Infrastructure companies under the RTI Act

Deepto Roy

The Central Information Commission (“the CIC”) in a recent order – that of Sanjay Ramesh Shirodkar v.Mumbai International Airport Limited, Complaint No. CIC/ MA/C/ 2008/000195/SS (“the MIAL Order”), has brought Mumbai International Airport Limited (“MIAL”), which operates the Mumbai airport within the ambit of the Right to Information Act, 2005 (“the RTI Act”). MIAL has therefore become one of the first private entities to be brought within the jurisdiction of the RTI Act (there is a 2007 order of the CIC in the case of Anil Hebb v. Airport Authority of India, order dated January 17, 2007, holding that the Delhi International Airport Limited (“DIAL”) is also subject to the RTI Act). The MIAL Order however, is so widely worded that almost every infrastructure project can now be considered a “Public Authority” for the purpose of the RTI Act.

The facts of the case are not really relevant for the final decision of the CIC but it seems that Sanjay Shirodkar had made a complaint about the cost of Bisleri bottled water being sold on the MIAL premises. When MIAL refused to provide information under the RTI Act, the case was filed.

Before going into the discussions in the MIAL Order, it may be useful to quote Section 2(h)(d) of the RTI Act on which the CIC has relied. Section 2(h) defines “public authority” as

“… any authority or body or institution of self- government established or constituted—

…

(d) by notification issued or order made by the appropriate Government, and includes any

(i) body owned, controlled or substantially financed;

(ii) ….

directly or indirectly by funds provided by the appropriate government.”

The only question before the CIC was whether MIAL is a “public authority” under the RTI Act. The CIC broke this down further as follows:

(A) Whether MIAL was established or constituted by an order by the appropriate government?

(B) Whether MIAL is a body controlled by the appropriate government?

(C) Whether MIAL is a body substantially financed either directly or indirectly by funds provided by the appropriate government?

The CIC arrived at the conclusion that all three tests were satisfied by MIAL.

In relation to the query in (A), the CIC determined that the decision to privatise the airports at Delhi and Mumbai was taken as a policy decision by the Government of India and that MIAL was established as a result of such a decision. The CIC notes:

“The Government order is implied in the sense that the privatization of the Mumbai and Delhi airports were to take place through the JV route and the bidders were under an obligation to form MIAL if they were to get the privatization tender to execute the project. Hence MIAL is a public Authority under Clause (d) of Section 2(h) of the RTI Act.”

Clearly, the CIC misinterprets the fairly clear language of Section 2(h)(d). The wording of the Section refers to entities established by Government order or notification, not to an entity that was set up to comply with tender conditions. The policy decision to privatise and allow private bidders to perform the contract does not in any manner amount to establishing an entity by a Government order or notification.

With respect to the question of whether MIAL is controlled by the Government, the CIC quotes several provisions of the Operations, Management and Development Agreement (“the OMDA”) entered into by MIAL with the Government in relation to the development of the airport to try and substantiate that MIAL has several obligations, for example developing a Master Plan in relation to the project, which has to be approved by the Government and then developing the airport in accordance with the Master Plan. The CIC also mentions the twenty-six per cent held by the Airports Authority of India (“the AAI”) in MIAL which allows the AAI to block special resolutions.

To get past the fact that there is really no significant “control” that the Government exercises over MIAL (apart from contractual obligations which are common for all concession based projects), the CIC makes a distinction between “control” as specified in Clause 2(h)(d)(i) and “deep and pervasive control” which is a requirement for an entity to be considered as “State” for the purpose of Article 12 of theConstitution of India. The CIC concludes that “the word ‘control’ is not qualified by expressions such as overall, effective, direct, indirect’ etc. and that it will be patently wrong to read such conditions into the definitive clause of Public Authority.”

The CIC uses an interesting example of two concentric circles with a common centre. The common centre they define as “absolute control”, the inner concentric circle as “deep and pervasive control” and the outer circle as “control”. Control for the purpose of Section 2(h)(i) of the RTI Act, according to CIC is the area between the inner and the outer circle. In effect the CIC goes on to dilute the already extended definition of State under Article 12 and attempt to include in its jurisdiction an even wider range of entities over which the government exercises some semblance of control. What the CIC does not do is set out minimum parameters of what amounts to control and leaves open the possibility that any form of control, however tenuous, will result in a company satisfying the test of “control” and being considered a public authority.

The MIAL order also ignores the well-established principle of ejusdem generis, that is, that a word must be known by the company it keeps. Since control is used along with “owned” and “substantially financed”, it is obvious that the reference to “control” is of substantial control and not just any form of control.

With respect to substantial financing, the CIC adopts even more forced reasoning. Much is made of the twenty-six per cent equity held by AAI, without considering that AAI is not actually expected to provide any finances. All additional equity investment is required to be brought in by MIAL (with AAI having no obligation to make further investments). A substantial amount also came from debt that was arranged by MIAL.

The CIC also uses examples like stamp duty remission, and grant of land at concessional rates to establish “substantial financing”. By this logic, any infrastructure project, or indeed industrial project, which benefits from stamp duty and tax concessions, would be substantially financed by the Government.

Following the CIC order, every private company developing public infrastructure or which has been awarded a project under a concession agreement would have to comply with the provisions of the RTI Act. The objectives of the RTI Act are to promote transparency and accountability in the working of public authorities, not regulate private entities.

The key to India’s ever growing public infrastructure crisis is to ensure private participation. Increasing compliance obligations in a regulatory environment that is anyway considered inconsistent and arbitrary, would further disincentivise private parties from participating in infrastructure projects (The Karnataka and Bombay High Courts have already held that the Mumbai and Bangalore airports are subject to writ jurisdiction under Article 226 of the Constitution of India. The Madhya Pradesh High Courthas come to a similar conclusion in relation to Lanco Amarkantak Power Private Limited, which operates a power project).

To expect private infrastructure developers to retain efficiency, innovation, and flexibility (which was the reason projects were privatised in the first place) and also operate under all the obligations and compliances that public authorities are expected to operate under, is completely unjustified and is bound to be a failure.

It is nobody’s case that there should be no regulation of a private entity. However, the Companies Act, 1956 already has a differentiated regime for disclosures required from a private company, a public company, and a listed company. Further, all infrastructure developers are regulated entities, whether regulated by contract or by regulatory authorities. Concession Agreements have extensive provisions in relation to documents or information that is required to be submitted by the private developer on a regular basis. This information is anyway accessible under the RTI Act. To impose a regime that applies strictly to government and government owned entities to private companies goes against the basic principles of a public-private partnership, that is the public and private sectors should have differentiated responsibilities and obligations, with each being responsible for what it is best at doing.

[First published in http://www.mylaw.net, 13 June 2011]