Flight Cancelled Refund: Who Keeps the Balance?

One of my clients recently had a case which I am explaining below and if you are stuck in such similar situation, here is what to do.

Note: Due to attorney-client privilege, I cannot disclose complete case details or identify the actual parties involved. However, I am sharing the essential facts and legal approach so that if you find yourself in a similar situation, you can understand the available solutions and legal remedies.

Flight Cancelled Refund: What the Airline and the Agent Each Owe You

TL;DR: When an airline cancels a flight, you're entitled to either a full refund or an alternative flight, and a flight cancelled refund that comes back short can be challenged. The airline can't quietly keep the value of a leg it put you on itself, and the travel agent that collected your money can't hide behind the airline. Ask for a written fare breakdown — base fare, taxes, statutory levies, the agent’s own fee — before you accept anything, and keep the email that gives it to you.

What she had was a ticket, a cancellation email from the airline, and a credit note for roughly two-thirds of what she had paid. The airline said it had refunded everything it was holding. The agent said the rest was "charges". Nobody put either of those claims in writing with numbers attached. We only have her side of the exchange, and the airline's side arrived, as these things do, in the form of a one-line reply that answered a question nobody had asked.

That gap — between what an airline says it refunded and what a passenger actually receives — is where most of these disputes live. Not in a courtroom. In a fare breakdown that nobody has produced yet.

Flight Cancelled Refund: Who Actually Owes You the Money?

Two different parties owe you money, and they are not the same party. The airline owes the fare it carried on its own books. The agent who sold you the ticket owes you whatever it collected on top of that fare, and it owes you a duty to pass on the airline's refund once it has received it.

So the first question is not "whom do I sue?" It is "who is holding which part of my money?" A large share of short refunds turn out to be an accounting problem, not a legal one, and an accounting problem is solved by a written breakdown rather than a complaint.

Key facts

• If the airline cancels the flight, you are entitled to a full refund of the ticket or a re-routing at no additional cost. This does not depend on whether your fare was labelled non-refundable.
• Taxes and statutory levies collected on an unused ticket are not the airline's revenue. GST on the ticket, airport charges and the security component sit in a different bucket from base fare.
• A travel agent's own convenience or service fee is a separate contract from the carriage itself. It can be non-refundable even when the airline refunds in full, but only if the terms said so before you paid.
• Where a booking had more than one leg and the airline re-routed you onto one of them, expect an argument about the value of that leg. Ask for the fare breakdown in writing.
• A consumer complaint under the Consumer Protection Act, 2019 must be filed within two years of the cause of action.

Where the Claim Actually Comes From

Indian passenger rights on refunds are not primarily a consumer law creation. They come from a regulator's directions, with the Consumer Protection Act sitting behind them as an enforcement route.

The DGCA Civil Aviation Requirements

Passenger entitlements on cancellation, denied boarding and delay are set out in a Civil Aviation Requirement issued by the Directorate General of Civil Aviation — CAR Section 3, Series M, Part IV — under Rule 133A of the Aircraft Rules, 1937. That is the document an airline's customer service team works from, whether or not it tells you so.

Its core rule on cancellation is straightforward: the airline must offer you the choice between a full refund of the ticket and an alternative flight or re-routing at no additional cost. The choice is yours, not the airline's.

Compensation is a separate and narrower question. The CAR prescribes compensation in specified situations — broadly, where the airline did not give you the required advance notice of cancellation and could not offer you an alternative within the prescribed window. It also lists circumstances in which compensation is not payable at all, including weather, air traffic control restrictions and security-related disruption. The exact slab turns on the block time of the flight, and the exceptions are read fairly broadly by airlines. On the material we had, compensation was arguable; the refund was not.

The Carriage by Air Act, 1972

India gives effect to the Montreal Convention through the Carriage by Air Act, 1972. That Convention governs the carrier's liability in areas like delay, baggage and injury, and it imposes a two-year limitation period on actions for damages against a carrier.

A refund claim is a contract claim rather than a damages claim, so the Convention is not the main weapon here. It matters if you are also claiming consequential loss — a missed connection you paid separately for, a hotel night, a wedding you flew in for. Those heads of loss are where the Convention's limits and conditions bite, and where the airline will push back hardest.

The Consumer Protection Act, 2019

Transport is a "service" under the Act, and a short or refused refund can amount to a deficiency in service. Jurisdiction depends on the value of the claim: up to ₹50 lakh goes to the District Commission, ₹50 lakh to ₹2 crore to the State Commission, and above that to the National Commission. Complaints can be filed online through the e-Daakhil portal.

What the Airline Owes

The airline owes you the money it collected for the ticket. In practice that means:

• Base fare and fuel charge for the sector that was not flown. If the airline cancelled, this is refundable regardless of the fare type.
• Taxes and levies attributable to the unused sector. These are collected on the government's and the airport operator's behalf, not earned by the airline. An airline that keeps them after cancelling its own flight has retained money that was never its.
• A refund within the timeline the CAR prescribes. The regulator sets out a time limit for processing refunds. Airlines' own conditions sometimes promise a longer period. The regulator's timeline is the one that governs.

What the airline does not owe you, in the ordinary case, is a refund of the agent's service fee. That money never reached the airline. Which is the next problem.

What the Travel Agent Owes

If you booked through an agent or an online travel platform, the money you paid went to the agent first. The agent paid the airline the fare and kept its own fee. When the airline cancels and refunds, the refund flows back to the agent — and the agent is obliged to pass it on to you.

Two things follow from that.

First, the agent cannot say "the airline hasn't refunded me" indefinitely without showing you that it chased the airline. Ask for the date the refund was requested and the date it was received. That is a factual question with a factual answer.

Second, the agent's own fee is governed by the terms you agreed to at the time of booking. If the terms said the convenience fee is non-refundable in all circumstances, that term will usually hold — it is a fee for a service the agent actually performed. If the terms said nothing, or buried it, the position is more open, and a consumer commission may look at whether the fee was ever disclosed clearly before payment.

Why a Flight Cancelled Refund Comes Back Short

Four explanations cover most of it. Only one of them is usually defensible.

• The airline treated the cancellation as yours. A cancellation charge gets deducted even though the airline pulled the flight. This is the most common error and the easiest to correct with a written demand.
• Taxes were treated as consumed. The airline or agent retained GST, airport charges or the security component on a sector nobody flew.
• The agent's fee was deducted without separate disclosure. Legitimate only if the terms said so upfront.
• Currency and conversion spread. On an international ticket, the refund comes back at a different exchange rate and after a markup. Some difference is unavoidable; a large one is worth questioning.

What To Do, In Order

Step one: demand the breakdown. Write to the airline and the agent on the same email. Ask for a line-by-line statement — base fare, fuel charge, taxes, airport charges, agent's fee, and the amount actually refunded. Do not ask for "a refund". Ask for the numbers. This single email resolves a surprising number of these disputes, because it forces someone to put a figure against a deduction.

Step two: escalate to the regulator. The Ministry of Civil Aviation runs the AirSewa grievance portal, and the DGCA has its own grievance channel. A complaint there is free and creates a dated record. Airlines respond to regulator queries faster than they respond to passengers.

Step three: if you paid by card, ask your bank about a chargeback. Card network rules allow a chargeback for services not rendered. It is not a substitute for the refund claim and the timelines are tight, so do not let this be the only route you take.

Step four: a consumer complaint. File on e-Daakhil within two years. Keep the claim proportionate. A commission will order the refund and, where the deficiency is clear, some compensation for the trouble — but the figures are modest, and it will not compensate you for the hours you spend on it.

Step five, in a narrow set of cases: if an agent collected your money, never passed it to the airline, and stopped answering, the issue stops being a refund dispute. Money taken without any intention of performing the service can attract a cheating case, and an FIR can be filed with the police. That is a different proceeding from the consumer claim, and the two can run together. On these facts, that stage had not been reached. It rarely is, and it should not be alleged casually.

Documents To Keep

• The ticket and the booking confirmation, showing the full amount paid.
• The airline's cancellation email or SMS, with the timestamp.
• Any refund credit note or statement the airline sent.
• Your payment record — card statement, UPI reference, bank entry.
• The agent's terms and conditions as they stood on the date of booking.
• Every email you sent and received. A phone call proves nothing later.

Frequently Asked Questions