Bombay High Court stays ₹1.5 crore costs imposed on Airports Authority of India by trial court

The Bombay High Court recently stayed the ₹1.5 crore costs imposed by a city civil court on the Airports Authority of India (AAI) for unnecessarily involving Irish aircraft lessor Aer Lingus in a 27-year-old commercial dispute over unpaid airport charges [Airport Authority of India v Aer Lingus Ltd].A Division Bench of Chief Justice Alok Aradhe and Justice MS Karnik granted interim relief to AAI.“Having given our anxious consideration to the observations of the Trial Court in para 48, prima facie, in our opinion, imposing exemplary costs and litigation costs on the appellant appears to be unjustified...Merely because defendant No.1 (Aer Lingus) is made a party to the suit and a claim is made against them is not sufficient to impose exemplary costs," the Court said in its order. .The Court was hearing an appeal filed by AAI against the judgment dated January 3, 2025, passed by the Bombay City Civil Court, which had not only rejected AAI’s claims against Aer Lingus but also held the suit to be 'malicious and vexatious'. The civil court had directed AAI to pay Aer Lingus ₹1 crore as exemplary costs and ₹50 lakh as litigation expenses under the Commercial Courts Act, and to refund ₹96.25 lakh towards bank guarantee charges incurred over 27 years—each with 9% annual interest..The case originated from a 1997 commercial suit filed by AAI seeking recovery of ₹2.71 crore in unpaid parking, landing, and navigation charges for the period between January 1995 and March 1996, during which two aircraft—VT-EWH and VT-EWI—leased from Aer Lingus were being operated by East West Airlines. AAI impleaded Aer Lingus along with East West Travel & Trade Links Ltd., East West Airlines, its liquidator, and two aircraft.Aer Lingus, however, consistently maintained that it had no operational role in India and had leased the aircraft to East West Airlines for a five-year term beginning in 1992. The lease was later terminated for non-payment and for operating without insurance coverage. The Irish company argued that as a lessor, it had no privity of contract with AAI and was not liable for airport dues incurred by the lessee..The trial Court, in its January order, had accepted this argument and strongly criticized AAI’s conduct, citing admissions made during the cross-examination of AAI’s witness. It found that AAI officials were fully aware of East West Airlines' liquidation and the prior High Court ruling which held Aer Lingus as not liable. Despite this, AAI pursued the suit, allegedly in collusion with the airline, knowing they could not recover dues from the bankrupt lessee.The trial Court also relied on a Comptroller and Auditor General (CAG) report which noted that AAI had accepted only ₹1.75 lakh as a security deposit from East West Airlines, instead of the prescribed ₹17.5 crore, allowing it to operate in violation of rules..While staying the ₹1.5 crore cost (₹1 crore exemplary and ₹50 lakh litigation expense), the High Court noted that AAI may have impleaded Aer Lingus only out of caution to protect its interests since Aer Lingus was the owner of the aircraft and there was “hardly any material to arrive at the figure of ₹50 lakhs” claimed by Aer Lingus. The bench held that the prima facie finding of collusion between AAI and the airline appeared misconceived.However, the High Court declined to stay the clause of the decree which directed cancellation of the 1996 bank guarantee furnished by Aer Lingus pursuant to earlier litigation. The Court directed the Prothonotary and Senior Master of the High Court to take steps for cancellation of the bank guarantee expeditiously.Separately, the Court also stayed clause 3 of the trial court’s order—which directed AAI to refund ₹96.25 lakh in bank guarantee charges—subject to AAI depositing the said amount in court within eight weeks. Aer Lingus was permitted to seek withdrawal of the amount after it is deposited..Advocate Aseem Naphade along with advocates Radha H Bhandari and S D Shetty instructed by M V Kini & Co appeared for Airports Authority of India.Advocate Archana Deshmukh along with advocates Krishan Singhania, Srishti Singhania, Anjana Devi and Aayush Shah instructed by Singhania & Co. represented Aer Lingus Ltd..[Read Order]