The proposed joint venture between Malaysian low-cost carrier AirAsia and the Tata Group has been challenged in the Supreme Court by Janata Party chief Subramanian Swamy.

In a public interest suit, he has sought cancellation of the Foreign Investment Promotion Board’s (FIPB) clearance. The matter will be discussed in the court on Monday.

Swamy argues illegalities in the deal and that on the back of pressure from the ministry of commerce and industry, the ministry of civil aviation decided not to push its contention on allowing foreign direct investment (FDI) in new joint ventures (JVs). Earlier, there was doubt on whether the liberalised FDI norms applied to foreign airlines investing in existing Indian carriers or also to those setting up JVs for new airlines.

FIPB had on March 7 cleared AirAsia’s proposal to launch a domestic airline in India, in alliance with Tata Sons. Civil Aviation Minister Ajit Singh had then said: “The commerce ministry should change the FDI guidelines to bring more clarity on whether a new airline JV comes under its rules.” However, Singh had later clarified he supported the proposal in principle.

On a visit to India earlier this month, AirAsia chief Tony Fernandes had met Singh along with Tata Group Chairman Emeritus Ratan Tata. After the meeting, Singh said the group had applied to his ministry for a no-objection certificate and given the names of all top appointees for security clearance to the home ministry. “When they get security clearance, they will apply for a flying permit. I don't expect that it will take too long," Singh had said.

The airline expects to start operations by the end of 2013. Its headquarters would be Chennai. AirAsia India is a three-way joint venture partnership (49:30:21) with the Tata Group and Arun Bhatia of Telestra TradePlace.