On October 3, 2023, the Ministry of Corporate Affairs (MCA) issued a notification under Section 14(3) of the Insolvency and Bankruptcy Code (IBC), exempting the applicability of the moratorium to transactions, agreements or arrangements, under the Cape Town Convention on International Interests in Mobile Equipment (Convention) and the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment (Protocol), relating to aircraft, aircraft engines, airframes and helicopters (Aircrafts; such notification, the Notification)

This article analyses the underlying objective of the Notification, and its implications on the aviation industry, particularly in the context of insolvency proceedings of Go First Airlines. Furthermore, an emphasis has been supplied on the need for ratification of the Protocol and the interplay of the IBC and the Convention while dealing with insolvencies in the aviation sector.

Alignment with International Conventions

The issuance of this Notification aligns with the International Convention and the Protocol, whereby the latter set forth the provisions in respect of Aircrafts, among others that relate to the rights and obligations of contracting parties. In 2001, India became a signatory to the Convention, in accordance with Article 6 of which the reading of provisions under the Convention must be done along with those under the Protocol, and to interpret them as a single instrument. The Convention facilitates the acquisition, financing and leasing of Aircrafts objects by way of protecting the interests of all the contracting states.

The Notification is an instance of delegated legislation, pursuant to which the MCA has exempted certain transactions or arrangements under the ambit of Section 14 of the IBC. The said stipulation has sought to streamline the process for aircraft lessors to reclaim their Aircrafts in the event that the airlines undergo insolvency or bankruptcy. This important move is in furtherance of the Convention and the Protocol, which constitute the frameworks for global treaties designed to safeguard the lessors' interest in case of default by the airlines. The primary goal is to achieve an efficient financing of high-value aircraft, engines and spare parts by lowering the lessors' risks and creating procedural remedies for the lessors. To that end, the Protocol contains certain provisions (Article XI- Remedies on Insolvency), which provide an effective remedy to the creditor in the circumstances of default, including without limitation, the de-registration and export of aircraft as a measure of interim relief. The dichotomy between IBC and the Convention has now been aligned with the issuance of the Notification.

Under the Protocol, a critical tool namely, "Irrevocable de-registration and export request authorization" ("IDERA") has been provided for, whereby an aircraft lessor authorizes a creditor or lessor to de-register and export the aircraft from the country where it is registered without needing the owner's consent. Importantly, an IDERA is an irrevocable measure, implying that it cannot be cancelled or withdrawn by the owner once issued.

Insolvency of Go First Airlines

Recently, on May 2, 2023, the Go First Airlines had filed an application for voluntary insolvency proceedings under Section 10 of the IBC, while facing financial distress in making payments to vendors and aircraft lessors. During the proceedings, it was highlighted that the engines from a global technology company were inherently defective as a result of which the aircrafts had been grounded and could not take off. All aircraft lessors in the present case filed an application to seek possession of the aircraft engines and a restraint order against the airlines to operate the aircraft for commercial use. However, the said pleas were dismissed by the National Company Law Tribunal ("NCLT") on grounds that the moratorium was applicable, and it barred the lessors from re-possession of their aircrafts. The said ruling could have led to a loss of confidence in the Indian aviation industry as the international lessors effectively stood to lose their rights that were contractually promised to them under the respective lease agreements.

The instant case exemplified that while dealing with insolvencies in the aviation industry, an equilibrant approach is critical to address these issues. The protection of aircraft lessors' rights must not come at the expense of keeping distressed airlines in business. The importance of ratifying the Convention by the Government cannot be overstated in order to align the international commitments with domestic laws. This would improve the aviation industry's stability, attract multinational lessors and make insolvency resolution processes for financially challenged airlines more efficient.

However, it is still unclear whether or not the Notification would apply to the insolvency proceedings against Go First Airline.

Likely Implications of the Notification

As mentioned above, Section 14 of the IBC bars the recovery of any property once the corporate insolvency resolution process is initiated for 180 days and further extended for 90 days. Notably, the "Alternative A" of the Protocol provides for a timely reclaim of the aircraft, which must not be later than the end of the waiting period (sixty days, as declared by India) and the date on which the creditor would be entitled to take possession of the aircraft/ object if this Article did not apply. 'Waiting period' has been defined as "the period specified in a declaration of the Contracting State which is the primary insolvency jurisdiction". The above-stated timeline is in conflict with the corresponding provision under the IBC, resulting in the prevalence of the latter being a special law, over the Convention. Through this Notification, the Government has imparted relief to the aircraft lessors by dispensing with the contradiction.

The Aviation Working Group ('AWG'), the organization that monitors contracting states' compliance with the Convention, had placed India on its watchlist in May 2023. The AWG further downgraded India's compliance index rating of the Convention and Protocol to 'low' in September 2023, which could have resulted in an increased aircraft leasing rates for Indian carriers. However, the Notification should certainly help mitigate the jurisdictional risk and emerge as a positive step for aircraft leasing in India.

In the case of Go First Airlines, wherein for the first time this conflict was highlighted, the issuance of Notification reflects a timely reaction and incorporation of the Convention into our domestic framework, which is imperative in ensuring that India's aviation regulations are aligned with the international regime. Enforcement of this Notification is likely to boost the confidence of international aircraft/ helicopter lessors with the assurance of protection of their rights and promoting a stable aviation industry. In a similar vein, had the Notification been issued during the case of Jet Airways, Kingfisher or other similarly situated instances, wherein the major Indian airlines were declared insolvent owing to financial distress, it could have served to extenuate the impact of proceedings that caused losses to stakeholders and created instability in the Indian aviation industry.


In furtherance to the Notification, it may be logical for the Indian Government to ratify the Convention, consistent with the underlying commercial wisdom and the market dynamics to restore and potentially boost investment in this industry. This clearly is a tectonic shift in the treatment of Aircrafts during the insolvency resolution process of airlines, having the potential to reshape the position of lessors and trigger a wave of opportunities for stakeholders to boost confidence in the Indian market.

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