INDIA. In a shock development the Bombay High Court yesterday ordered Mumbai International Airport Ltd (MIAL) to call a fresh tender for the duty free contract at Chhatrapati Shivaji International Airport within eight weeks.
The news follows a protracted legal action by Flemingo International into what it claimed was an unfair exclusion from last year’s Mumbai duty free tender.
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In a 184-page document, the Court has set aside the duty free retail contract awarded by MIAL last November to DFS Group (after delays to the planned 1 January start-up, DFS began operating in March). The court concluded that the contract awarded (to DFS Venture Singapore and subsequently ascribed to DFS India Pvt) should be “set aside”.
MIAL was directed to issue another public tender “as expeditiously as possible, in any case within a period of eight weeks from today”. The ruling said that although, by its order, the granting of the contract in favour of DFS was cancelled, MIAL was at liberty to allow the retailer to continue running the duty free operation on the same terms and conditions in the interim.
DFS Group Vice President Global Communications & Government Relations Sharon Weiner told The Moodie Report: “We are evaluating the document,” without adding further comment.
A source at MIAL told us that the company was still awaiting receipt of the full judgement – it initially had only received a two-line ruling – but said that it will surely appeal to the Supreme Court. “We hope to get the eight-week timeline either extended or annulled,” he added.
MIAL had initially awarded the contract to a partnership between Aldeasa of Spain and India Tourism Development Corp (ITDC). But in a dramatic turn of events in late November, that partnership’s failure to agree final terms or to start trading resulted in second bidder DFS Group being awarded the concession.
But Flemingo’s ongoing legal case continued to cast a cloud over the concession. Yesterday’s ruling, while almost certain to be challenged by MIAL, throws the situation into flux. It certainly has significant repercussions for the way the private sector operates in the Indian aviation environment – and other industries.
Local media Daily News & Analysis, which first broke the story, said the ruling was “a landmark judgment with far-reaching consequences for private entities”. It reported that the Bombay High Court had ruled that MIAL, though registered as a private company, performs a public function and is therefore a ‘state’ as defined by the Constitution.
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The Bombay High Court has ordered Mumbai International Airport Ltd (MIAL) to call a fresh tender for the duty free contract at Chhatrapati Shivaji International Airport |
“Even though it (MIAL) is registered under the Companies Act, its functions in operating, managing and developing the Mumbai International Airport cannot be characterised as “˜purely private’,” Justice DK Deshmukh and Justice ND Deshpande held.
Airports Authority of India (AAI) had leased out the international airport to MIAL for 30 years. The court held that MIAL performs statutory functions and exercises statutory powers under the AAI Act, 1994. “It (MIAL) is not a simple lessee of property,” the judgment stated.
MIAL had issued a public announcement in October 2006 inviting expressions of interest (EOIs) for the duty-free retail contract. One of the nine EOIs received was from Flemingo but it failed to make the final short-list.
The High Court said: “Total absence of any reasons in any formal document or evaluation, admitted non-communication of any reasons to the petitioner (Flemingo) and contradictory untenable stands taken in different affidavits by MIAL clearly show that it has acted in an arbitrary manner in short-listing entities.”
Click here for reaction from Flemingo Duty Free Shop Director Atul Ahuja.
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MORE STORIES ON MUMBAI
DFS Group begins Mumbai retail roll-out – 10/03/08
Flemingo court case over Mumbai contract set for January hearing and early 2008 decision – 12/12/07
Delight for DFS as it wins Mumbai duty free contract in wake of impasse with ITDC/Aldeasa – 26/11/07
