SC weighs in on flight tickets cancelled during lockdown

SC weighs in on flight tickets cancelled during lockdown

The Supreme Court (SC) announced its decision in four connected writ petitions in a public interest litigation. It had to deal with the issue of providing full refunds for tickets of flights cancelled in wake of the lockdown and subsequent restrictions imposed by the government to contain covid-19.

The Ministry of Civil Aviation had issued an advisory to all stakeholders in the civil aviation sector via an office memorandum, dated 16 April 2020, stating that if passengers had booked tickets during the lockdown to travel in this period, the payments for the tickets shall be refunded in full, without levying any cancellation charge, for both domestic and international air travel.

It was further stated that the refund shall be made within a period of three weeks from the date of request of cancellation, and the Directorate General of Civil Aviation (DGCA) should monitor its compliance.

The petitioners contended that, instead of refunding the amounts, the airlines were providing a credit note with a validity period of one year, which was in violation of the Civil Aviation Requirements of May 2008 (CAR), issued by the DGCA. They reasoned that the decision to claim a re- fund or obtain a credit note should be with the passenger and not a default practice of the airline. In addition, the memorandum did not deal with tickets booked before the lockdown was imposed.

It was further contended by one of the petitioners, the Travel Agents Federation of India, that the memorandum was silent on travel agents who had booked tickets for passengers even before receipt of the fare amount from the passengers, and if the refunds were not made to them, they would suffer undue hardship.

However, as per the existing regulatory mechanism, the travel agent involved in the purchase of any ticket on behalf of any passenger remains only an intermediary, leaving the principal contract between the airline and the passenger.

With the intervention of the Supreme Court, the dispute was finally settled for refund of domestic and international travel tickets as under:

(1) For bookings made during the lock- down period (from 25 March to 24 May 2020) – the airline shall refund the full amount collected, without any cancellation charges, within a period of three weeks from the date of cancellation. If a booking is done through a travel agent, a refund shall be given by the airline immediately to the agent, who will transfer the amount to the passenger;

(2) For bookings at any period of time, but for travel after 24 May 2020, a refund of fares to the passenger is to be governed by provisions of the CAR;

(3) In all other cases, the airline is to refund the amount to the passenger within 15 days from 1 October 2020. If, on account of financial distress, any airline is unable to do so, they shall provide a credit note equal to the amount of the fare collected, in the name of the passenger, and the same may be utilized on any route on or before 31 March 2021. If the tickets are booked through a travel agent, the passenger can:

(i) Utilize the credit note on any route of their choice only through the travel agent who has booked the ticket;

(ii) Transfer the credit note to any person including the travel agent through whom the ticket was booked; and

(iii) If the credit note is not utilizedby 31 March 2021, the airline shall refund the amount to the travel agent, who will transfer the amount to the passenger.

If passengers transfer the credit note to travel agents, the same can be utilized by them for third-party use. If passengers transfer the credit note to a third person, the same can be utilized only through the agent who has booked the ticket at the first instance, thus protecting the interest of the travel agent. The concerned airline shall honour such transfers by devising a mechanism to facilitate the same; and

(4) In all cases where the credit note is issued, there shall be an incentive to compensate the passenger from the date of cancellation up to 30 June 2020, in which event the credit note shall be enhanced by 0.5% of the amount for ev- ery month, or part thereof, between the date of cancellation and 30 June 2020. After that, the value of the credit note shall be enhanced by 0.75% of the face value per month up to 31 March 2021.

The DGCA was directed to ensure strict compliance of the above mentioned directions by issuing necessary instructions to all concerned. Thus, the Supreme Court took into consideration the difficulties of the passengers, travel agents and airlines, and resolved their disputes.

The dispute digest is compiled by Numen Law Offices, a multi-disciplinary law firm based in New Delhi and Mumbai. The authors can be contacted at Readers should not act on the basis of this information without seeking professional legal advice.