A court in Canada has ordered seizure of amounts collected by the International Air Transport Association (IATA) on behalf of Air India and the Airport Authority of India (AAI).
Separate orders were passed on November 24 and December 21 on pleas by shareholders of Devas Multimedia Private Limited, who have filed multiple petitions to enforce arbitration awards against the Indian government.
Around $6.8 million belonging to the Airport Authority of India has been seized as a consequence of the order. The exact amount due to Air India that is held up due to the order is not known.
The development comes weeks before the Tata group takeover of the national airline after a successful bid last year. The group has been granted indemnity from past legal claims in its shareholder agreement with the government.
Three shareholders of Devas who won a $111 million arbitration award against the government moved the Superior Court in Quebec for enforcement and on their applications the garnishment orders were issued.
“We will pursue the Indian government in courts worldwide to ensure the debts owed to Devas are satisfied. Our action in Canada has resulted in millions of dollars garnished by Devas shareholders, and represents the first fruits of a globally-focused effort to be paid,” said Matthew D McGill, partner at Gibson, Dunn & Crutcher and lead counsel for several shareholders.
“Devas shareholders have been clear from the start: Despite state-sponsored investigations intended to intimidate and scare-off the victims of India’s unlawful acts, we will continue to pursue the Indian government’s assets to satisfy the awards, while remaining open to an amicable settlement,” McGill added.
Emailed queries to the Ministry of Civil Aviation did not yield any response. “On the intervention of Air India’s counsel, the commercial division of the Quebec Superior Court accepted to designate a judge on an urgent basis to hear the applications of quash and seizures brought by Air India, AAI and IATA. The hearing will take place on January 4, a day on which court would normally be closed due to the holidays,” a senior government official said.
IATA assists airlines and air navigation service providers in collecting monies due from ticket sales and route navigation charges. Its billing and settlement plan (BSP) mechanism acts as a payment gateway for travel agents around the world. Remittances for ticket sales are made to an airline through the BSP. Similarly, it collects route navigation charges from foreign airlines operating to India and for flights overflying the country and passes them to the Airport Authority of India.
In FY 19-20, AAI earned Rs 3592 crore from airport navigational services (route navigation and terminal navigational and landing charges) and it accounted for nearly 28 per cent of its revenue.
Reacting to the order, Air India, on December 22, removed all its ticket inventory from global distribution systems (GDS). Travel agents use GDS platforms like Amadeus or Travelport for issuing tickets. The platforms are linked to IATA BSP which gets a record of all the sales carried out through this mechanism.
Over half of Air India sales come from GDS platforms and the sudden non-availability of its tickets created unease amongst travel agents.
“This is a nightmare during the festive season when most flights are full arriving into India and passengers need to connect to domestic destinations – often requiring rescheduling due to delays,” said Abbas Moiz, national general secretary of Travel Agents Federation of India (TAFI) in a press release on Monday.
Attempts to contact senior management have proved futile and sales persons have been stalling and attributing the problem to a technical issue without any official announcement, TAFI said in its Monday release. The Travel Agents Association of India too wrote to the airline seeking clarity about the disruption.
Last Wednesday Air India again put up its ticket inventory on GDS platforms but is allowing ticket issuance only with approved credit cards. Agents also received text messages that any ticket issued against cash will be canceled by Air India.
Payments through credit card are paid to the airline by bank or the credit card company. Though IATA keeps record of credit card sales it is not involved in the collection and remittance process.
Other than credit cards, agents have the option to do a bank transfer to IATA for ticket sales. These are known as cash sales and agents get up to seven days to make payments to IATA under this process.
