Refund of tickets for cancelled flights: Legal angle

Reading time: 8-10 minutes.

On 20th April 2020, a plea was filed in the Hon’ble Supreme Court of India. It requested the Apex Court to direct the Centre and the Directorate General of Civil Aviation (DGCA) to order all the airlines, with domestic and international operations, to refund in full the amount of the tickets cancelled due to COVID-19.

This plea filed by Pravasi Legal Cell also challenges the April 16 office memorandum of the Ministry of Civil Aviation. This was because the memorandum covered the refund of the tickets booked during the first lockdown period. It overlooked a huge chunk of passengers who had booked their tickets before the imposition of flight ban due to the lockdown.

The memorandum directed the airlines that those passengers who had booked their tickets during the first lockdown to travel within the time frame of lockdown were eligible for a refund. They must be refunded in full without charging any cancellation fee and within 3 weeks from the date of cancellation.

The petition further stated that the airlines have provided the passengers with a mandatory “credit shell” that is valid for a year. This means that the airlines have not refunded the full amount back to the passengers. Instead, they provided them with credit shell which is an account made with the airlines where they have transferred the amount under your name and email id. This amount is non-transferable and is stuck with the airline. It cannot be put to any other use. The passengers would have to use it within one year to book flights with the same airline to utilize this amount. In this manner, the airlines have given away the refunds without actually parting with anything.

Significance of this development

Normally it is not within the domain nor is it the prerogative of the Government of India to interfere when a dispute arises between private entities and its citizens. It is the Judiciary that is empowered to interfere and has the requisite jurisdiction to resolve the dispute between the two. But what seems to be of utmost significance in the present situation is the government’s proactive stepped in.

The official memorandum by the Ministry of Civil Aviation is no solution as it has drawbacks of its own. But it must be acknowledged that the government tried to take a positive step to protect the economic interests of its citizens. By giving a directive to the airlines asking them to refund the money of the passengers in full is a unique step as it will spell economic dooms for the airlines. And yet the government decided to choose the wellbeing of its citizens over the economic downfall.

It is yet another thing altogether that the airlines have disregarded the government directive and found a way around it. Despite being told to refund the tickets, the airlines have refused to do the same. As a result, troubled customers flooded social media and the customer support of the airlines with various queries. To curb this and to work within the government’s directive, the airlines are offering options like credit notes or rescheduling of the dates.

What are the airlines offering?

Air India: Air India has announced to offer “One Free Change” to its passengers to postpone any domestic or international bookings made by the respective passenger. This offer would be valid for all the existing bookings with travel date till 30th April and for new bookings made till the end of March.

IndiGo: Being India’s largest airline, IndiGo has reported a 500% increase in the number of queries received through emails and calls in the past few weeks. IndiGo has allowed its customers to change the date & time of travel or even cancel the bookings at no extra costs. The airline has promised that a quick refund process would be initiated for all ticket cancellations.

SpiceJet: SpiceJet has waived of fee for the alteration of date and time of travel but on some conditions. In case of cancellation of domestic flights, there are no special provisions. But in case of cancellation of international bookings, a foreign national coming to India can get a refund for travel between March 13 and April 15.

Vistara: For tickets booked on or before 31st March for travel on/before 30th April, Vistara is allowing the passengers to reschedule their travel till 31st December of this year. It would not be charging any rescheduling fee to alter the time or date of travel but the customers would have to pay for the difference in prices.

GoAir: The rescheduling of flights by passengers is allowed without any fee. For new and existing bookings for travel between 19 March 2020 and 3 May 2020, the passengers can, without any charges, reschedule their travel plans.

Air Asia: This airline has not asked for charges or fare differences from passengers who have booked tickets on 23rd March or before, for travel between 23rd March and 31st May.

It is clear that despite the government’s directive, the airlines are not refunding passengers’ money. Instead, they are giving them the choice of rescheduling cancellation, or receiving of refund amount through credit shell account. This money does not reach the passengers and they will be forced to use it for travel within the given time. If they do not, they will end up losing that amount.

The petition questions this action of the airlines that aims to bypass the government’s directive. As for the memorandum, it covers only a section of passengers while leaving the others outside its ambit. It has directed the airlines to refund in full the bookings made during the first lockdown. This directive leaves out a huge number of passengers as it does not cover those who booked tickets before the lockdown or during the second lockdown. The memorandum is thus “ambiguous and without logic” in the petition.

Aviation law regarding the issue

The plea also raises a point stating that the office memorandum had directed the airlines to issue full refunds. But they have only provided for a credit shell. This is in direct violation of the refund rules of the DGCA. It violates the Requirement of May 2008 issued by the DGCA.

The 2008 order states that the “option of holding the refund amount in credit shell by the airlines shall be the prerogative of the passenger and not a default practice of the airline”. It also stated that the airlines must refund within 7 days from the date of cancellation in case the mode of payment is a credit card. If the mode of payment is cash, then the refund must be done immediately. The airlines must complete their refund process within 30 days in case of bookings through travel agents/portals.

On perusal of the 2008 order of the DGCA, it cannot be understood how the airlines can provide credit shells to passengers without violating the law, and this is what the current plea is also trying to raise.

Constitutional issues

One of the Constitutional issues raised by this plea is that of the violation of Right to Equality enshrined in Article 14 of the Indian Constitution. The petition contends that the question of anyone booking a ticket during the first lockdown does not arise because scheduled passenger flights were cancelled. Thus, the office memorandum of the Ministry of Civil Aviation is ambiguous and devoid of any logic.

By directing the airlines to refund only those bookings that were made during the lockdown, the memorandum stands in a clear violation of the fundamental rights guaranteed by the Indian Constitution. It discriminates against those passengers who had booked their travel tickets before the lockdown was announced or during the second lockdown. It has created a class within a class of passengers and this is impermissible. This act of the Ministry of Civil Aviation, thus, amounts to treating equals unequally.

Probable future of the case

This petition requests the Apex Court to declare the act of the airlines of not refunding the flight tickets as being violative of the Civil Aviation Requirement 2008 issued by the DGCA.

In the present scenario, the Supreme Court can pass a direction to the Ministry of Civil Aviation to direct the airlines for issuing refunds instead of empty credit shell promises. It can call out the office memorandum for being violative of Article 14 and give directions to refund all the passengers whose flights were cancelled due to COVID-19. This would satisfy the passengers as they would finally get their lost money. Though, this would hurt the airline sector and will hamper the Indian economy in the long run as well. This is also one of the reasons why the government has been quiet on the credit shell issue.

The airlines can take a defence of Force Majeure. They have already been asking the government to invoke it. A civil aviation agreement generally involves the Airports Authority of India and the Airline Company. Such an agreement contains the force majeure clause which allows the airline operator to suspend its obligation to perform when it is prevented from performing its obligation by an event of force majeure. This clause can be invoked by the airlines provided the following conditions are satisfied:

  • There are material and adverse effects on the performance of an obligation,
  • The situation is beyond the reasonable control of the airline,
  • The airline could not have prevented or overcome the situation with the exercise of Good Industry Practice or reasonable skill and care,
  • The situation has not resulted from the negligence or misconduct of the airline or its failure to perform its obligations.

A force majeure clause in a contract generally includes an exhaustive list of events such as:

  • If any airport becomes unusable for flight operations by the airline;
  • War, invasion, armed conflict or act of foreign enemy;
  • Revolution, riot, insurrection or other civil commotion, an act of terrorism or sabotage;
  • Nuclear explosion, radioactive or chemical contamination or ionizing radiation;
  • Strikes, working to rule, go-slows and/or lockouts which are in each case widespread, nationwide or political excluding strikes by the employees or personnel of the airline;
  • Any effect of the natural elements, including epidemic or plague, lighting, fire, earthquake, heavy rains, tidal wave, flood, storm, cyclone, typhoon or tornado;
  • Explosion

The government can invoke the force majeure clause to protect the airlines as COVID-19 falls under the epidemic or plague condition. In such a case, the airlines would become free of their obligations. Then, they won’t be liable to refund the cancellation amount to the passengers.

One act can go against the welfare of the people and another would go against the airlines. It would be interesting to see how the events unfold.

Conclusion

In these unprecedented times, no one has any clue about what to do. The governments of various nations across the globe are facing such a situation for the first time. India as a nation is trying too.

What is to be noted regarding the ticket cancellation and refunds case, that if judgment comes in favour of the airlines even then the passengers would not be entirely at loss. The airlines have provided the passengers with credit shells. Even if they won’t have the money in their hands, they would be able to utilize it. As a saving grace for the passengers, they would have a period of one year to use those credit shells in buying another ticket for another time. Plus, the airlines would also not go into heavy losses, keeping everyone happy.

But the judiciary does not take sides, and neither does it pass judgment based on who gets more piece of the pie. The Apex Court looks at the inconvenience suffered by both the parties and then tries to balance it according to the word of law. This petition might become a trendsetter and act as a precedent for future outbreaks if any.

Author: G. Brahmakrit Rao from Symbiosis Law School, Hyderabad.

Editor: Shalu Bhati  from Campus Law Centre, Faculty of Law, University of Delhi.

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