Cinema Multiplexes as Non‑Aeronautical Activities under the AAI Act: Commentary on PVR INOX Ltd v. Airports Authority of India

1. Introduction

The Madras High Court’s decision in PVR INOX Ltd v. Airports Authority of India & Ors (W.P. Nos.22968 & 23060 of 2025, judgment dated 09.12.2025, per M. Dhandapani J.) addresses a novel and commercially critical question: whether an airport operator like the Airports Authority of India (AAI) can permit – and later prohibit – operation of a cinema multiplex located in a multi-level car parking complex (MLCP) at an airport, on the ground that such activity is not a “permissible” function under the Airports Authority of India Act, 1994 (AAI Act).

The case arises from the establishment and operation of a 5‑screen PVR multiplex in the “Aerohub” MLCP complex at Chennai International Airport, developed under a Public–Private Partnership (PPP) between AAI (1st respondent) and Meenambakkam Realty Pvt Ltd (MRPL, 2nd respondent). MRPL, the concessionaire, in turn granted a sub‑licence to PVR INOX to operate the multiplex. After years of active facilitation and approvals by AAI, a sudden direction was issued to close the cinema, citing Section 12 of the AAI Act. This was followed by MRPL’s termination of the Development Agreement and takeover of the MLCP by AAI, throwing the sub‑licensee’s business into jeopardy.

The Court had to grapple with a complex blend of public law, statutory interpretation, PPP contract structure, sub‑licensing, promissory estoppel, and legitimate expectation. It framed, among others, these central issues:

Is the MLCP/Aerohub area an “airport” under Section 2(b) of the AAI Act, or merely “airport premises” under Section 28‑A?
Does Section 12 of the AAI Act prohibit operation of a cinema multiplex on airport land?
What is the fate of a sub‑licence (PVR INOX) when the principal Development Agreement (AAI–MRPL) is terminated?
Can PVR INOX invoke promissory estoppel or legitimate expectation directly against AAI, despite no privity of contract?
What are the limits of AAI’s discretion to allow or disallow non‑aeronautical commercial activities under the concession and the AAI Act?

The judgment is significant for all stakeholders in airport PPPs, non‑aeronautical revenue streams, and sub‑licensees operating inside or around airports. It also lays down a structured approach to the interface between statutory powers under the AAI Act and contractual discretion in PPP concession agreements.

2. Summary of the Judgment

2.1. Factual and Procedural Background (In Brief)

AAI issued an RFP/NIT for development of an MLCP with integrated commercial infrastructure at Chennai Airport on a DBOM basis, explicitly including a retail and cinema multiplex component.
MRPL was the successful bidder, and a Development Agreement (20.06.2018) was executed. It allowed MRPL to design, build, operate and maintain the MLCP with commercial areas and to grant sub‑licences, subject to AAI’s approval, for up to 15 years, co‑terminous with the Agreement.
AAI:
- Approved architectural plans showing a cinema multiplex;
- Applied for and obtained environmental clearance for “cinema multiplex” as part of MLCP;
- Formally wrote to the Commissioner of Police (20.07.2021) seeking a location NOC for a 5‑screen cinema at the MLCP;
- Through its Independent Engineer, approved the draft sub‑licence between MRPL and PVR.
MRPL then executed a sub‑licence deed (15.11.2022) with PVR INOX for a 13.5‑year term (co‑terminous with the Development Agreement), followed by grant of cinema licence under the Tamil Nadu Cinemas (Regulation) Rules. PVR commenced operations in February 2023.
On 21.07.2023, AAI suddenly wrote to MRPL directing immediate closure of the cinema hall, stating that “running of cinema hall is not permissible under the AAI Act.”
MRPL invoked arbitration under the Development Agreement and secured interim “status quo” from the Delhi High Court, later continued by the Arbitral Tribunal under Section 17 of the Arbitration and Conciliation Act.
Subsequently, MRPL served notice (28.02.2025) and terminated the Development Agreement (31.03.2025) under contractual clauses, citing AAI’s breaches. AAI elected to take over all project facilities (MLCP and Aerohub) under Article 42 of the Agreement.
MRPL informed PVR (15.05.2025) that AAI would take over the MLCP from 30.05.2025 and that PVR’s sub‑licence issues would henceforth be “handled directly by AAI”.
The Arbitral Tribunal vacated the interim order protecting the cinema (10.06.2025). PVR approached the Madras High Court via W.P. No.21208/2025, leading to a status quo order on 16.06.2025 and a direction to AAI to decide PVR’s representation dated 29.05.2025 seeking continuation.
AAI rejected PVR’s representation by letter dated 20.06.2025, reiterating that cinema operation was impermissible under the AAI Act and that surrender provisions could not be given effect to for a cinema hall.
Aggrieved, PVR INOX (and its zonal head in a parallel petition) filed the present writ petitions challenging AAI’s letter and seeking a direction to permit continued operation of the multiplex.

2.2. Core Holdings

The Court’s conclusions can be grouped in two broad heads: statutory interpretation and contractual/privity issues.

On the AAI Act and the legality of cinema multiplex at MLCP
- The MLCP/Aerohub area, including the PVR multiplex, is not an “airport” as defined in Section 2(b) of the AAI Act (which focuses on runways, landing/take‑off areas, aircraft maintenance and passenger facilities within the restricted security zone).
- However, it falls within “airport premises” under Section 28‑A(a) (premises belonging to or leased for the airport), i.e., it is part of the broader airport estate but outside the restricted operational area.
- There is no express prohibition in Section 12 of the AAI Act against operating a cinema multiplex in airport premises. Section 12(3)(r), a residuary clause, empowers AAI to undertake “any other activity at the airports and civil enclaves in the best commercial interests of the Authority”.
- Since many other retail and commercial outlets (clothing, electronics, pharmacies, even a matrimonial agency) operate in the same complex without explicit mention in Section 12, AAI cannot single out the cinema multiplex as impermissible only because cinema is not specifically enumerated.
- Accordingly, the Court rejects AAI’s interpretation that the AAI Act itself prohibits operation of cinema halls and holds that cinema multiplexes in the MLCP/unrestricted zone are legally permissible non‑aeronautical activities under Section 12(3)(r).
On the Development Agreement, sub‑licence, and privity
- The PVR sub‑licence is co‑terminous with the Development Agreement (Article 3.1.2(h) of the Development Agreement; Article 1.31 of the sub‑licence). When MRPL terminated the Development Agreement, the sub‑licence could not survive independently against AAI.
- There is no privity of contract between PVR and AAI; PVR’s rights flow only from MRPL, not from AAI. Therefore, PVR cannot compel AAI to honour or continue the sub‑licence.
- Article 42 (Surrender Provisions) of the Development Agreement gives AAI a discretion:
  - Under Article 42.1(c), AAI may refuse to assume “contracts that, in the sole opinion of Authority, are unreasonably onerous”.
  - Article 42.2 states that AAI “at its own discretion may allow the sub‑licensees/tenants/users to continue on mutually negotiable terms and conditions.”
- The Court holds that this discretion cannot be converted into a mandatory obligation through writ proceedings; a court cannot force AAI to enter into a fresh commercial contract with PVR.
On promissory estoppel and legitimate expectation
- The Court acknowledges the doctrine of promissory estoppel as laid down in Motilal Padampat, Godfrey Philips and Manuelsons Hotels, and the doctrine of legitimate expectation as explained in Sivanandan.
- However, it holds that:
  - No clear promise or representation was made by AAI directly to PVR that it would allow the multiplex to run for the full 13.5 year term; all promises flowed through MRPL.
  - PVR’s legitimate expectation, if any, lies primarily against MRPL, its immediate contractual counter‑party, not against AAI with whom it has no privity.
  - Given the clear contractual stipulation that sub‑licences are co‑terminous and subject to AAI’s discretion under Article 42, PVR could not reasonably expect an absolute right to continue irrespective of termination.
- Hence, promissory estoppel and legitimate expectation are held inapplicable against AAI on these facts.
Remedial direction and policy dimension
- Notwithstanding its finding that AAI’s statutory interpretation is erroneous, the Court respects the contractual structure and AAI’s discretion.
- However, given the absence of any statutory bar and the importance of non‑aeronautical revenue, the Court directs AAI to place the issue before the Ministry of Civil Aviation (MoCA) for a policy decision on permitting cinema multiplexes within secured and unsecured airport zones.
- Pending this policy decision, the Court continues the status quo order, allowing PVR to operate the multiplex.
- It then structures consequences based on MoCA’s eventual decision:
  - If MoCA permits cinema multiplexes, AAI shall exercise Article 42.2 and negotiate with PVR for a sub‑licence to run the multiplex in the MLCP complex.
  - If MoCA decides against permitting cinema multiplexes, PVR is given liberty to pursue remedies against MRPL, and MRPL to proceed against AAI, as per their contracts and the Development Agreement.

In effect, the Court upholds the statutory permissibility of cinema multiplexes in airport premises, but declines to compel AAI to contract, instead requiring a central policy resolution and preserving PVR’s operations in the interim.

3. Detailed Analysis

3.1. Interpretation of “Airport” and “Airport Premises”

3.1.1. Section 2(b) AAI Act – “Airport”

Section 2(b) defines “airport” as:

“a landing and taking off area for aircrafts, usually with runways and aircraft maintenance and passenger facilities and includes aerodrome as defined in Section 2(2) of the Aircraft Act, 1934.”

The Court reads this as covering the restricted, security‑controlled operational zone:

Runways;
Landing and take‑off area;
Aircraft maintenance area;
Passenger facilities in that restricted zone (lounge, boarding gates, security‑hold areas, etc.);
Aerodrome as per the Aircraft Act.

By confining Section 2(b) primarily to the secured core of the airport, the Court avoids an over‑broad construction that would make every adjoining commercial venture subject to the same strict constraints as airside operations.

3.1.2. Section 28‑A – “Airport Premises”

Under Chapter V‑A, which deals with eviction from airport premises, Section 28‑A(a) defines “airport premises” as:

“any premises (i) belonging to airport; (ii) taken on lease for the purposes of airport; (iii) acquired for the Authority...”

The Court uses this provision innovatively to draw a two‑tier structure:

Tier 1 – “Airport” (Section 2(b)): core operational, secured, aviation‑centric areas.
Tier 2 – “Airport premises” (Section 28‑A): the broader estate belonging to or used for the airport, including unrestricted commercial zones like MLCP/Aerohub, accessible to:
- Passengers,
- Visitors, and
- General public (e.g., nearby residents using the mall/multiplex).

The PVR multiplex sits firmly in this unrestricted airport premises zone. While still under AAI’s control, it does not fall within the narrow confines of “airport” under Section 2(b). This classification is crucial because AAI’s entire prohibition theory was premised on the multiplex being inside the “airport” where only aviation‑linked functions and limited passenger amenities are allowed.

3.2. Section 12 AAI Act – Functions of the Authority

3.2.1. Enumerated Functions and Residuary Power

Section 12(3) lists various functions AAI “may” perform. Particularly relevant clauses are:

12(3)(a) – plan, develop, construct and maintain runways, taxiways, aprons and terminals and ancillary buildings;
12(3)(f) – establish and maintain hotels, restaurants and restrooms at or near the airports;
12(3)(j) – regulate and control plying of vehicles and entry/exit of passengers and visitors;
12(3)(r) – “any other activity at the airports and the civil enclaves in the best commercial interests of the Authority including cargo handling, setting up of joint ventures…”.

The Court reasons as follows:

Clause 12(3)(f) expressly contemplates facilities “near” airports, indicating that AAI’s functional remit extends beyond the security‑hold area to the surrounding airport premises and adjoining lands.
Restaurants, hotels and restrooms “at or near” the airport are obviously meant not only for passengers but also for visitors and non‑passengers.
Clause 12(3)(j) explicitly refers to “passengers and visitors”, reinforcing the idea that AAI’s regulatory role extends to areas accessible to the general public as long as those areas are part of airport premises.
Most significantly, clause 12(3)(r) is a residuary enabling provision that allows “any other activity” in AAI’s best commercial interests, beyond the specific examples listed.

AAI argued that 12(3)(r) must be read narrowly using the canon of noscitur a sociis (a word is known by the company it keeps) and confined to activities akin to “cargo handling” and “joint ventures” supporting aviation. The Court effectively rejects this, holding:

There is no express bar on cinema halls in Section 12;
“Best commercial interests” is deliberately broad; and
If AAI’s restrictive reading were accepted, many existing airport retail outlets (clothing, electronics, pharmacies, etc.) would also be ultra vires.

Thus, the Court adopts a purposive and expansive reading of Section 12(3)(r): any non‑aeronautical commercial activity can be permitted if it:

Is carried out at the airport or airport premises; and
Is in AAI’s best commercial interests; and
Is not otherwise barred by law.

On this approach, a cinema multiplex is squarely within AAI’s competence to permit as a non‑aeronautical commercial activity that generates revenue and enhances passenger experience.

3.3. Contractual Structure: Development Agreement and Sub‑Licence

3.3.1. Co‑terminus Sub‑Licensing

The Development Agreement between AAI and MRPL is the parent concession. Article 3.1.4 permits MRPL to sub‑license commercial areas, but with clear limitations:

Sub‑licence tenure cannot exceed 15 years from the Appointed Date; and
“such tenure shall be co‑terminus with the Agreement.”

This means:

The power to grant sub‑licences is derivative; it exists only as long as the principal concession exists; and
A sub‑licensee cannot claim a better or longer right than the concessionaire (MRPL) has vis‑à‑vis AAI.

The Court underscores this using the ordinary meaning of “co‑terminus”: having the same duration or boundaries. Once MRPL terminates the Development Agreement, the foundation of all sub‑licences collapses, at least as against AAI.

3.3.2. Surrender Provisions and Discretion under Article 42

Article 42 of the Development Agreement becomes operative on termination. Its key elements are:

Article 42.1(b): AAI may, at its option, have the rights and obligations under MRPL’s third‑party contracts (including sub‑licences) “vested in” AAI or its nominee.
Article 42.1(c): Before assuming any contract, AAI may conduct due diligence and “shall not be bound to assume” contracts that, in its sole opinion, are “unreasonably onerous”.
Article 42.2: “The Authority at its own discretion may allow the sub‑licensees/tenants/and users to continue on mutually negotiable terms and conditions.”

The Court’s reading:

These provisions do not create an automatic right for sub‑licensees to continue post‑termination.
Instead, they confer on AAI:
- A right, but not a duty, to step into sub‑licence agreements; and
- A clearly articulated discretion to decide whether particular sub‑licences are too onerous to assume.
This discretion is contractually recognised and was part of the risk allocation all parties accepted when entering the PPP structure.

The Court also notes that under Article 5.2.4, MRPL was required to include a “step‑in” covenant in all Project Agreements, with an undertaking from counterparties (like PVR) that they would not seek relief from AAI in the event of termination or suspension unless AAI chose to assume those contracts. PVR, as a sophisticated commercial entity, is taken to have accepted this risk.

3.3.3. Privity and Remedies

A central plank of AAI’s argument is absence of privity of contract with PVR. The Court agrees:

The only direct contract between AAI and MRPL is the Development Agreement.
The sub‑licence binds MRPL and PVR; AAI is not a contracting party.
While AAI approved the draft sub‑licence and facilitated clearances, that does not create a direct contractual obligation to PVR.

Consequently:

PVR’s primary contractual remedies (including damages for wrongful termination or disruption) lie against MRPL, not AAI.
AAI’s obligations flow from the Development Agreement and from statute; they cannot be extended by implication to bind it to sub‑licensees beyond what the contract states.

This privity analysis directly influences the Court’s rejection of promissory estoppel and legitimate expectation against AAI.

3.4. Promissory Estoppel and Legitimate Expectation

3.4.1. Promissory Estoppel – Godfrey Philips and Manuelsons

The Court sets out the classic formulation of promissory estoppel from Union of India v. Godfrey Philips India Ltd and Motilal Padampat:

Where one party makes a clear and unequivocal promise, intended to be binding and to induce action, and
The other party acts in reliance and alters its position,
The promisor may be bound by that representation, even without consideration, if it would be inequitable to allow them to resile.

In Manuelsons Hotels (P) Ltd v. State of Kerala, the Court earlier had emphasised the “unconscionable departure” test: the doctrine prevents a party, including the State, from acting in an unconscionably inconsistent manner when another has reasonably relied on its assurance.

Applying these principles, the Madras High Court acknowledges:

AAI did actively facilitate the establishment of the multiplex – environmental clearance, location NOC request, approval of plans and sub‑licence.
PVR invested heavily in reliance on these steps.

However, it ultimately concludes:

There is no direct representation or promise from AAI to PVR that:
- AAI would contract with PVR; or
- The multiplex would be allowed to operate for the full term irrespective of concession termination.
The express terms of the Development Agreement and sub‑licence (co‑terminus nature, Article 42 discretion) negate any implied promise of guaranteed continuity.

Thus, the high threshold of a clear promissory representation by AAI to PVR is not met; reliance alone cannot create a promise where the contracts were explicit about risk.

3.4.2. Legitimate Expectation – Sivanandan

The Court cites the Constitution Bench in Sivanandan C.T. v. High Court of Kerala, where legitimate expectation is described as rooted in:

Consistency, transparency and predictability in State action;
The rule of law requiring fairness and non‑arbitrariness (Article 14);
Trust reposed by citizens in public authorities’ adherence to past practice and assurances.

Nonetheless, the Court draws a line:

Legitimate expectation cannot override clear contractual allocation of discretion and risk.
PVR, as a sophisticated commercial party, was – or ought to have been – aware that:
- Its sub‑licence was co‑terminus with the Development Agreement; and
- Post‑termination, Article 42 left AAI with a discretion, not a duty, to continue sub‑licensees.
Any expectation that AAI would necessarily assume and continue the sub‑licence is therefore unreasonable and cannot be protected as a legitimate expectation.

Legitimate expectation, thus, cannot be invoked to rewrite a concession structure or to nullify express clauses vesting discretion in AAI.

3.5. Judicial Review of AAI’s Discretion and the Policy Direction

Having held that:

Statutorily, cinema multiplexes in airport premises are permissible; and
Contractually, AAI has discretion post‑termination to accept or reject sub‑licences,

the Court faces a delicate question: to what extent can it interfere with AAI’s decision not to continue PVR’s multiplex?

Key points in the Court’s approach:

AAI’s rejection letter primarily rested on the legal premise that cinemas are impermissible under Section 12 – a premise the Court finds incorrect.
However, security concerns and airport operations remain legitimate considerations within AAI’s domain of expertise.
The Court recognises that whether, and where, to allow cinema multiplexes is ultimately a matter of policy and risk assessment, better handled at the Central Government/Ministry level, especially because:
- AAI operates and regulates multiple airports across India;
- Some airports are privately operated but still under the AAI Act; and
- Non‑aeronautical revenue is a crucial element in airport economics nationwide.

The Court therefore adopts a calibrated remedy:

Directs AAI to place the question of cinema multiplexes in airport/airport premises (secured and unsecured zones) before the Ministry of Civil Aviation within four weeks.
Directs MoCA to take a policy decision on this question “as expeditiously as possible”.
Continues the status quo in favour of PVR – allowing the multiplex to run – until the policy decision is taken.
Contours of consequences:
- If MoCA decides that cinema multiplexes are permissible:
  - AAI must then exercise Article 42.2 and negotiate with PVR for a sub‑licence to run the multiplex in the MLCP complex.
- If MoCA decides against permitting cinema multiplexes:
  - PVR is at liberty to work out remedies against MRPL under the sub‑licence; and
  - MRPL can pursue its rights under the Development Agreement against AAI in arbitration or otherwise.

This structure:

Protects PVR’s short‑term business interests and preserves the status quo;
Respects the institutional competence of the executive for policy choices involving aviation security and infrastructure planning;
Ensures that any long‑term decision is grounded in a nationwide policy rather than ad hoc orders in individual cases; and
Prevents proliferation of inconsistent decisions across different High Courts and airports.

4. Precedents Cited and Their Role

4.1. Promissory Estoppel and Public Law: Godfrey Philips, Motilal Padampat, Manuelsons

Union of India v. Godfrey Philips India Ltd, (1985) 4 SCC 369 / AIR 1986 SC 806:
- Laid down in detail the doctrine of promissory estoppel against the Government.
- Stressed that Government is bound by its promises where citizens have altered their position in reliance, unless barred by statute or overriding public interest.
- Clarified that “executive necessity” cannot be a general escape route.
Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P., (1979) 2 SCC 409:
- Held that promissory estoppel can be a cause of action (a sword, not only a shield).
- Reiterated that formal contract under Article 299 is not necessary for promissory estoppel, if the elements of representation and reliance are made out.
Manuelsons Hotels (P) Ltd. v. State of Kerala, (2016) 6 SCC 766:
- Reinforced that promissory estoppel prevents an “unconscionable departure” from an assumption adopted by one party and relied upon by another.
- Under Indian law, detriment need not be proved as strictly as in some common law jurisdictions; reliance suffices.

The Madras High Court cites these to set the doctrinal background but ultimately finds them **inapplicable** as against AAI because:

There is no clear promise from AAI to PVR of continuity post‑termination;
The contracts themselves disclose the limits of AAI’s obligation and the co‑terminus nature of PVR’s rights; and
Where the contractual framework clearly confers discretion on AAI, courts are slow to imply contrary promises.

4.2. Legitimate Expectation: Sivanandan

Sivanandan C.T. v. High Court of Kerala, (2024) 3 SCC 799 (Constitution Bench):
- Emphasises rule of law values – consistency, predictability and fairness – as the foundation of legitimate expectation.
- States that deviation from past practice must be justified by greater public interest or harm.

The Court invokes this to show the contours of legitimate expectation, but points out that:

Where the governing contract expressly reserves discretion to AAI (Article 42); and
Where the sub‑licensee is aware (or must be taken to be aware) of the co‑terminus nature of its rights,

a claim that “the State must continue my sub‑licence regardless of concession termination” cannot be a legitimate expectation protected in writ jurisdiction.

4.3. No Estoppel Against Statute: Godfrey Philips and later cases

AAI relied heavily on the principle that there can be no estoppel against a statute and that courts cannot compel authorities to continue an illegality. Cases cited include:

Union of India v. Godfrey Philips India Ltd (for limits of estoppel where action would contravene statute);
Tinku v. State of Haryana, 2024 SCC OnLine SC 3292 (equity cannot be used to perpetuate illegality).

Interestingly, the Court’s response here is two‑fold:

It accepts the general rule in principle, but
Holds that in this case there is no statutory illegality because the AAI Act does not actually prohibit cinema multiplexes under Section 12. Therefore, the “no estoppel against statute” defence is not triggered on these facts.

4.4. Writs in Contractual Matters: Dwarkadas Marfatia and others

Though the Court expressly declines to dwell deeply on maintainability (saying the law is settled and the main issue is statutory interpretation), the petitioners relied on:

Dwarkadas Marfatia & Sons v. Port of Bombay, (1989) 3 SCC 293:
- Public authorities, even as landlords, must act in public interest; their otherwise “private” actions can be scrutinised under Article 14.
Other cases on writ maintainability in the context of contractual transactions with State entities.

The Court implicitly accepts that:

Where the challenge is grounded in arbitrariness and constitutional violations, and
Where a statutory power (Section 12 AAI Act) is being interpreted and applied,

writ jurisdiction can be invoked notwithstanding availability of contractual remedies or arbitration. However, the Court uses this jurisdiction primarily to:

Clarify the legal scope of Section 12; and
Direct a policy decision at the Central level; rather than
Enforce private contractual claims of PVR against AAI.

5. Complex Concepts Simplified

5.1. “Airport” vs “Airport Premises”

Airport (Section 2(b)): The core operational area used directly for aviation (runways, taxiing, landing/take‑off, aircraft maintenance, passenger facilities in secured zones).
Airport premises (Section 28‑A): The larger estate belonging to or leased for the airport – including car parks, access roads, malls, hotels, and other facilities outside security control.

The distinction is important because stricter restrictions may apply within the “airport” proper, while more flexible commercial uses are acceptable in “airport premises”.

5.2. Co‑terminus Sub‑Licence

A “co‑terminus” sub‑licence is one whose duration ends when the parent agreement ends. It cannot outlive the main concession. Here:

The Development Agreement is the main concession.
The PVR sub‑licence is co‑terminus with it.
When MRPL terminates the Development Agreement, PVR’s right collapses as against AAI, unless AAI independently agrees to continue it.

5.3. Privity of Contract

“Privity” means that only parties to a contract can sue or be sued on it. Third parties generally cannot enforce contractual obligations. In this case:

PVR and MRPL have a contract (sub‑licence) – they are in privity.
AAI and MRPL have a Development Agreement – they are in privity.
PVR and AAI do not have a direct contract – no privity.

Therefore, PVR cannot normally enforce contractual rights directly against AAI, except to the extent that statutory or constitutional rights are implicated.

5.4. Onerous Contracts (Article 42.1(c))

A contract is “onerous” if it places heavy burdens or unfavourable obligations on one party. Article 42.1(c) allows AAI, in its “sole opinion”, to refuse to assume contracts it considers unreasonably onerous when stepping into MRPL’s shoes post‑termination.

This gives AAI a safety valve to avoid taking over sub‑licences that:

Are financially unattractive;
Pose security or operational risks; or
Would not have been accepted by AAI if it were contracting directly at the outset.

5.5. Promissory Estoppel

Promissory estoppel stops a party (including the State) from going back on a clear promise if:

The promisee relied on that promise; and
Changed position to its detriment; and
It would be unfair or “unconscionable” to allow the promisor to resile.

Here, although AAI’s conduct encouraged PVR to invest, the Court finds no direct promise by AAI to PVR to continue the multiplex irrespective of termination; hence the doctrine does not apply.

5.6. Legitimate Expectation

A person has a legitimate expectation when a public authority’s consistent past practice, assurances or policy leads them to reasonably anticipate a particular treatment in future.

However:

An expectation is not the same as a right.
It cannot override explicit statutory provisions or contract terms.
Here, because the contract clearly said PVR’s rights are co‑terminus and subject to AAI’s discretion, any expectation of guaranteed continuity was legally weak.

6. Impact and Significance

6.1. For Airport PPPs and Non‑Aeronautical Revenues

The judgment is consequential for the evolving model of “airport cities” and commercial hubs around airports:

It affirms that the AAI Act allows broad, commercially viable non‑aeronautical activities under Section 12(3)(r), including potentially cinemas, malls, hotels, and other entertainment venues.
It clarifies that such activities, especially in MLCPs and similar complexes, can lawfully be located in unrestricted airport premises, accessible to non‑passengers.
This enhances the legal comfort for:
- Concessionaires bidding for integrated commercial developments; and
- Financiers and sub‑licensees relying on non‑aeronautical revenue streams.

6.2. For Sub‑licensees and Concessionaires

At the same time, the judgment is a cautionary tale:

Sub‑licensees cannot assume that a long‑term occupancy or business right is secure merely because:
- They have invested heavily; or
- They were approved by the principal authority.
If their rights are expressly made co‑terminus with the main concession, they inherit the concessionaire’s risk of termination.
The proper risk‑mitigation strategies for sub‑licensees include:
- Rigorous due diligence of the principal concession; and
- Robust indemnity and compensation provisions against the concessionaire.

For concessionaires, the judgment underscores:

Obligation to clearly communicate the risk profile of sub‑licences to their sub‑licensees; and
The importance of aligning sub‑licence terms with the Development Agreement, especially as to tenure and step‑in rights.

6.3. For AAI and Policy‑Making

The Court’s direction to MoCA to frame a policy on cinema multiplexes at airports is significant:

It elevates the issue from an ad hoc local decision to a Central policy question affecting multiple airports.
It compels the executive to transparently articulate its stance on balancing:
- Security and operational integrity;
- Passenger convenience and experience; and
- Financial sustainability via non‑aeronautical revenue.
Once a policy is framed, it will:
- Guide AAI’s future concessions and sub‑licensing; and
- Reduce litigation by providing clarity to developers and sub‑licensees.

6.4. For Judicial Review in Contract‑Heavy Sectors

The judgment offers a nuanced template for judicial intervention where public law, statute and complex PPP contracts intersect:

Courts will:
- Vigorously review statutory interpretations and strike down incorrect legal premises (as with AAI’s view of Section 12); but
- Exercise restraint in rewriting or compelling parties to enter into commercial contracts.
They may craft interim, status quo‑preserving remedies and require the competent policy‑maker to decide sensitive issues instead of imposing judicially‑crafted policy from the bench.

7. Conclusion

The Madras High Court in PVR INOX Ltd v. Airports Authority of India has delivered a carefully balanced judgment that:

Clarifies the law that:
- The MLCP/Aerohub zone is part of “airport premises” but not the “airport” under Section 2(b);
- There is no statutory bar in the AAI Act against cinema multiplexes in such areas; and
- Section 12(3)(r) is sufficiently wide to include cinema multiplexes as non‑aeronautical activities in AAI’s commercial interest.
Affirms contractual discipline, holding that:
- PVR’s sub‑licence is co‑terminus with the Development Agreement;
- No privity exists between PVR and AAI; and
- AAI has a contractually reserved discretion under Article 42 not to assume sub‑licences that it considers onerous.
Rejects public law doctrines of promissory estoppel and legitimate expectation as tools to compel AAI to contract, in light of explicit contractual provisions and the absence of clear promises from AAI to PVR.
Adopts a structured remedial approach by:
- Continuing status quo to protect PVR’s ongoing operations; and
- Directing AAI to place the broader question of cinema multiplexes at airports before MoCA for a national policy decision, which will then guide AAI’s exercise of Article 42 discretion.

The central legal principle that emerges is this:

Cinema multiplexes and similar non‑aeronautical commercial activities located in the unrestricted “airport premises” are, in principle, permissible under the AAI Act as activities in the Authority’s best commercial interests, but sub‑licensees cannot compel AAI to contract with them or continue their operations beyond the life and terms of the underlying concession agreement; their protection lies primarily in contract and in policy, not in an absolute right enforceable in writ jurisdiction.

By simultaneously affirming statutory permissibility, respecting contractual allocation of discretion, and requiring a coherent policy response, the judgment sets an important precedent for future disputes involving non‑aeronautical developments at Indian airports.