Canadian court quashes seizure of AAI dues, limits action against Air India

Decisions are part of a judgment delivered by Superior Court of Quebec on pleas by India against separate garnishment orders which led to seizure of over $30 million

In a partial relief to the Centre in its legal battle against the shareholders of Devas Multimedia, a court in Canada has set aside an order of seizure of Airports Authority of India’s (AAI’s) dues held by the International Air Transport Association (IATA).

The court, however, dismissed Air India’s (AI’s) appeal against a similar seizure order but limited its scope to 50 per cent of the amount.

The decisions are part of a judgment delivered by Justice Michel Pinsonnault of the Superior Court of Quebec. They are on pleas by India against separate garnishment orders that led to the seizure of over $30 million. The judgment was delivered on Saturday.

The seized amount includes collections of ticket sales of AI and route navigation charges collected by AAI.

Three shareholders of Devas, who won a $111-million arbitration award against the government, had moved the Superior Court in Quebec for enforcement. On their applications, the garnishment orders were issued on November 24 and December 31.

In its appeal, AI argued that it is in no way indebted to Devas Multimedia shareholders and yet substantial assets of the airline have been seized through an ex-parte process.
 

“The funds seized with IATA represent about 65 per cent to 75 per cent of its revenues. This effectively requires Air India to carry out flights all over the world with barely 25 per cent to 35 per cent of its usual passenger sales revenues. 

The continued operation of the airline is therefore put in jeopardy pursuant to these ex-parte proceedings against it,” the airline argued. AAI demanded dismissal of the seizure order as it enjoys presumption of state immunity provided in the State Immunity Act.

While the court dismissed AI’s application of the quashing of seizure order, it limited the scope of seizure to 50 per cent of its dues held with IATA. The revision was made after considering the drastic impact of a seizure action on AI’s operations.

The court agreed with AAI’s view that state immunity invoked by it must be decided on merits before authorising any order of seizure.

“The court had no reason to proceed on an ex-parte basis against AAI by accepting to rely exclusively on the allegations and representations of plaintiffs (Devas shareholders) in the absence and without the knowledge of AAI,” Justice Pinsonnault said.

“We will study the judgment and decide the next steps,” a senior government official said on Sunday.

Shareholders of Devas termed the judgment as a huge win as they can continue to seize Air India’s funds held at IATA. They said that the court has supported their claim to secure enforcement of arbitral awards in Canada.

They pointed out that the court observed that actions of the Indian government leave very little doubt that it would be next to impossible to execute the treaty awards within India. This, they said, leaves Devas shareholders with the sole alternative to execute it on assets located outside that country.