that the FTC is a non-aeronautical service. It is clearly mentionedin Entry 17 of Schedule 5 of OMDA.44. There is also substance in the contention of AERA that themethodology of Airport Operators would amount to a manner ofsubterfuge to somehow pass on the FTC to the airlines with only 30 percent of it being covered in the TR. Forget the aspect of advantage to theAirport Operators, the issue is one also of a number of other stakeholdersbeing adversely affected. The airlines are bound to pass this charge onto the passengers. It would thus have a cascading effect.. If one maysay, the Australian Competition and Consumer Commission also looksinto this aspect as has been noted by the AERA in the MIAL TariffOrder and, in fact, categorises it with stronger words as “abuse of marketpower.” One cannot use the ICAO documents selectively in differentcontexts to derive the conclusion as was sought to be done on behalf ofthe Airport Operators.45. We thus have no hesitation in upholding the view taken by theAERA and the TDSAT opining that the FTC was a part of the“Aeronautical Service.”Calculation of Hypothetical Regulatory Asset Base (HRAB):46. The two airports were not set up de novo. Existing airportswere taken over. The IGIA was a brownfield airport before it had beenDELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMICREGULATORY AUTHORITY OF INDIA [SANJAY KISHAN KAUL, J.] ABCDEFGH894SUPREME COURT REPORTS[2022] 11 S.C.R.taken over by DIAL and, thus, assets as reflected in the books of accountswould record depreciation. This created its own difficulties in arriving ata value of the regulatory base for the first year of the first control period.Another problem faced by the AAI was that it had a common book ofassets for several airports across India. Thus, SSA provided a hypotheticalregulatory asset base to be derived by working backwards. Thecalculations to be made would have a cascading effect for successiveyears and, thus, base calculation for RB0 would have an impact on thecalculation of RB1 and for further years.47. The object of calculation of HRAB was to determine RB0,which was the sum total of:i.the Book Value of the Aeronautical Assets in the booksof the JVC; andii.the hypothetical regulatory base computed using the thenprevailing tariff and the revenues, operation and maintenancecost, corporate tax pertaining to aeronautical services at theairport, during the financial year preceding the date of suchcomputation.48. The effect of the aforesaid is that HRAB was to be computedas a value for the financial year 2008-2009 (i.e., the first year of theFirst Control Period). The controversy in relation to computation of HRABbefore this Court was limited to two aspects:A. Whether the expression “pertaining to aeronautical services”will be applicable to all the components of RBo, i.e. prevailingtariff and the revenues, operation and maintenance cost,corporate tax ?B. Whether permitting AERA to include cost of DIALmanpower in addition to the contractually mandated AAImanpower artificially inflates the operation & maintenance cost,thereby distorting the value of HRAB?Issue A49. The AERA opined that the components relating to aeronauticalservices had to be reckoned. It was the view of AERA in the MIALtariff order that MIAL had erroneously calculated HRAB by relyingupon the Target Revenue as the base and then calculated upwards toreach the value of HRAB instead of relying upon the components given ABCDEFGH895in the formula for calculating RB0. On the other hand, MIAL contendedbefore the TDSAT that the absence of a comma after the term “corporatetax” in the definition means that it is only the corporate tax that pertainsto aeronautical services and not the other elements. This contention wasrejected by the TDSAT vide its order dated 15.11.2018 in MIAL’s appealwherein it was observed that it would be useful to test both the contestinginterpretations on the ground of consistency and logical meaning. Thereare three commas and three elements in the sentence, namely “prevailingtariff and revenues”, “operation and maintenance costs” and “corporatetax”. In terms of consistency TDSAT noticed no problem with treatingall terms as pertaining to “aeronautical services at the airport”. It wasnoticed that if the argument of MIAL was to be accepted then onlycorporate tax is qualified as pertaining to aeronautical services. Thismeans that the other two elements can be pertaining to either aeronauticalor non-aeronautical services or both. Admittedly, “operation andmaintenance costs” are meant to be those pertaining only to aeronauticalservices. MIAL’s contention was that the remaining first element“prevailing tariff and revenues” should be treated as aeronautical pluspartial non-aeronautical or as aeronautical plus non-aeronautical. TheTDSAT in this regard observed that it is obvious that this would beinconsistent and illogical to read from the construction of the sentence.Thus, the only consistent and logical way to read this sentence is to treatall the three elements as pertaining to aeronautical services. A referencewas also made to the fact that operation and maintenance cost in theformula to calculateRB0 is an independent and express provision. It wasobserved that in the pre-control period of FY 2008-2009, the provisionsof fixing tariff were different than the approaches during the later yearsof the control period when ‘S’ is treated as a cross-subsidy foraeronautical revenue.50. Airport Operators urged before us that the expression“pertaining to aeronautical services” applies only to “operation &maintenance cost” and “corporate tax”. In this regard it was submittedthat in the formula for TR, operation and maintenance cost pertaining toaeronautical services is reckoned. Similarly, as defined, corporate tax isalso only in terms of earnings pertaining to aeronautical services for thesaid purpose.51. It was contended by the Airport Operators that all through theSSA and other documents, “pertaining to aeronautical services” has onlyDELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMICREGULATORY AUTHORITY OF INDIA [SANJAY KISHAN KAUL, J.] ABCDEFGH896SUPREME COURT REPORTS[2022] 11 S.C.R.been used in the context of operation & maintenance costs and taxation.It was further contended that “prevailing tariffs” is also a defined termrelating to aeronautical services and therefore, it would be absurd for“revenues” to also relate to aeronautical services. It will only make senseif “revenues” relates to non-aeronautical services.52. On the accounting principle it was contended that the prevailingtariff and the revenues represent the receipts of income whereas operationand maintenance cost and corporate tax refer to outflow. With respectto corporate tax, this has to be linked only to aeronautical services. Allrevenues arising out of aeronautical and non-aeronautical services wereshared in full to compute the aeronautical charges prior to 01.01.2009.Thus, as per the provisions of Schedule I of SSA, the hypotheticalregulatory base will be computed based on the entire revenue from theperiod between 01.04.2008 and 31.03.2009, i.e., aeronautical and non-aeronautical income so as to calculate the value of the regulatory base.The expression ‘regulatory base’ means the assets which are requiredto earn revenues by the regulatory entity.53. Mr. Datar sought to rely on the judicial pronouncement inNabha Power Ltd. (NPL) v. Punjab State Power Corporation Ltd.(PSPCL) & Anr.12 for the purposes of rules of interpretation of contractsand how courts should read implied terms into the contract. Morespecifically he relied on the Reddendo Singula Singulis principle, whichstates that “Where a complex sentence has more than one subject, andmore than one object, it may be the right construction to render each toeach, by reading the provision distributively and applying each object toits appropriate subject. A similar principle applies to verbs and theirsubjects, and to other parts of speech.”It was, thus, urged that this principle should be applied to interpretthe disputed clause at hand.54. AERA contended that “prevailing tariff” and “revenue” arenot two different phrases. Prevailing tariff results in the computation ofrevenue and by itself the prevailing tariff cannot be used as a componentto determine RB0. The expression “pertaining to aeronautical services”should be applied to either all the components of HRAB or none at all.On accounting formulation, it was urged that Prevailing Tariff x No. ofUsers = Revenue and, thus, there could be no bifurcation.12 (2018) 11 SCC 508. ABCDEFGH89755. Mr. Buddy Ranganathan learned counsel for FIA sought tocontend that the definition of TR formula as well as the RegulatoryBase and the Hypothetical Regulatory Base made it clear that they allpertain to aeronautical services and assets. He urged that adding thecomponent of non-aeronautical revenue by trying to bifurcate “prevailingtariff and revenue” is unwarranted and is contrary to the SSA. It wasalso contended that MIAL also understood this in the same manner andwhile arguing on 23.11.2011 before AERA for calculation of HRAB, ithad taken 30 per cent of non-aeronautical revenue whereas before thisCourt it has suggested that 100 per cent of non-aeronautical revenuesbe taken in the definition of HRAB. AAI’s letter dated 18.06.2018 talksabout traffic revenue and non-traffic revenue which was completelydifferent from tariff revenue and bears no relation to HRAB.Our Rationale:56. If we analyse the aforesaid aspect, it is an issue of plainconstruction of the contract as it reads. There is no reason why explicitgrammatical connotation should not be applied to a contract unless itresults in some absurdity. The contract was negotiated by experts andthey are expected to know all the ramifications of the language theyuse. The sentence reads as under:“ii. the hypothetical regulatory base computed using the thenprevailing tariff and the revenues, operation andmaintenance cost, corporate tax pertaining to aeronauticalservices at the airport, during the financial year preceding thedate of such computation.” (emphasis supplied)57. The question, which arises is whether prevailing tariff andrevenue is one expression itself followed by a comma, which refers tooperation and maintenance cost and another comma followed bycorporate tax. Thus, the three expressions have been used whereafter itis added that it pertains to aeronautical services at the airport. To ourmind, it is quite clear that all the three phrases are qualified by thempertaining to aeronautical services at the airport. An alternative pleawas raised (a lesser one at that) to distinguish prevailing tariff and revenueas two different terms. This was to make aeronautical services notapplicable, at least, to prevailing tariffs and revenue by seeking to bifurcatethese two expressions. The result sought to be achieved was that as analternative, the aeronautical services would apply to operations andDELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMICREGULATORY AUTHORITY OF INDIA [SANJAY KISHAN KAUL, J.] ABCDEFGH898SUPREME COURT REPORTS[2022] 11 S.C.R.maintenance on one hand and corporate tax on the other while seekingto exclude tariff and revenue. If one may say, in order to achieve aparticular result, a reverse engineering process was sought to be appliedto contend that the term revenue would include both aeronautical andnon-aeronautical services.58. We are unable to appreciate how the principle of interpretationof Reddendo Singula Singulis principle as discussed in Nabha PowerLtd. (NPL)13 case would be applicable in the present case. The principleis clear in its terms. It is when a complex sentence has more than onesubject and more than one object that a construction may be required torender each to each by reading the provision distributively. Firstly, we donot find it a complex sentence. Secondly, there is no requirement to readone part with one particular aspect by excluding the other part of thesentence. The sentence reads clearly where the three concepts arequalified by aeronautical services.59. The endeavour should not be to somehow achieve an objectiveof increasing the financial inflow of the Airport Operators by one methodor the other. It is not a contract drawn by laymen but by specialists. Tosomehow strain the aspect of construction to achieve a particular objectivecannot be a method of constructing this clause. We do find that theargument is specious, innovative as it may be.60. We have, thus, no hesitation in agreeing with the view adoptedby AERA and the TDSAT.Issue B61. The DIAL tariff order passed by AERA records that trainingis an integral part of efficient operation and hence costs incurred in thisactivity cannot be ignored only on account of alleged overlap. The costadmittedly pertained to aeronautical services. AERA disallowedseparation of operation and maintenance costs into “efficient costs” and“non-efficient costs” and took into account only efficient costs whilecalculating HRAB especially when SSA makes no such distinction.62. The aforesaid conclusion was upheld by TDSAT in the appeal,wherein repelling the plea of DIAL to exclude the cost of an extra set ofemployees for the initial year for calculating HRAB had been rightlynegatived in the light of the provisions in OMDA and other relevant13 (supra). ABCDEFGH899facts. It was observed that no good ground was made out to overlookthe costs actually incurred.63. Dr. A.M. Singhvi and Mr. Krishnan Venugopal, learned seniorcounsels appearing for DIAL sought to contend before us that the AAImanpower was contractually imposed upon DIAL pursuant to Article6.1.1 of OMDA. Thus, only the cost of such manpower should havebeen included as part of operation and management cost which wouldallow efficient costs to be recovered through pricing being the relevantcost for operating the airport as mandated by the Economic Efficiencyprinciple in the SSA. Thus, the cost of DIAL’s employees should not beconsidered for calculation of HRAB as the same was required in thetransition phase and not in normal course of business. Thus, as per theSSA, HRAB should be calculated considering profit in normal course ofbusiness for the year immediately before the first control period (i.e., FY2008-2009). The inclusion of the cost of DIAL manpower in addition tothe contractually mandated AAI manpower in the operation andmanagement cost artificially inflated the operation and management cost,thereby distorting the value of HRAB which was in violation of Section13(1)(a)(vi) of the said Act. It was the plea that AERA had not gone intothe issue of duplication of work and, therefore, the issue cannot be raisedby the respondents at this stage.64. On the other hand, this plea was stoutly resisted by both AERAand FIA predicating that training was an integral part of efficient operationand, therefore, costs incurred in this activity, which is an aeronauticalactivity, could not be ignored. It was not the case of DIAL that the costof AAI staff was not incurred for any aeronautical service or that theAAI staff functioning at the airport was unnecessary for the smoothoperations of IGIA during FY 2008-2009. It was only a non-recurringcost and not a non-efficient cost contrary to DIAL’s plea this cost wasa non-efficient cost and therefore could not have been taken into account.The AAI employees and the employees appointed by DIAL worked asan integrated unit to run the airport and as and when AAI team wasweaned away, DIAL had added new employees to take their place.65. We find little merit in this contention. The principle of economicefficiency incorporated in SSA only means that there should be no extracost included which does not affect the efficiency of the system. It canhardly be said that the system could have worked in the relevant yearDELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMICREGULATORY AUTHORITY OF INDIA [SANJAY KISHAN KAUL, J.] ABCDEFGH900SUPREME COURT REPORTS[2022] 11 S.C.R.without the AAI manpower. No doubt it was a transition phase whichrequired both sets of manpower to work in tandem towards the efficiencylevels. The relevant aspect is that as and when AAI started pulling outtheir manpower, DIAL supplemented the manpower. That manpowersupplemented may be less or more is not relevant. In the year in question,the presence of both sets of manpower was necessary for the efficientfunctioning and the manpower of DIAL was in the learning process.This learning curve cannot be excluded on the ground of not being relatableto economic efficiency. It can hardly be called duplication of work eventhough it may in some sense add to the value of HRAB but that is anatural corollary. The parties to the contract were quite conscious ofthis ramification as they knew the methodology which would be adoptedfor the takeover of the airport. Now to contend that this should beexcluded to somehow increase the profit margins of DIAL is, in ourview, completely unsustainable and, thus, we reject this contention.Application of CPI-X methodology for calculation of tariff:66. A mathematical controversy has arisen with respect to thealgebraic formulation arising from the methodology adopted by AERA.AERA calculated tariff by applying Consumer Price Index (for short‘CPI’) and then determining the ‘X factor’, which would be subtractedout of CPI. This X factor has to be calculated as per the SSA. We willhave to appreciate the background scenario to determine the issue. Theoperation of the airports is monopolistic in character. The endeavour isthat this monopolistic character should not be misused and, thus, in away revenue returns are sought to be controlled. The CPI is determinedby the Government from a basket of pricing factors. From this CPI, theX factor is to be subtracted. This is how AERA seeks to apply theformula. The view of DIAL is that step one is calculation of TR andthereafter at the second stage the CPI should be subtracted. Finally, Xfactor in applied. On the other hand, as far as AERA is concerned theyhave made it a two-stage process by which target revenue is calculatedfirst and CPI and X factor are calculated together at the second stage.67. We now come to the issue of X factor as per Schedule 1 ofthe SSA. The X factor is calculated by determining what equates thepresent value over the regulatory period of the target revenue with thepresent value that results from applying the forecast traffic volume witha price path based on the initial average aeronautical charge, increasedby CPI minus X for each year. Accordingly, the following equation hasbeen provided: ABCDEFGH901where ACij = average aeronautical charge for the jth category ofaeronautical revenue in the ith yearTij = volume of the jth category of aeronautical traffic in the ithyearX = escalation factorn= number of years considered in the regulatory periodm = number of categories of aeronautical revenue e.g. landingcharges, parking charges, housing charges, Facilitation Componentetc.The maximum average aeronautical charge (price cap)’ in aparticular year ‘i’ for a particular category of aeronautical revenue‘j’, is then calculated according to the following formula:ACi= ACi-1 x (1+CPI-X)where CPI = average annual inflation rate as measured by changein the All India Consumer Price Index (Industrial Workers) overthe regulatory period.68. It is apparent from the reading of the aforesaid equation thatX factor does not directly figure in the equation but the SSA provides thefollowing formula to calculate the maximum average aeronautical charge(price cap) in a particular year ‘i’ for a particular category of aeronauticalrevenue ‘j’:ACi= ACi-1 x (1+CPI-X)69. It is the plea of DIAL that in the CPI-X methodology of tariffdetermination as envisaged in the SSA, the CPI is tariff add-on to coverinflation. It was thus suggested that in this methodology, the efficientway is to determine the X factor without considering inflationary increasesand only considering real increases in costs, which would provide anunadulterated ‘X factor’, bereft of inflation. Thereafter, the CPI inflationcoverage on actual year on year basis in rate card is provided to ensuretransparency and ease of computation. Hence, DIAL requested AERAthat it should first arrive at ACi without inflations and thereafter applythe CPI inflation separately.DELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMICREGULATORY AUTHORITY OF INDIA [SANJAY KISHAN KAUL, J.] ABCDEFGH902SUPREME COURT REPORTS[2022] 11 S.C.R.70. AERA in DIAL Tariff Order that if this submission was to beimplemented, it would result in the following equation:71. Regrouping the terms, the aforesaid formula would effectivelyresult in the following:72. AERA thus held that this formula contains an additional term“-ACi-1 x CPI x X” in the determination of aeronautical charge, whencompared to the formulation in the SSA. It was observed that for anegative X factor, this additional term would result in a net increase inthe aeronautical charge. AERA decided that the treatment suggested byDIAL is not envisaged in the SSA.73. The subsequent MIAL Tariff Order opined that in the illustrationprovided in Schedule 1 of the SSA, X factor is determined together withinflation. AERA had proposed to follow the formulation specified in theSSA and to calculate the X factor by solving the system of equationsmentioned therein. In light of no comments by stakeholders or MIAL inrespect of AERA’s position, AERA decided to continue with this position.74. The TDSAT in terms of its order dated 23.04.2018 opinedthat the formula for aeronautical charges is based on the shared tillinflation-X price cap model. The equation suggested by DIAL is differentfrom what is provided in the SSA and hence is unacceptable. Suchanomaly arises when an interpretation is sought where none is warrantedin the SSA. The TDSAT vide its subsequent order dated 15.11.2018while dealing with the MIAL appeal did not delve into the CPI-Xmethodology, and the issue has not been appealed by MIAL before theSupreme Court.75. In the submissions before us, DIAL sought to contend thateach step in CPI-X methodology needs to be applied sequentially ascombining all steps would lead to an incorrect result. The three stepsreferred to in the beginning would be:Step 1 is to apply the tariff formula to determine the targetrevenue. ABCDEFGH903Step 2 requires the calculation of the X factor expressed asa percentage that would need to be applied to the existing tariffrate card to equate the existing tariffs to the target revenue. TheX factor is required to be determined without considering inflationwhich would provide an unadulterated X factor bereft of inflation.Thereafter, the existing tariffs may need to be increased ordecreased and hence the X-factor may either be an escalation/reduction factor.Step 3 is to apply the formula set out in Schedule 1 of theSSA to factor inflation into the tariffs along with the X factor.This would require that the existing tariffs be increased ordecreased by the sum of the X factor and the CPI expressed as apercentage.The use of the word ‘then’ in the formula for maximumaverage aeronautical charge in step 2 and before step 3 showsthat X is to be calculated and applied first, and thereafter increasedby CPI. The approach adopted by AERA calculates X along withCPI, where CPI gets subsumed in X. However, target revenueescalated by X including CPI can never be equal to aeronauticalcharges because that would amount to giving the benefit of CPIon one hand and taking it away on the other hand.76. DIAL also sought to contend that CPI must be applied to allfive building blocks. AERA had applied the CPI to only two blocks andnot to the remaining three building blocks, i.e. return on RAB, depreciation,and taxes. AERA had not provided any logical basis or explanation forthis partial application of CPI, due to which the value of tariff increasehad reduced. However, there was no mandate in the SSA to apply theCPI only to operation and maintenance costs, and non-aeronauticalrevenues, and not to the other building blocks in SSA. DIAL sought toproduce an expert opinion of Prof. Martin Cave14 to canvas that AERA’sconsultation paper had misunderstood the purpose of CPI. The approachhad focussed on cost and revenue of the regulated business, whereasthe focus should have been on overall potential for profits. Thus, neitherAERA, nor any of the stakeholders have been able to produce any expertevidence to the contrary, or even rebut Prof. Cave’s critique of the manner14 Former Deputy Chairman of erstwhile UK Competition Commission and currentlya visiting Professor at Imperial College Business School in regulatory economics.DELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMICREGULATORY AUTHORITY OF INDIA [SANJAY KISHAN KAUL, J.] ABCDEFGH904SUPREME COURT REPORTS[2022] 11 S.C.R.in which AERA had applied the CPI-X methodology in Schedule 1 ofthe SSA.77. The AERA, on the other hand, sought to rebut the approachcanvassed by DIAL. The plea based on selective treatment of twobuilding blocks was sought to be repelled as incorrect as even thoughAERA had applied the CPI factor to each “jth category of aeronauticalrevenue”, all five blocks were taken into consideration for calculatingthe Target Revenue for aeronautical service by using the formula ofTarget Revenue set out in Schedule 1 of the SSA.78. The concept and purpose of the CPI-X factor is to equalizethe Net Present Value of the Target Revenue determined as per formulafor determining the Target Revenue in Schedule 1 of the SSA which isbased on building blocks and is a cost-based formula, to the Net PresentValue of the actual/projected revenue determined using the forecast trafficvolume, which is a revenue-based formula. This was so as the Net PresentValue of the TR determined as per the formula in the SSA would bedifferent from the actual/projected revenue determined by the Net PresentValue of the actual/projected revenue based on traffic volume.79. Thus, it is the say of the AERA that if “X factor” is equalisedbefore CPI is factored, the Net Present Value of Target Revenue willget equated with the Net Present Value of the actual/projected revenue,and will thereafter be enhanced using 1+CPI, making the Net PresentValue of the actual/projected revenue always higher than the Net PresentValue of Target Revenue.80. FIA sought to support the stand of AERA by emphasising thatDIAL had willingly entered into the SSA and it was not open to DIAL toseek revision of its terms and rescind from the agreement entered intoor cause violence to the algebraic formula. DIAL was thus seeking toalter the agreement and such alteration of the terms would beimpermissible and detrimental to the stakeholders. It was furthersubmitted that DIAL had not provided the detailed business plans andthe computation based on which X-Factor had been determined. Theexpert opinion without citing any authority alluded to the “orthodoxmethod” for calculation of the formula, and no reliance ought to be placedof the same due to of lack of substantiation. AERA had duly factoredfor inflation where applicable and required with regard to othercomponents, such as return on RAB, depreciation and tax. A reading ofthe AERA guidelines and the SSA left no doubt that the return on RAB ABCDEFGH905is to be calculated on a nominal basis, i.e. after considering inflation.Depreciation is not cash incurred and as such the question of consideringinflationary index for the same does not arise. Lastly corporate tax is aderivative of aeronautical revenues and aeronautical expenses, whichare components that have been duly adjusted for inflation as per theformula for Target Revenue provided for in the SSA, and, hence, did notrequire any further adjustment for inflation.Our Rationale:81. On the consideration of the plea it is obvious to us that theendeavour of DIAL was to lower the ‘X-factor’, which in turn will resultin a higher tariff. The objective is, thus, how the tariff can be madehigher rather than staying true to how the agreement reads. A reverseengineering process again!82. We must keep in mind that a specialised authority has goneinto this aspect and also the Tribunal. The controversy revolves arounda formula. This formula in turn would have been determined after duedeliberations. It is an algebraic formula and has to be solved by theprinciples of algebra. We can only remind ourselves that the BODMASprinciple would have to apply to the formula in the SSA, which is whatthe AERA has done. What DIAL wants to do is to re-write the formulaand then apply BODMAS. This, in fact, causes complete violence to theformula itself. If the manner of calculation of DIAL was to be the basis,then the SSA would have provided that formula. Now DIAL seeks tore-write/remodel the formula based on the so-called expert opinion, whichis self-serving in character.83. DIAL sought to lay a lot of emphasis on the wordings prior tothe setting out of the formula. In that process the use of the word “then”was sought to be used as a rationale for re-working the formula. In ourview, all that the sentence states is that the maximum averageaeronautical charge (price cap) in a particular year ‘i’ for a particularcategory of aeronautical revenue ‘j’ is “then” calculated according tothe formula. The fact that these have to be worked within the formula isemphasised and the earlier three aspects are factors which have to beincluded in the formula in the manner so provided.84. We cannot accept such a self-serving argument by DIAL tosomehow enhance their revenue and that possibly is the reason thatMIAL did not even consider worth its while to emphasise it before theDELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMICREGULATORY AUTHORITY OF INDIA [SANJAY KISHAN KAUL, J.] ABCDEFGH906SUPREME COURT REPORTS[2022] 11 S.C.R.Tribunal or come up in appeal on that aspect before us. We have, thus,no hesitation in rejecting this plea of DIAL and affirming the manner ofcalculation as per formula by the AERA.Revenue from Disallowed Area:85. In the determination of development fee, while approving theproject cost, AERA disallowed an area of 8652 sq. mtrs. of Food andBeverages area. The said area consisted of non-aeronautical assets builtwithin IGIA’s terminal area. AERA determined the same to be excessiveconstruction and not required.86. AERA in the DIAL Tariff Order opined that the mere fact ofdisallowance does not impact the real asset allocation on the ground. Inparas 7.8 to 7.11 of the DIAL Tariff Order, AERA observed that in itsDevelopment Fee Order, assets for which the costs were disallowedwere not required to be built and were over and above the requirementin respect of the airport project. However, even though AERA haddisallowed costs incurred in creation/construction of such assets fromthe allowable project cost, these assets had been created, were beingused by the airport operator, and were also accounted for in the finalasset allocation mix. AERA had neither prohibited the airport operatorfrom utilizing such assets nor was the airport operator asked todecommission them.87. The question of whether the cost of construction of a particulararea providing non-aeronautical services was to be considered as partof the total project cost in determining the development fee was notrelevant to the present consideration. In para 21.4.5 of the DIAL TariffOrder, AERA observed that it had taken the decision while determiningthe development fee under Section 13(1)(b) of the said Act, read withSection 22A of the AAI Act. However, the present exercise pertainedonly to fixation of aeronautical tariff in terms of Section 13(1)(a) of thesaid Act, which only required determination of aeronautical RAB. Itwas decided that though an area of 8652 sq.mtrs. was disallowed in theDevelopment Fee Order, the total non-aeronautical revenue would bereckoned towards the determination of aeronautical tariff without theexclusion proposed by DIAL.88. Interestingly MIAL did not think it worth its while to raisesuch a plea either before the AERA or the TDSAT. The TDSAT’s orderdated 23.11.2018 relating to the appeal by DIAL had also not modified ABCDEFGH907the DIAL Tariff Order in any manner. DIAL still sought to contend thatthe view adopted by AERA was fallacious and sought to rely on thedefinition of “non-aeronautical assets” in the OMDA. As per article 1.1of the OMDA, non-aeronautical assets are defined as under:“all assets required or necessary for the performance of non-aeronautical services at the airport.”89. It was thus urged that the disallowed area would fall outsidethe ambit of non-aeronautical assets. Therefore, they were also outsidethe ambit of Revenue Share Assets as defined under the SSA. Hence,the revenue generated from the disallowed area could not be consideredas part of revenue from Revenue Share Assets.90. DIAL urged that AERA’s approach was not only discriminatorybut also inconsistent and contrary to its own tariff philosophy andguidelines. As per para (g) of 5.2.1 of AERA’s Guidelines on TariffDetermination for Airport Operators 2011 - where an asset is excludedfrom RAB, the corresponding revenues and expenditures are also to beexcluded from the TR. Similarly, the revenue from the disallowed areashould not form part of the revenue from Revenue Share Assets andaccordingly 30 per cent of such revenue should not be considered forpurposes of the cross-subsidy. Considering the revenue from disallowedarea for cross-subsidizing the tariff would amount to penalizing DIALtwice; by disallowing the cost of the subject area, and then by includingthe revenue generated therefrom in reducing the TR of DIAL.91. DIAL contended that AERA had violated Section 13(4)(c) ofthe said Act, which required that its decisions be fully documented andexplained. The AERA’s approach was stated to be inconsistent with theexpert opinion of Prof. Martin Cave. Prof. Cave had opined that AERAshould exempt the excluded area from which DIAL had already beenprevented from recovering its proper economic costs from the pool ofRevenue Share Assets. AERA simply re-emphasised the reasoningcontained in the DIAL Tariff Order. FIA supported the same andemphasised that the determination of the allowable project cost anddetermination of aeronautical tariff are wholly separate issues under theprovisions of the said Act. The project cost was determined under Section13(1)(b) of the said Act read with Section 22(a) of the AAI Act. However,the question that fell for determination of AERA in the DIAL TariffOrder related to Section 13(1)(a) of the said Act for tariff fixation, whichonly required determination of aeronautical RAB. Whether a particularDELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMICREGULATORY AUTHORITY OF INDIA [SANJAY KISHAN KAUL, J.] ABCDEFGH908SUPREME COURT REPORTS[2022] 11 S.C.R.area was considered for project costs or not was of no relevance as thesame was not a pass-through.Our Rationale:92. It would suffice for us to say that the present controversy islimited to whether the revenue from disallowed area must be consideredwhile fixing aeronautical tariff under the said Act. The airport operatorswere not asked to decommission the assets in the disallowed area. Thesaid assets had already been created and were being used by the airportoperator. Hence, the revenue from the disallowed area had to be includedin the tariff.93. The aspect relating to disallowance of the project cost for thedisallowed area was not urged by FIA and hence, we are not commentingon the same.Calculation of tax for determining the Target Revenue:94. The TR is to be calculated as per formula provided in Schedule1 of the SSA. The ‘T’ (tax) element in the formula contemplates theinclusion of “corporate taxes on earnings pertaining to AeronauticalServices”. AERA has opined qua both Airport Operators that thecalculation of corporate taxes should be done after deducting all costs,which would include the revenue share or the Annual Fee paid by themto the AAI.The ‘T’ element in the DIAL and MIAL Tariff Orders95. DIAL had computed the ‘T’ element by separately calculatingaeronautical earnings and determining the corresponding taxes paid onthe same. This manner of calculation excluded earnings from non-aeronautical sources and the tax on such earnings. In essence, DIALproposed to treat aeronautical earnings as a separate ‘block’ or astandalone entity. It was contended before AERA that this was in linewith the SSA, and was a worldwide practice followed across all regulatoryregimes in all industries.96. AERA vide the DIAL Tariff Order disagreed with DIAL’scalculation and noted that in financial years 2009-10 and 2010-11, theactual tax paid by DIAL was nil. For 2011-12, the forecast for tax requiredto be paid was also nil. For 2012-13 and 2013-14, AERA was able tomake certain forecasts. AERA also noted that the tax was a statutorypayment due to the Government and was being expensed as a cost in ABCDEFGH909the target revenue computation. Thus, if actual tax paid in any of theyears was lower than the forecast amount, it would lead to a situationwherein DIAL would be unjustly enriched. Thus, only the actual taxpaid could be taken into account in the ‘T’ element for the years 2009-10, 2010-11, and 2011-12.97. Insofar as MIAL is concerned, a similar manner of calculationwas adopted. However, AERA vide the MIAL Tariff Order noted thatthere was a significant difference between the actual tax paid by MIALin respective years as a company and the tax towards aeronauticalrevenue calculated by MIAL. This difference was due to the lattercalculation not accounting for the Annual Fee paid by MIAL to AAI.98. AERA adopted the view that the total tax paid by MIALconsisted of its operations as a whole and the total cost associated withthe same. In its company account, MIAL had taken the revenue sharepaid to AAI as a cost and there was no separation into aeronautical ornon-aeronautical. Thus, it was held that the tax paid by MIAL should betaken on actuals for the years 2009-10, 2010-11, 2011-12, and a similarmethod was to be followed for 2012-13 and 2013-14. AERA observedthat MIAL ought not to benefit from the difference between tax calculatedin its regulatory account and the tax actually paid by it. This wasnotwithstanding the fact that considering the actuals of tax paid wouldlower the TR.99. The TDSAT has actually just affirmed the view taken by AERAfor DIAL. The TDSAT in the appeal by MIAL had also reached asimilar result although with greater explication. MIAL had relied onhypothetical examples which showed that the ‘T’ element in the tariffformula would always be zero if the Annual Fee were to be expensed asa cost. The TDSAT disagreed and found that the outcome would not bezero simply if the assumptions taken in the hypothetical examples wereto change. The ‘T’ element could only be said to be rendered otiose ifthe result of ‘T’ was zero in all circumstances, which could not be saidto be the case here.100. MIAL did seek to contend that they were given a commitmentthat the revenue share payable to AAI would not be treated as an elementof cost. The AERA negated this contention on the ground that there wasnothing to evince the same. The illustrative example contained inSchedule I to the SSA, in which the ‘T’ element was a positive numericalfigure, would not be indicative of such a commitment. The example wasDELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMICREGULATORY AUTHORITY OF INDIA [SANJAY KISHAN KAUL, J.] ABCDEFGH910SUPREME COURT REPORTS[2022] 11 S.C.R.certainly useful but could not be said to be exhaustive in terms of factsor assumptions. The TDSAT found that the AERA was following aconsistent and reasonable methodology, which was:First, AERA had proposed to consider the actual tax paid by MIALas the component ‘T’.Second, AERA would review the actual corporate tax onaeronautical services paid by MIAL.Third, AERA would true-up the difference between corporatetax paid after separating aeronautical activities and the actual taxpaid as considered by AERA.101. The TDSAT found that AERA’s methodology was alsoconsistent with Article 3.1.1 of the SSA. The said provision providedthat the Annual Fee “…shall not be included as part of costs for provisionof aero services and no pass-through will be available…” It was observedthat this provision mandated that the Annual Fee would not be made partof Operation & Maintenance or any other cost so that it does not have a‘pass-through’ effect. However, this could not be a ground for MIAL toargue that the Annual Fee was not a ‘cost’ for taxation purposes. Infact, a ‘pass-through’ effect would occur if the Annual Fee was notdeducted as a cost. If not deducted, it would have an upward effect onthe value of T, thereby increasing the value of TR.102. It was held that ‘T’ was “corporate tax on earnings pertainingto aeronautical services” (emphasis supplied). Earnings were nothingother than the balance of revenue after deducting costs and expenses.Annual Fee was nothing more than a cost and had to be deducted aswell.103. Mr. Arvind Datar, learned senior counsel led the battle bothon behalf of DIAL and MIAL on this aspect.104. His emphasis was on the express language of the definitionof ‘T’ in Schedule 1 of the SSA which indicates that a determination hasto be made of “corporate taxes on earnings pertaining to AeronauticalServices”. Thus, ‘T’ had to be computed based solely on the regulatoryaccounts prepared by AERA for the TR formula by excluding the AnnualFee. A contrary view would amount to alteration of the definition, whichwould then read as corporate taxes ‘paid’ on Aeronautical Services orcorporate taxes ‘on’ Aeronautical Services. He strenuously invoked the ABCDEFGH911principle of business efficacy to read a term in the agreement to achievethe results intended by the parties acting as prudent businesspeople.15105. It was his submission that if AERA’s method were to befollowed, there would never be a profit on aeronautical services. Thetotal of Operation & Maintenance, depreciation, and interest, takentogether with the Annual Fee would always exceed total aeronauticalrevenues. ‘T’ would thus always be zero and the component would berendered otiose. Various hypothetical examples were adduced in thisregard. To fortify the argument, it was submitted that the given value of‘T’ was positive in the numerical illustration appended to the TariffDetermination formula in Schedule I to the SSA.106. Mr. Datar then turned to Article 3.1.1 of the SSA whichmandates that the Annual Fee shall not be considered as a cost in relationto provision of Aeronautical Services. The decision in Nabha PowerLtd.16 was cited to the effect that a multi-clause contract must alwaysbe interpreted in a manner that any view on a particular clause of thecontract should not do violence to another part of the contract. TheAirport Operators would effectively be victims of ‘double jeopardy’ ifAERA’s methods were followed. The Annual Fee paid by them was nota constituent of the TR Formula and could not be recovered by them.However, they would also be unable to fully recover the corporate taxcomponent, i.e., ‘T’, due to the Annual Fee getting deducted as a costfrom aeronautical revenue.107. AERA and FIA had common ground while endorsing theimpugned order. The actual tax paid was the substratum of their argument.The Airport Operators, it was pleaded, could not be permitted to unjustlyenrich themselves and create an additional burden for other stakeholdersif their actual taxes paid were lesser than forecast taxes. The establishedregulatory practice was stated to consider corporate tax paid on actualsand not on a notional basis.108. It was submitted that the Airport Operators’ reliance on Article3.1.1 of the SSA was misplaced. The clause provided that there shall beno pass-through available in relation to Annual Fee. However, a pass-through would certainly occur if the Annual Fee was not deducted as acost from Aeronautical Revenue. The burden for bearing the same would15 Nabha Power Ltd. (NPL) (supra).16 (supra).DELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMICREGULATORY AUTHORITY OF INDIA [SANJAY KISHAN KAUL, J.] ABCDEFGH912SUPREME COURT REPORTS[2022] 11 S.C.R.instead shift onto the stakeholders, which is contrary to the object of theaforementioned provision. DIAL and MIAL had voluntarily submitted topay 45.99 per cent and 38.7 per cent of their total revenue as AnnualFee respectively. Thus, even assuming that a deduction of the AnnualFee would lead to ‘T’ remaining zero, the same would only be a result ofchoices made by the Airport Operators with respect to their commitmenttowards Annual Fee percentage.109. FIA and AERA urged that the treatment of corporate taxunder ‘T’ could be contrasted with the formula for Weighted AverageCost of Capital (for short ‘WACC’), which is another separate componentof the TR formula. The definition for WACC notes that the “marginalrate of corporate tax” must be taken. Thus, in the context of ‘T’, had theintention of the drafters been to compute only the notional tax and notthe actual tax liability, they would have clearly specified as they did inthe case of WACC.Our Rationale:110. Our thought process on the aforesaid plea has given rise to aconundrum – whether we should adopt the course taken in respect ofthe other issues where we lay emphasis on the view adopted by AERAand the Tribunal, or whether we should follow the principle enunciatedin Nabha Power to read the contract strictly in its terms.17111. No doubt, it is a principle of taxation that it is the actual taxwhich is paid and which has to be taken into account. This is what theAERA and the TDSAT have done ostensibly on the premise that thereshould not be any undue enrichment of the Airport Operators. However,to our mind, the more important factor is to look at what the contractsays and whether some other construction would be required to be givento the contract.112. If we turn to the express language of ‘T’ in Schedule 1 of theSSA the wordings are clear and unequivocal. The determination has tobe made of “corporate taxes on earnings pertaining to AeronauticalServices” (emphasis supplied). ‘T’ is part of a formula. No doubt itrefers to taxation, but how it would apply to the formula has to bedetermined from the definition of ‘T’ and not from how generally ‘tax’ isunderstood. These are complex formulas settled by experts and variousfactors weigh in arriving at them.17 (supra). ABCDEFGH913113. In the overall scenario, it is the TR which is crucial where‘T’ is only a component. No one is saying that a different methodologyand not the common practice has to be followed for payment of tax. It isfor the component ‘T’ to be calculated in the formula for TR that ‘T’ hasbeen defined. ‘T’ has to be computed based solely on regulatory accountsprepared by AERA for the TR formula. If the Annual Fee is thecomponent which is taken out of aeronautical services, the definition of‘T’ would have to be read completely differently.114. The focus of all stakeholders has resulted in a particularformula in with various components whereby aeronautical services arecontrolled. Non-aeronautical services are more revenue generatingaspects. In order to balance the interest of the other stakeholders withthe Airport Operators, 30 per cent of the non-aeronautical revenue issubtracted from the aeronautical revenue. In this larger philosophy, itwould be imprudent and contrary to the express terms of the contract toseek to re-define any component other than the manner in which it isspecifically mentioned. To that limited extent, Mr. Datar was right ininvoking the principle of business efficacy as that was the result intendedby the parties.115. Article 3.1.1 of the SSA mandates that Annual Fee shall notbe considered as a cost in relation to provision of Aeronautical Services.The question thus arises is that if it is so, then how can tax be computedany differently. In our view, the clause has to be read as a whole. Itforms part of a proviso, which reads as under:“3.1.1 GOI’s intention is to establish an independent airporteconomic regulatory authority (the “Economic RegulatoryAuthority”), which will be responsible for certain aspects ofregulation (including regulation of Aeronautical Charges) of certainairports in India. GOI agrees to use reasonable efforts to havethe Economic Regulatory Authority established and operating withintwo (2) years from the Effective Date. GOI further confirmsthat, subject to Applicable Law, it shall make reasonableendeavours to procure that the Economic Regulatory Authorityshall regulate and set/ re-set Aeronautical Charges, in accordancewith the broad principles set out in Schedule 1 appended hereto.Provided however, the Upfront Fee and the Annual Fee paid /payable by the JVC to AAI under the OMDA shall not be includedas part of costs for provision of Aeronautical Services and noDELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMICREGULATORY AUTHORITY OF INDIA [SANJAY KISHAN KAUL, J.] ABCDEFGH914SUPREME COURT REPORTS[2022] 11 S.C.R.pass-through would be available in relation to the same.” (emphasissupplied).116. The first part of the proviso is clear in its terms that upfrontfee and the Annual Fee paid/payable by the Airport Operators to AAIunder the OMDA shall not be included as part of costs for provision ofAeronautical Services. There is no doubt a second part to it which statesthat “no pass-through would be available in relation to the same”. It isthe latter part which is sought to be emphasised in the decision-makingprocess of the AERA. This is because if the first part is implementedthere will be an element of pass-through. However, if we were to acceptthe view of the AERA, it would be in a sense amount to nullifying thefirst part of the proviso. No construction should be given to a contractwhere the first part itself is nullified by a reading of the latter part. Thisclause is more general in its terms. Pass-through would not be permittedin normal circumstances as per the clause. However, insofar as the taxelement is concerned, there appears to be an exception because of themanner in which the ‘T’ in the formula itself has been derived. Qua theAnnual Fee, the SSA does not contemplate a subtraction from theexpenses. There is also no direct extraction from other stakeholders quathe annual fee and thus there is no pass-through. This would also beharmonious construction of the clauses of the contract so that one partof it does not do violence to the other.117. Thus, the aforesaid is the only aspect on which we are inclinedto interfere with the impugned orders and find merit in the contention ofthe Airport Operators that the Annual Fee paid by them should not bededucted from expenses pertaining to aeronautical services beforecalculating the ‘T’ element in the formula.118. We now come to remaining issues raised in the appeals filedby FIA and Lufthansa.Development Fee:119.The Development Fee (for short ‘DF’) concept does notform part of OMDA or SSA, neither did it form part of the Act initially.The cost of development of the airport overshot the estimated budgets.Vide its order dated 09.02.2009, the Central Government had permittedDIAL to collect DF at Rs. 200 per departing domestic passenger andRs. 1300 per departing international passenger, inclusive of applicabletaxes, in terms of Section 22A of the AAI Act. This was on an ad-hoc ABCDEFGH915basis for a period of 36 months with effect from 01.03.2009. The aforesaidorder mentioned two milestones upon which this approval was to bereviewed at a subsequent stage by AERA. A similar order of the CentralGovernment was made with respect to MIAL on 27.02.2009 althoughwith different amounts of DF.120. These orders were the subject of challenge in Civil AppealNos. 3611/2011, 3612/2011, 3613/2011, and 3614/2011 before this Court.It was held in Consumer Online Foundation & Ors. v. Union of India& Ors. that the order dated 09.02.2009 was ultra vires the AAI Act.18Further, it was noted that no DF could be levied or collected fromembarking passengers at major airports under Section 22A of the AAIAct unless the AERA had determined the rate of such DF. AERA videOrder No. 28/2011-12 dated 08.11.2011 issued on 14.11.2011 determinedthe DF as Rs. 200 per embarking domestic passenger and Rs. 1300 perembarking international passenger commencing from 01.12.2011 for aperiod of 18 months.121. In the case of MIAL, AERA determined the DF at Rs. 100per embarking domestic passenger and Rs. 600 per embarkinginternational passenger with effect from 01.01.2013 until April 2021.The TDSAT vide the impugned orders dated 20.03.2020 and 16.07.2020chose not to interfere with either of the AERA orders.122. The DF has been subsequently discontinued by DIAL witheffect from 30.04.2016. Thus, the dispute pertains to only that particularwindow.123. The said Act initially did not contain any reference to thisaspect. However, in terms of Act 27 of 2019 vide S.O. No.3445(E)dated 19.09.2019, sub-section (1A) was incorporated in Section 13 ofthe said Act with effect from 26.09.2019. Section 13 of the said Actdeals with the functions of authority and falls in Chapter III, i.e. “Powersand Functions of the Authority”. The inserted sub-section (1A) reads asunder:“[(1A) Notwithstanding anything contained in sub-sections (1) and(2), the Authority shall not determine the tariff or tariff structuresor the amount of development fees in respect of an airport or partthereof, if such tariff or tariff structures or the amount of18 (2011) 5 SCC 360.DELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMICREGULATORY AUTHORITY OF INDIA [SANJAY KISHAN KAUL, J.] ABCDEFGH916SUPREME COURT REPORTS[2022] 11 S.C.R.development fees has been incorporated in the bidding document,which is the basis for award of operatorship of that airport:Provided that the Authority shall be consulted in advance regardingthe tariff, tariff structures or the amount of development feeswhich is proposed to be incorporated in the said bidding documentand such tariff, tariff structures or the amount of developmentfees shall be notified in the Official Gazette.]”124. Mr. Buddy Ranganathan learned counsel for FIA, however,did not press this issue insofar as imposition of DF is concerned per se.Cargo and Ground Handling Services:125. FIA was aggrieved by the TDSAT’s treatment of Cargo andGround Handling Services as non-aeronautical in nature. It wascontended that the AERA in the DIAL Tariff Order had treated suchrevenue as aeronautical for the period from 01.04.2009 to 24.11.2009 asDIAL was performing these services by itself. For the remainder of theFirst Control Period, this was held to be non-aeronautical. The TDSATvide impugned order dated 23.04.2018 had held that these revenues wouldbe non-aeronautical in nature irrespective of whether such services wereperformed by DIAL itself or through its delegates. In the case of MIAL,the TDSAT vide order dated 15.11.2018 noted that the treatment ofCargo and Ground Handling Services had already been conclusivelydecided in its previous order dated 23.04.2018 and was not an issue thatsurvived for determination.126. FIA submitted that Cargo and Ground Handling Serviceswere contemplated to be aeronautical in nature, and referred to thedefinition under Section 2(a) of the said Act and Schedules 5 & 6 ofOMDA. FIA also sought to rely on the Parliamentary Standing CommitteeReport on the AERA Bill 2007 to fortify its stand.127. However, on the pointed query of the Court as to whetherthese contentions had been urged by the FIA before the TDSAT in thesame manner, learned counsel for FIA candidly confessed that they werenot. This particular line of argument had never been advanced beforethe AERA and the appellate authority and that closes this issue.Levy of User Development Fee (UDF):128. AERA in the MIAL and DIAL Tariff Orders had allowedUDF to be charged on embarking as well as disembarking passengers.This finding was affirmed by the TDSAT in its order dated 23.04.2018. ABCDEFGH917Lufthansa in the present appeal contended that such levy was notcontemplated in the said Act. The AERA and the TDSAT had erroneouslytraced the source of this levy to Section 13(1)(b) of the said Act, whichreferred only to AERA’s power to determine the DF. This was to bedifferentiated from the levy of the UDF, which was a separate fee. Theplea was that the DF having been determined under the aforesaidprovision, there could not be subsequent determination of another UDF.129. We may say that not a very serious argument was made inthis behalf other than the aspect of two different nomenclatures. Weagree with AERA’s reasoning that the expression ‘UDF’ is mentioned inthe Aircraft Rules, 1937, and is different from Section 13(1)(b) of thesaid Act which contemplates ‘DF’ only. Thus, the AERA had beenmandated to determine the UDF. Nothing more is really required to bediscussed on these aspects.Conduct of AERA:130. One of the last-minute arguments sought to be advanced byLufthansa was on the aspect of AERA failing to discharge its duty asper the mandate of the said Act by not determining the tariff in areasonable and efficient manner. The grievance can be summarized asunder:a. AERA had simply adopted DIAL’s submissions and proposalsin its tariff order without considering objections by stakeholders.b. AERA granted meetings to DIAL on 13.12.2011, 29.12.2011,30.12.2011 and 02.01.2012. However, other stakeholders weregranted only one meeting. This was not consonant with the dueconsultation process envisaged in Section 13(4) of the said Act.c. Figures presented by DIAL were not independently verified byAERA due to paucity of time. There were also no independentstudies carried out by AERA and instead, things were left to betrued-up as a matter of course.131. We are unable to appreciate this contention for the reasonthat all stakeholders were heard. The orders of the AERA and the TDSATare more than exhaustive on all aspects and the authorities had endeavoredto perform their roles. We may say that the very aspect which we havenot appreciated in favour of the Airport Operators, i.e., their attempt tosomehow reduce their liability equally applies to Lufthansa whichDELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMICREGULATORY AUTHORITY OF INDIA [SANJAY KISHAN KAUL, J.] ABCDEFGH918SUPREME COURT REPORTS[2022] 11 S.C.R.somehow wants to reduce their outflow on different aspects. AERAhad recognized that their determination was in the nature of an initialpioneering flight based on the material available, and fine-tuning couldalways be done in the future. We do appreciate that the aviation industryis competitive in nature but that holds both for the airline and the AirportOperators. It is a delicate balancing role which has to be performed bythe authorities. That role having been performed, the general grievancesreally do not survive.Project Cost:132. An aspect seriously debated before us was with respect toProject Cost, which kept on escalating from the original estimate. TheProject Cost is taken as the base figure for determination of the RegulatoryAsset Base. Thus, an increase in the Project Cost leads to a higher tariffdetermination by AERA. FIA has raised the issue of Project Cost, whichis a ground for challenge in CA Nos.10902/2018 and 6658-6659/2019i.e., appeals qua the challenge to the DIAL and MIAL Tariff Orders, aswell as in CA Nos.3675/2020 and 145/2021, i.e., appeals qua the challengeon DF and fixation of Project Cost. The findings sought to be assailedby FIA are primarily as contained in the TDSAT order dated 20.03.2020at paragraph 88 in respect of the first set of appeals and the TDSATorder dated 23.04.2018 passed in DIAL’s appeal.133. On analysis of the AERA order dated 08.11.2011, whatemerges is that the issue of DF was dealt with on account of the increasein costs, the proposal of DIAL to levy DF was accepted to bridge thegap. The upward revision of Project Cost was accepted by AERA to beRs.12,502.66 crores. AERA relied upon the reports of KPMG andEngineers India Limited (EIL) and expressed its inability to explore thematter further on grounds of the auditors themselves having not beenable to further identify losses in monetary terms. Thus, it is this figure ofRs.12,502.66 crore, which has been used for determination of aeronauticaltariff at IGIA.134. FIA contended that even if the Project Cost of Rs.8,975crore (projected by DIAL to MOCA as reflected in the CentralGovernment’s letter dated 09.02.2009) is accepted as proper and final,its further increase to Rs.12,503 crore should have been discarded byAERA. A 43 per cent increase had been claimed by DIAL in the 4thyear of operation of the IGIA. Reliance was placed on the DevelopmentFee order dated 08.11.2011 to comment that while the Project Cost in ABCDEFGH919that order had been accepted as Rs.12,502.86 crores only as a tentativeestimate, the same figure has been accepted almost as final in theimpugned tariff order.135. AERA sought to rebut these contentions before the TDSAT.It was contended that the avowed task of determining the Project Costcould only be looked at from a narrow hole – i.e. in order to examine theincurred cost as per available records and verify whether it relates tothe approved and essential parts of the Airport. This in turn had to betaken on the basis of accounts bearing certificates granted or approvedby the Chartered Accountant. It was vehemently argued that such costcannot be re-examined on the yardstick of efficient cost but has to betaken as the incurred cost only, as appearing in the duly certified booksof accounts. The aforesaid plea of the AERA found favour with theTDSAT and was accepted.136. If we turn to the TDSAT’s order dated 20.03.2020, this aspecthas been dealt with in paras 22, 23 & 24. It was held that the AERAcould not have had much latitude in dealing with rising Project Costs asit had little or no scope to do so within its limited statutory role under thesaid Act. The TDSAT found that AERA had referred to the reports ofthe two experts and had consulted with all stakeholders, who had beengiven sufficient opportunity to make their submissions. This would meetthe requirement of Section 13(4) of the said Act which requires AERAto ensure transparency in exercising its powers and discharging itsfunctions. The only caveat put by the TDSAT was that the exclusionsmandated by AERA from DIAL’s project cost to the tune of Rs. 354.14crores should be allowed. The TDSAT’s order dated 16.07.2020 withrespect to MIAL’s Project Cost held that no new grounds had beenraised and the issue stood settled in DIAL’s case.137. Both FIA and Lufthansa argued on the same lines before usby contending that while determining the figures of Project Cost, AERAselectively chose comments from the auditors reports (KPMG and EIL)relating to specific cost adjustments, but failed to take cognizance ofDIAL’s overall failure of cost control and monitoring. AERA had failedto recognize that a higher project cost would lead to a higher regulatedasset base and which would consequently lead to higher tariff. Thus,AERA had performed the role of merely approving the books of accountson the basis of cost incurred.DELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMICREGULATORY AUTHORITY OF INDIA [SANJAY KISHAN KAUL, J.] ABCDEFGH920SUPREME COURT REPORTS[2022] 11 S.C.R.138. Qua the CSIA, Project Cost increased from Rs. 6130 croresin July 2006 to Rs. 12,380 in 2011. It was contended by FIA that this gapwas sought to be met by levying DF. Thus, DF amounted to 3.9 times ofpromoter’s equity contribution and the end users are ultimately bearingthe burden. MIAL had acted contrary to Article 13.1 of OMDA, whichexplicitly provided that the airport operator was solely responsible forfinancing of the airport. Reliance was also placed on audit reportsindicating that escalation in the project cost was attributable to the casualapproach of MIAL towards management and monitoring of the project.139. In the aforesaid context, arguments were also advanced onthe aspect of role of AERA as a regulator in determining Project Cost.Section 14(1)(a) and (b) of the said Act provide for engaging professionalsor AERA’s own staff to enquire and assess the performance of serviceproviders, which included the Airport Operators. No independent studywas conducted by AERA even though the same is a statutory obligationunder the said Act. Escalated Project Costs had been allowed withoutconducting thorough prudence checks as mandated under the aforesaidprovisions. Similarly, it was urged that the TDSAT failed to appreciatethat AERA had derelicted from its duty as a regulator, and privateconcessionaires were being rewarded at the cost of the common man.140. On the other hand, the Airport Operators contended thatSection 13(1)(a)(i) of the said Act deals with capital expenditure whileSection 13(1)(a)(iii) deals with the cost of improving efficiency. Thesaid provisions read as under:“13 Functions of Authority. —(1) The Authority shall perform the following functions in respectof major airports, namely:—(a) to determine the tariff for the aeronautical services taking intoconsideration—(i) the capital expenditure incurred and timely investment inimprovement of airport facilities;xxxx xxxxxxxxxxxxxxxx(iii) the cost for improving efficiency;”The cost for improving efficiency as used in sub-clause (iii) wassubmitted to be very different from efficient cost in respect of capitalexpenditure and, thus, elements of (iii) could be read into (i). There is no ABCDEFGH921test of efficiency laid out in the said Act in terms of capital expenditureand thus AERA only had a limited role qua determining the Project Costs.141. It was sought to be emphasized that this was a pioneeringeffort and the Commonwealth Games 2010 were round the corner. Theinitial timeline of 48 months to develop the IGIA was reduced to 37months due to pending litigation. This in return played a critical role incost escalation and into what has been flagged by auditors as processissues.Our Rationale:142. On examination of rival submissions, we believe that whathas to be kept in mind is that we are the third tier of scrutiny. Theconcerned authority and the appellate authority were also dealing with ascenario which was the introduction of public-private partnershipmechanism for operation of airports for the first time. Any pioneeringeffort thus require multiple creases to be ironed out. There was no pastexperience in that sense. Everyone puts their best foot forward. It wouldthus not be fair to examine these aspects under the microscope.143. Different aspects towards determination of Project Cost havebeen examined by AERA, and AERA has carried out its responsibilitywhile granting a little leeway for the pioneering effort in an untestedfield in the country. The auditors too had not been able to quantify oridentify the losses due to increased Project Cost in monetary terms.How can one expect AERA to take on such a task in light of the functionsascribed to it under the said Act.144. There is also substance in the contention that the whole projectwas running against strict timelines on account of litigations relating toprojects, a common phenomenon in our country. This was more so in thecontext of the Commonwealth Games being around the corner.Additionally, there is also some substance in what is contended by theAirport Operators that the terminology in Sections 13(1)(a)(i) and13(1)(a)(iii) of the said Act cannot be read into each other. The mannerof reading of the provision by FIA is to combine sub-para (iii) with sub-para (i) while determining tariff.145. In our view, the provisions have been separately madebecause the concept of Section 13(1)(a)(i) requires AERA to determinethe tariff by including capital expenditure incurred and timely investmentin improvement of airport facilities. One of the other distinct factors toDELHI INTERNATIONAL AIRPORT LTD. v. AIRPORT ECONOMICREGULATORY AUTHORITY OF INDIA [SANJAY KISHAN KAUL, J.] ABCDEFGH922SUPREME COURT REPORTS[2022] 11 S.C.R.be considered is the cost of improving efficiency as under Section13(1)(a)(iii). These aspects have no doubt been examined by the authorityconcerned, although not necessarily in the manner FIA seeks them to.Does it really lie with us to superimpose a view which has not beenfound feasible in the given conspectus of the large number of reportsand documents before the AERA as well as the TDSAT. We thus rejectthe contention.146. In the end, we do believe that the matter having traversedfrom the AERA to the appellate authority to this Court, the parties andthe counsel may have become fully aware of the nitty-gritties of thevarious matters and thus sought to embark on canvassing the case almostas we are some kind of first authority on these aspects. We are unwillingto do so. We have analysed all the contentions in a broad perspective,keeping in mind that the authority has performed its task and so has theappellate authority. Despite the course of action followed by counsel,we have still analysed the matter in such depth as was required to bedone by this Court in rejecting all aspects in these appeals and cross-appeals except one aspect which arose from terminology and itsdefinition.Conclusion:147. In view of the aforesaid, all appeals are dismissed, except onthe issue relating to corporate tax pertaining to aeronautical services,where for the reasons recorded aforesaid we have accepted thecontention on behalf of the Airport Operators that the Annual Fee paidby them should not be deducted from expenses pertaining to aeronauticalservices before calculating the ‘T’ element in the formula. It is only tothat extent that the impugned order stands modified.148. We are not imposing costs in this matter as both sides havetaken time to argue the matter before us and there is no point in burdeningthem with costs.149. The appeals stand allowed limited to the aforesaid extentwhile on all other aspects the appeals and cross-appeals are dismissed.Bibhuti Bhushan BoseAppeals disposed of.(Assisted by : Mahendra Yadav, LCRA)