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

In some relief to the Government of India in its legal battle against shareholders of Devas Multimedia, a court in Canada has set aside an order of seizure of Airport Authority of India’s dues held by the International Air Transport Association. The court has however dismissed Air India’s appeal against a similar seizure order but has limited its scope to 50 per cent of amount.

The decisions are part of a judgment delivered by Justice Michel Pinsonnault of Superior Court of Quebec on pleas by India against separate garnishment orders which led to 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 which 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 whole at a particularly delicate time given global interruptions to the airline industry due to the Covid-19 pandemic;” the airline argued.

AAI demanded dismissal of the seizure order as it enjoys presumption of state immunity provided in the State Immunity Act including in respect of execution against its property.

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 seizure action on Air India’s operations.

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

“The court had no reason to proceed on an ex parte basis against AAI, and 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 award 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 leaving Devas shareholders with the sole realistic alternative but to execute the same on assets located outside that country.

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