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Synopsis

The Petitioner by way of the present writ petition being filed in public interest, seeks to bring to the attention of this Honble Court, the fraudulent, deceptive and corrupt acts by the authorities representing the Government of India, whereby there has been a grant of largesse of national asset in favour of a foreign airline (Etihad Airways) resulting in undue enrichment and enormous pecuniary advantage to such foreign airline at the cost and expense of the public, national and domestic airlines as well as airports. In order to facilitate the execution of this colossal fraud on the Indian exchequer, the foreign airline (Etihad Airways) has agreed to guarantee personal loans as well as pay a premium towards its foreign investment in a domestic airlines - Jet Airways. Such grant of largesse is in the form of an unprecedented increase of capacity entitlements through execution of Bilateral/ MoU in favour of Abu Dhabi under existing Air Service Agreement between Government of India and United Arab Emirates. The actions of the authorities from the execution of the Bilateral to the unprecedented haste in order to assist the realisation of wrongful gains by the facilitator are writ large with acts of collusion and abuse of position.

The Petitioner challenges such arbitrary, irrational and malafide act of grant of largesse in the form of Bilateral and by way of the present petition seeks an investigation under the supervision of this

Honble Court into the matters of national and public interest, namely execution of bilateral, enrichment of foreign party at the cost of the Indian exchequer, diversion of benefits to facilitator as well as the antecedents of the facilitator; in order for the determination of complicity of those involved and ultimately the prosecution of those public servants who abused their position of authority as being guilty for offences under applicable laws, including the offence of criminal misconduct in terms of Section 13(1)(d) of the Prevention of Corruption Act, 1988

The issues arise in the context of air service access and capacity entitlements that are typically defined at country level, and India has exchanged air access and capacity rights through execution of Bilaterals/ MoUs with more than 100 countries. However, as a departure from accepted practice, United Arab Emirates (UAE) seems to have been accorded a special status as India has executed multiple Bilaterals/ MoUs under a single Air Service Agreement for exchange of access and capacity rights with each emirate of UAE i.e. Dubai, Sharjah, Ras Al Khaimah and Abu Dhabi. It is noteworthy, that Emirates Airlines (state airline of Dubai) is being called the national airline of India, as it operates more flights and carries more passengers to and from India than Air India, our national carrier. The fact that more than 70% of the passengers from India carried by Emirates Airlines travel to points beyond Dubai

on the Emirate network has significantly contributed to Dubais development as an International hub.

In the aforesaid background, on 24.04.2013 a Memorandum of Understanding was executed between the Governments of India and UAE granting an unprecedented, arbitrary, irrational and

unsustainable manifold increase of upto 50,000 seats per week (i.e. additional 36,670 seats per week over and above existing 13,330 seats per week) in capacity entitlement to Abu Dhabi (an emirate of UAE) for the benefit of its state owned airline Etihad Airways. Additionally third country code sharing and domestic code sharing was allowed. It is the Petitioners case that this increase of capacity entitlement together with code sharing permission was made with the underlying intention to grossly and unjustly enrich the foreign airline for collateral purposes and in the process encourage a foreign investment into a private domestic airline Jet Airways, that acted as a facilitator. The grant of such largesse is otherwise malafide, illegal and contrary to national and public interest as it results in creation of hurdles to the recovery and health of the national airlines as well as directly impedes the growth of domestic airports into international hubs.

It is the Petitioners understanding that the benefit to Etihad Airways from increase in capacity entitlements/ access, together with third country and domestic code sharing through the execution of the

Bilateral/ MoU, can be reasonably estimated at about Rs. 9,524 crores per annum. Abu Dhabi sought through the Bilateral/ MoU dated 24.04.2013 to overnight emulate the success of Dubais emergence as an international hub on the strength of its Emirates airlines and the gradual increase in capacity entitlements via Bilaterals executed in its favour over the years. Whereas, as a

consequence of the very same Bilateral/ MoU dated 24.04.2013 a reasonable estimate of losses that would be incurred by the Indian national carrier Air India would be about Rs. 2,555 crores per annum and the losses estimated by other domestic airlines would be about Rs. 773 crores per annum. It is shocking that on one hand the Government of India undertakes to infuse Rs. 30,000 crores into Air India for its revival, and on the other hand executes with deliberate, malafide intent and collusion Bilaterals which would bring to naught and waste such infusion of public funds. The losses to major Indian airports such as Delhi and Mumbai, which may lose their status as hubs with reduced passenger flows are otherwise unquantifiable, especially in view of a clear hub strategy of Air India with Delhi as a chosen hub. Consequently, the currently profit making Airports Authority of India (AAI) will also face immense hardship as they are dependent on revenue share from the Delhi and Mumbai Airports not only for further growth but also for their day to day operations. Thus, while the only beneficiaries of the Bilateral/ MoU are Etihad Airways and the facilitator - Jet Airways, the same is clearly at the

tremendous cost and expense of the Indian exchequer. This is a mega fraud in thousands of crores each year.

The Office of the Comptroller Auditor General (CAG) had in its report titled Performance Audit Report on Civil Aviation in India of August 2011 has in Chapter 7 Conclusion and Recommendations therein, come to a conclusion (at Pg 115 therein) that The current dismal state of affairs of the merged entity Air India is a combination of a multiplicity of factors such as .. o a liberalised policy on bilateral entitlements for

international air travel introduced by GoI without affording adequate time to AIL/ IAL to set their house in order and gear up for a highly competitive environment, & subsequent rights being liberally approved to foreign carriers without any quid pro quo to Indian Carriers. Also in its examination of the roles of the Government/ Ministry of Civil Aviation, the CAG report concludes (at Pg. 119 therein) that: o Freeze on bilateral entitlements to countries/airlines predominantly utilising 6th freedom traffic Most of the liberalised entitlements for bilateral rights granted to foreign airlines (especially in Dubai, Bahrain, Qatar and other Gulf/ SE Asian countries) has been utilised for 6th freedom traffic and not for genuine traffic to the other country. AI and other private Indian airlines are handicapped by the lack of

adequate hub facilities and other factors (e.g. lack of agreement for change in gauge at Dubai Airport) from competing effectively with other predominantly 6th freedom carriers (e.g. Emirates). Till India has its own effective and efficient hubs and AI/ other Indian carriers are able to exploit them effectively (say within 3 to 5 years), entitlements for airlines/ countries predominantly dependent on 6th freedom traffic (notably Dubai, Bahrain and other Gulf countries in the first instance) should be strictly frozen by MoCA; if possible, subject to diplomatic and other considerations. Options for rollback of excess entitlement granted beyond genuine traffic requirements may also be explored by MoCA. Thus, the Bilateral/ MoU signed on 24.04.2013 was contrary to the findings and recommendations of the CAG in August, 2011 especially when the CAG recommended not only freezing of such bilaterals with Gulf countries but also reassessment and rollback of concluded agreements. Further, while the recommendations of CAG are pending examination before the Public Accounts Committee (PAC) of the Parliament, the Respondents for extraneous reasons decided not to wait for the final report of the PAC and have instead proceeded with the fresh bilateral agreement with UAE, in complete disregard of either the recommendations of the CAG or the authority and consideration by the PAC.

The Parliaments Standing Committee on Transport, Tourism and Culture (hereinafter PSC) comprising of thirty (30)

parliamentarian from the Rajya Sabha and the Lok Sabha, in its Report No. 191 dated 3rd May, 2013 has made scathing observations on the execution of the MoU/ Bilateral with Abu Dhabi, granting unprecedented capacity entitlements while detailing that the same was not in the interest of the nation and the public. The PSC has inter alia reported that:

81. The Committee understands that the Government has increased the bilateral weekly seats between India and Abu Dhabi to 36,670 seats a week from 13,330 at present. The Committee also notes that the announcement has come in the backdrop of Ethihad paying huge premium of 32% over the market price to pick up just 245 equity in Jet Airways.

82.

The increase in bilateral capacity put the premium that The Committee is aware that

Ethihad paid in perspective.

bilateral negotiations between two countries for increasing airline seats take place only when the existing allotments become insufficient. The Committee understands that

concerned domestic Airlines have not exhausted those allotted seats. In such a situation, the Committee is surprised to see this increase in the bilateral to 36,670 seats a week by the Government. Prima facie this move appears to facilitate one

airline to strike a deal with a foreign Airline for its stake sale at a huge premium. The Committee feels that the huge premium could be a backhanded way of obtaining access to the huge Civil Aviation market in India.

83.

The increase in the bilateral is questionable especially in

view of the fact that the Indian carries are not in a position to use increased seat capacity due to fleet constraint. In such a situation, the foreign airline may try to catch up passenger traffic headed to destinations in North America, Europe, Africa and Middle East resulting in huge losses to Air India and various airports of India.

. 88. The Committee feels that creating hubs needs time and

also a home carrier with a critical size to be able to sustain the hub. Air India has just started to create a hub in Delhi as its chosen hub, which needs to be encouraged/ supported in its endeavour. The development of events will, no doubt, have adverse impact on Air Indias efforts in this regard.

89.

The Committee finds that Air India is already struggling to

make a turn around as Indian passengers prefer to travel via the foreign hubs. Rs. 30,000/- crores of tax payers money is

being pumped into it by the Government to keep it afloat and signs of certain turnaround is already visible.

90.

. If the Ministry supports the development of more and

more hubs outside India, thousands of crores of taxpayers money will go waste, not to mention the investment of thousands of crores made by private enterprise along with the Government in developing world class airports in Delhi and other major metros.

91.

The Committee, therefore, calls upon the Ministry to

reconsider the Agreement for bilateral with the UAE, which may be kept frozen at the current level of 13,330 seats and any bilateral may be opened only after the capacity of the Indian carriers is increased. . 93. The Committee recommends that the bilateral

arrangement with the Abu Dhabi may be reconsidered by the Government to protect our national carrier and the airports of India.

It is noteworthy that under the Rules of Procedure and Conduct of Business in the Council of States (Rajya Sabha) the report of a Standing Committee shall have persuasive value and shall be treated as considered advice given by the Committee.

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The saga of corruption, collusion and fraud was not just limited to the execution of the Bilateral/ MoU on 24.04.2013. In fact, a mere perusal of the dates leading upto the signing of the Bilaterals demonstrates how the active corruption and collusion was undertaken. The Inter-Ministerial Group (IMG) meeting on

18.04.2013 on the negotiation mandate for the execution of the Bilateral clearly evidences one of the underlying objectives of the Bilateral being to enable Etihad Airways to invest into Jet Airways. The IMG however approved a negotiating mandate for enhancement of total entitlements upto a maximum of 40,000 seats per week i.e. additional entitlement of 26,670 seats per week together with existing 13,330 seats per week and not 40,000 as demanded by Etihad Airways. Additionally, the IMG rejected Etihad Airways demand for third country and domestic code share. Following this, a meeting was held on 22.04.2013 of a group of Ministers under direction of the Prime Minister consisting of Ministers of Finance, Commerce, External Affairs and Civil Aviation, which approved a mandate different from that given by the IMG. Eithad Airways demands for additional 40,000 seats per week together with third country and domestic code sharing were approved contrary to national and public interest. The fact is that the negotiations, meetings and discussions of the bilateral/ MoU through which the Government of India granted a largesse of increase of capacity entitlement upto 50,000 seats per

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week from existing 13,330 seats per week in favour of Etihad Airways, was undertaken in the same place i.e. Abu Dhabi and at the same time i.e. 23-24.04.2013 as the negotiations between Etihad Airways to invest and purchase 24% of the shareholding of Jet Airways (India) Ltd., at an enormous premium by way of preferential allotment. It is a matter of record that just in less than 48 hours after the meeting of the group of Ministers which acceded to the unrealistic demands by the Etihad Airways, the Bilateral was signed in Abu Dhabi i.e. on the 24th of April 2013 and simultaneously the announcement of the investment by Etihad Airways into Jet Airways was made, i.e. on the same date, at the same time and at the same place.

Thus, not only did the foreign airlines Etihad Airways get a largesse in the form of unprecedented increase in capacity entitlement for itself i.e. upto 50,000 seats per week, as well as third country and domestic code sharing but by investing into the Indian carrier and entering into inter-se arrangements evidencing effective control over Jet Airways, it managed to get surrogate control and reap the rewards from the Jet Airways share of the Indian Bilateral, thereby effectively getting approximately 90,000 seats per week to and from India in contrast to the genuine entitlement of merely 13,300 seats.

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While, the Government of India has as an afterthought sought to explain the twin fold transactions of Bilateral and foreign investment into Jet Airways as a coincidence and being otherwise unrelated. However, media reports suggest that the twin fold transactions were intrinsically related to the extent that if the Bilateral had not been agreed exactly the way Etihad wanted, the MoU between Etihad and Jet Airways for equity investment at huge premium may not have materialised. Further Media reports also suggest that the Indian delegation for Bilateral talks with UAE arrived at Abu Dhabi on 21.04.2013 even before the final approval of the Government of India on the negotiating mandate which came through a meeting of four Cabinet Ministers on 22.04.2013, thereby indicating that the approval itself was a mere formality and was otherwise pre-determined.

The Petitioner has in his possession and submits for the consideration of this Honble Court, documents belying the explanation of coincidence and demonstrating the abuse of position by the public servants in the Government of India to obtain for Etihad Airways the valuable and pecuniary advantage of unprecedented capacity entitlements as well as secure wrongful gains through receipt of premium by way of foreign investment to private individuals, including the mysterious owners of Jet Airways, without any public interest. Such persons/ public servants are liable to be prosecuted for corruption under the laws of India.

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In terms of the applicable law in India, foreign investment into Jet Airways required conformance of sector specific guidelines such that the existent investment ought to be that of an NRI i.e. a Non Resident Indian. However, the company Jet Airways (India) Limited was controlled and managed through a tax haven company - M/s Tail Winds Limited, which is incorporated in the Isle of Man. The Indian Government has been ignoring the fact that Tail Winds is an Overseas Corporate Body i.e. OCB, which since 16.09.2003 stood de-recognised and permissions for investment made by it were withdrawn under applicable law. While, various regulatory authorities have been giving opportunity and advice time and again for Tail Winds to come clean with its ownership, details of funding, etc and regularise itself, the matter has dragged on over the last ten (10) years. It is a matter of fact, that not only has the Government of India over the past many years been unable to ascertain the beneficial ownership of the controlling company Tail Winds, rather the nature and source of funding has remained a mystery. One, Mr. Naresh Goyal, a Non-Resident Indian has been claiming to exercise authority over M/s Tail Winds Limited under alleged nomination/ ownership. However, if Mr. Goyal desired any foreign investment into Jet Airways, he was required by law to at the first instance regularise the ownership by purchase of Jet shares owned by Tail Wind into his own name i.e. convert the ownership by a derecognized OCB into that of an NRI.

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The Petitioner has documentary evidence to support that HSBC Private Bank (Suisse) SA, in May 2013 had provided loans of an unspecific amount to the Promoter Shareholder - Mr. Naresh Goyal based on purported pledge of shares by Tail Winds for purchase of securities, foreign exchange transactions etc., through a Third Party Pledge Agreement. Thereafter, HSBC Securities and Capital Markets Private Limited being the Trading Member with SEBI and Indian Stock Exchanges assisted the purchase by Mr. Naresh Goyal of Jet Airways shares held by Tail Winds. Jet Airways had applied and taken permission for such transfer/ purchase in the month of January/ February, 2013 itself. It is now, through revelations from the inter-se agreements between Jet Airways and Etihad, it is learnt that it was in fact Etihad Airways, which provided the guarantee to HSBC for its lending of US $ 300 million to Mr. Goyal to enable him to commence his attempts to regularize the ownership of Jet Airways. Thus, evidently Etihad Airways had bankrolled Mr. Goyal in early 2013 itself to facilitate the grant of the largesse of unprecedented increase in capacity entitlements by the Government of India. The collusion is again writ large from the fact that not only previously, Jet Airways had earlier put down a joint position paper for CIIs National Committee on Civil Aviation opposing even the existing bilateral requirement of 13,330 seats with Etihad, rather had limited its own requirements in the sector to about 6000 seats per week. However, consequent to the finance secured

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through Etihads guarantees, Mr. Goyal through Jet Airways demanded an increase of 40,000 seats per weeks to the Government of India.

In this context, it becomes essential to investigate and understand as to who is the real owner of Tail Winds Limited? A fact that even till date, while considering the proposal for foreign investment, the Department of Industrial Policy & Promotion (i.e. DIPP), Ministry of Commerce & Industry, made a preliminary observation on 29/30.07.2013 that the details of shareholding pattern of OCB (M/s Tailwinds) had not been submitted. It is equally

astonishing that while, Mr. Naresh Goyal declares himself to be an Indian national albeit a Non-Resident Indian for tax purposes (also to be eligible for investment as an NRI under the applicable FDI policy); the same Mr. Naresh Goyal in the regulatory filings of M/s Tail Winds Limited for years including 1997 has been declared to be an Arab National.

The requirement to investigate and lift the veil becomes paramount given the fact that in the past, when Mr. Goyal had sought to participate in a proposed disinvestment/ privatisation of the national airlines Air India, the Government of India had sought to enquire into his antecedents as well as source of funding. At that stage there were serious observations by the Intelligence Bureau (IB) to the effect that Gulf Airways and Kuwait Airways (erstwhile

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shareholders of M/s Tail Winds) were holding 20% shares in a benami capacity.

Additionally, in the context of national security, it is also pertinent to note that approval of the Ministry of Defence was never sought in the entire process of consideration and examination of the foreign investment proposal by Etihad Airways to invest into Jet Airways. This failure is irrational and arbitrary given the fact that several of domestic airports like Pune, Bagdogra, Chandigarh, Srinagar, Agra, Goa, Jodhpur, etc are defence airfields, where Jet Airways may be flying. Whereas, in terms of Government of India policy, foreign airlines require prior approval from the Ministry of Defence if they seek to use any defence airfield. Also, in the past, security concerns in respect of investment by foreign companies as well as their employment of foreign nationals in the civil aviation sector have been found to be sensitive and have been rejected on many occasions due to security concerns. The Petitioner believes that by allowing an airline of the Gulf/ Middle East to invest in a domestic airline, the Government of India is being a mute spectator to a surrogate entry of foreign airline on defence airfields, overlooking essential security concerns.

The Petitioner wrote to the Prime Minister of India on 29th May, 2013 stating his concerns of the collusion and requesting his intervention in relation to the illegalities. The same resulted in a

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public outcry and concerns were voiced in the media in respect of roles, responsibilities and functioning of those holding the highest offices in the Government of India in respect of grant of the final approval on 22.04.2013 for the negotiating mandate of the Bilateral. The Prime Ministers Office was pleased to issue a Press Release on 02.07.2013 describing inter alia the Prime Ministers version of the inter-ministerial discussions on the subject of bilateral. The Press Release states that As far as the Bilateral Air Services Agreement was concerned, the Cabinet Note was asked to be kept in abeyance till responses on letters with complaints on the agreement and on security concerns were received while drawing reference to the PMO Note dated 13.06.2013 where under Para 2(ii) it is noted that Subsequently, in the interest of wider consultations and greater transparency, the Prime Minister directed that the matter be brought to the Cabinet for a decision before operationalizing any agreements that may be arrived at by the Government with the other party. This fact may be incorporated in the Note and the Note may be brought to the Cabinet and not to CCEA.

Therefore, in a departure from accepted practice, where in the past only the approval of the Ministry of Civil Aviation was required to operationalize any Bilateral/ MoU, the office of the Prime Minister sought a wider consultative process through the cabinet prior to operationalize the malafide, arbitrary and irrational Bilateral which was contrary to the findings of the CAG, recommendations of the

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Parliamentary Standing Committee and otherwise intended to unjustly enrich a foreign airline and provide wrongful gains to a private domestic airline, at the cost of national as well as public interests. It is therefore, imperative that an independent investigation under supervision of this Honble Court is directed and brought to its logical end.

The Petitioner further seeks to bring to the attention of this Honble Court the haste sequence and of events shown demonstrating by the the

unprecedented

urgency

various

departments and organs of the Government of India to give effect to the foreign investment proposal made by Etihad Airways to invest in equity of Jet Airways. Initially, the Foreign Investment Promotion Board (i.e. FIPB) in its meeting on 14.06.2013 had expressed serious reservations in respect of the non-compliance of the investment proposal to the issues of substantial ownership and effective control being continued to be held by Indian nationals. The FIPB had emphasized on the requirement to carefully determine both the issues. It is uncharacteristic for the Foreign Investment Promotion Board (i.e. FIPB) to meet twice in a month, however the FIPB met on 6 July, 2013 and then again on 29 July, 2013. As widely reported in the media the validity of Jet-Etihad deal was to expire on 31st July, 2013. Furthermore, this deal was listed as an item to be considered in the meeting much before the promoter and investor filed their compliance (which was done only on 25 July, 2013).

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Normally, the compliance of the entities involved ought to have been examined and only then the meeting fixed. However, for reasons best known to the Government they adopted a reverse strategy thereby pushing the appraising agencies to appraise the deal in undue haste leading to serious non-application of mind.

The Petitioner has been writing to the Prime Minister with reference to the functioning of authorities, whose recent actions have demonstrated the extent of collusion between the authorities and the private beneficiaries. The authorities adopted a new found consultative approach, where instead of rejecting the non-compliant foreign investment application, they entered into dialogue to assist Etihad Airways/ Jet Airways to provide multiple versions and revisions of the inter-se agreements, while giving suggestions to wean out issues by clever drafting. It is an abuse of authority actionable under applicable criminal jurisprudence, when certain departments raise objections on transfer of effective control on a plain reading of the commercial cooperation agreements, instead of rejecting the application per se, the parties are advised to execute such agreements at a later date in order to avoid scrutiny and rejection. The media reports suggest that the FIPB had on 29.07.2013 recommended the granting of a conditional approval to the foreign investment by Etihad Airways in Jet Airways. The final approving authority in the present case (consequent to extent of investment involved) is the Cabinet Committee on Economic Affairs

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i.e. the CCEA. The collusion and criminal misconduct is further evident from the fact that the authorities including the CCEA, Competition Commission of India (CCI), SEBI are failing to consider the Jet-Etihad transaction under an amended definition of control which was notified on 22.08.2013. In the present petition, the Petitioner is relying upon the sequence of events of consideration by the public authorities of the FDI investment by Etihad in Jet Airways, only for the purpose of establishing that the same warrant an investigation under the aegis of this Honble Court, as it is apparent that the transaction was intended for realization of wrongful gains to the facilitator that assisted in the illegal execution of the bilateral. The Petitioner in the present petition is not challenging the grant of FDI approval by the CCEA to the investment by Etihad into Jet Airways. The Petitioner specifically reserves its right to do so separately.

On 04.09.2013, media reports state that the MoU/ Bilateral dated 24.04.2013 has received the post-facto approval of the Union Cabinet in a meeting chaired by the Prime Minister. Even the democratic framework under the Constitution of India does not permit corrupt, collusive, illegal diversion of public funds from transfer of national assets to be regularised through a vote by Cabinet ministers.

Therefore, the recent events, including unprecedented haste, lack of transparency, arbitrariness and bias in the consideration of

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the Jet-Etihad foreign investment clearly evidences the apparent collusion and abuse of position by public servants, to subserve the illegal grant of largesse (Bilateral) and unjust enrichment of foreign airline Etihad Airways as facilitated by Tail Winds/ Naresh Goyal through realisation of wrongful gains by guarantee of loan by Etihad as well as receipt of premium for share purchase under foreign investment; while ignoring the recommendations of the CAG, Parliamentary Standing Committee, and while acting in concert to the detriment of national airlines as well as domestic airports. The recent events further demonstrate a lack of will and failure by the head of the Government to exercise authority for taking remedial and corrective actions. In view of the above, it is in the interest of justice, nation, public and security that this Honble Court intervenes and prohibits the Respondents from undertaking any further steps for operationalization of the Bilateral and directs investigation under the supervision of this Honble Court, and consequential prosecution of those guilty in accordance with due process of law.